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Senate Ratifies Sin Tax Bill
Source: http://www.mb.com.ph/articles/385327/senate-ratifies-sin-tax-bill#.UMf3MuSceSo
Source Date: Wednesday, December 12, 2012
Focus: Citizen Engagement
Country: Philippines
Created: Dec 11, 2012

Philippines --- The Senate and the House of Representatives ratified yesterday the final version of the bicameral conference committee report on the bill restructuring excise taxes on alcohol and tobacco products paving the way for the measure to be passed and signed into law by President Benigno S. Aquino III before Christmas.

Voting 10-9, the Senate ratified the bicameral conference committee report, while the House, in a viva voce voting, supported the reconciled bill.

Senate President Juan Ponce Enrile approved the bicameral report after the Upper House went into nominal voting over the controversial measure.

At the House, Speaker Feliciano Belmonte was ecstatic over this development as he noted that previous Congresses were unable to increase taxes on so-called sin products for nearly 16 years.

In the Senate, those who voted in favor of the measure were Senators Edgardo Angara, Pia Cayetano, Miriam Defensor Santiago, Franklin Drilon, Panfilo Lacson, Manuel Lapid, Jr. Sergio Osmena III, Francis Pangilinan, Aquilino Pimentel III, and Antonio Trillanes IV.

Senators Arroyo, Jose “Jinggoy” Estrada, Francis Escudero, Ferdinand Marcos Jr., Ralph Recto, Gregorio Honasan, Ramon Revilla Jr., Enrile, and Vicente Sotto III gave a “resounding no” to the bill.

Under the reconciled bill, the financial contribution between the two products for 2013 is 69 percent for cigarette and 31 percent for alcohol.

By 2015, the ratio will be 66-34; 65-35 by 2016; and 64-36 by 2017.

Drilon, acting chairman of the Senate Ways and Means Committee, lauded the ratification of the bill saying he expects the tax reform law on so-called sin products to take effect starting January 1, 2013.

“The government is expected to generate P33.96 billion in additional revenues, in its first year of implementation in 2013, by increasing the taxes on sin products such as cigarettes and alcoholic beverages,” Drilon said.

Of the amount, he said P23.4 billion will come from increased taxes on tobacco, while P10.56 billion will be generated from taxes on fermented liquor and distilled spirits depending on its historical burden sharing.

But prior to the voting, senators debated over the measure as most members of the Upper Chamber expressed dismay at the outcome of the bicam report, which both Houses of Congress passed and signed yesterday morning.

During the debate, Enrile asked the Department of Finance (DOF) why it has not imposed taxes on 30 imported cigarettes.

Enrile pointed out that if these foreign brands are taxed, this would lessen the tax imposed on locally-manufactured brands. He also said the non-imposition of taxes on these foreign cigarettes “is imposing too much on the local tobacco industry.”

Drilon said he recognized the lapses of the DOF on this issue and said he would ask Finance Secretary Cesar Purisima to share with him his notes on the issue.

But Enrile, in explaining his negative vote, said: “I cannot support a bill that destroys local industries.”

Sen. Joker Arroyo for his part noted why the burden of taxes is more on tobacco and not on alcohol which has a lesser percentage in the tax take of the national government.

Sen. Ralph Recto also rejected the final version, saying he is sticking to his pledge to support a “reasonable, fair and realistic sin tax measure that raises significant amount of revenues, specifically earmarked for health insurance and improves health facilities and services especially in the countryside.”

“I cannot support a measure that promotes foreign interests, puts in jeopardy the revenues we are already collecting, by increasing local taxes too high, a tax shock is created, which therefore, incentivizes smuggling and illicit trade,” Recto said.

Tax Schedule

Once the bill is signed into law, distilled spirits will have a specific tax of P20.00 and an ad valorem tax equivalent to 15 percent of the net retail price (NRP) per proof liter, excluding the excise tax and the value added tax (VAT) by January 1, 2013.

But starting Jan. 1, 2015, the ad valorem tax will increase to 20 percent of the NRP per proof liter. By 2017, ad valorem taxes for distilled liquor will increase as the NRP increases.

By Jan. 1, 2013, fermented liquors with a suggested net retail price of less than P50.60 will have a specific tax of P15.00 per liter. Fermented liquors that have a NRP of more than P50.60 will be taxed P20.00.

By January 2014, government regulators will increase taxes of fermented liquors with prices less than P50.60 by P17.00 per liter and P21.00 for fermented liquors sold above P50.60 NRP.

By January 2016, fermented liquors sold at less than P50.60 NRP will be taxed P21.00 and those sold above P50.60 would be taxed P23.00.

By 2017, all beer, regardless of the suggested net retail price, will have a unitary tax of P23.50.

For cigarettes packed by hand, the specific tax to be imposed, starting January 2013 would be P12.00 per pack; P15.00 per pack by January 2014; P18.00 by 2015; and P21.00 per pack by January 2016.

By 2017, all cigarettes packed by hand will have a unitary tax of P30.00 per pack. Thereafter, a four percent increase of the P30.00 per pack rate will kick off by 2018.

For cigarettes packed by machine, there is a cut off for packs priced at P11.50 below and P11.50 above.

By 2013, cigarettes packed by machine with a price P11.50 below would have a specific tax of P12.00 per pack. Those priced below P11.50 will be taxed at P25.00 per pack.

By 2014, the tax goes up by P17.00 per pack for cigarettes priced below the cut off price and P27.00 for those priced higher.

By 2015, the tax is up by P21.00 per pack for cigarettes below P11.50 and P27.00 for higher priced cigarettes; by 2016, specific tax for cigarettes below P11.50 will be P25.00 per pack and P29.00 for those priced higher than P11.50.

Effective January 1, 2017 all cigarettes will have a unitary tax of P30 and the four (4) percent increase will kick off January 1, 2018.
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