House approves hiked sin taxes

December 04, 2018
Joey Salceda
Joey Salceda

EYEING much-needed funds for the Universal Health Care program, the House of Representatives approved on third and final reading two measures that increase excise taxes on sin products.

Members of the Lower Chamber are now urging the Senate to expedite the passage of its counterpart measure so that programs for the universal health care will have enough funds.

House Bill 8677, which seeks to raise tobacco excise taxes, got 187 affirmative votes with 7 negative votes and one abstention.

HB 8618, which seeks to increase alcohol excise taxes, was passed on a vote of 189-7 with one abstention.

Principally authored by Albay Rep. Joey Salceda, HB 8677 aims to curb smoking prevalence, especially among vulnerable sectors like the youth and the poor, as well as contribute to the UHC program.

Meanwhile, HB 8618, authored by Sultan Kudarat Rep. Horacio Suansing and former President and now House Speaker Gloria Macapagal-Arroyo seeks to raise excise tax rates on alcohol from the rates imposed by the National Internal Revenue Code (NIRC), as amended by Republic Act 10351.

HB 8618 in particular seeks to address the perceived inequality in the excise tax collections on alcohol products. Collections from alcohol account for 30 percent while cigarettes cover 70 percent of the government’s excise tax collections. The bill proposes to correct this by raising the indexation of excise tax rates on alcohol products from four percent to seven percent allowing for inflation.

Moreover, it seeks to impose on distilled spirits such as brandy, whisky, and alcopops a tax rate of 22 percent ad valorem on the net retail price (NRP) per proof plus a specific tax of P30 per liter beginning 2019. The specific tax will increase by P5 every year thereafter until it reaches P45 per liter in 2022. In 2023 and onwards, the specific tax for distilled spirits shall climb by seven percent each year.

The measure further integrates two specific tax rates for sparkling wine into a unitary rate pegged at P650. This means that beginning 2019, sparkling wines will receive 15 percent ad valorem tax per liter plus P650 specific tax per liter. The specific tax will be raised by seven percent beginning 2020 and every year thereafter.

In addition, HB 8618 deletes the “fortified wines” category and integrates it under still wines and carbonated wines with 14 percent alcohol and up. This category shall be taxed P80 per liter in 2019. In 2020 and every year thereafter, the tax shall increase seven percent every year beginning 2020.

On the other hand, still wines and carbonated wines with 14 percent alcohol or less shall be taxed P40 per liter beginning 2019. In 2020 and every year thereafter, this shall increase by 7 percent.

Cooking wines that contain a salt content of not less than 1.5 grams for every 100 milliliter shall be exempted from excise tax.

Finally, the distinction between fermented liquors brewed in microbreweries and in factories is removed by HB 8618 to facilitate simpler tax administration. Regardless of the brewery, fermented liquors shall be taxed P28 per liter volume of capacity in 2019; P32 in 2020; P34 in 2021; and P36 in 2022. It will be raised by seven percent each year thereafter.

Meanwhile, HB 8677 seeks to raise the unitary tax on cigarettes.

Under the NIRC, as amended by RA 10351, a unitary tax rate of P32.50 for each pack of cigarettes was imposed from January 2018 to June 2018. This increased to P35 in July 2018, and was slated to remain the same until December 2019. It was set to increase further to P37.50 per pack from January 2020 to December 2021, and then to P40 from January 2022 to December 2023. From January 2024 onwards, the unitary tax rate was supposed to increase four percent each year.

However, under HB 8677, each pack of cigarettes shall be taxed P37.50 beginning July 1, 2019 until June 30, 2020. An amount of P2.50 shall be added to the rate thereafter until it reaches P45. This means cigarettes per pack will be taxed P40 beginning July 2020; P42.50 beginning July 2021; and P45 beginning July 2022. On July 2023 and every year onwards, the tax rate shall be raised an additional four percent.