The Department of Finance (DOF) has reiterated its position that the revenue generation and health promotion objectives of the proposed sin tax reform bill are not mutually exclusive, as both goals are part of the broader government agenda of cutting the massive costs of alcohol abuse and e-cigarette consumption, and improving the lives of Filipinos.
“As you know, the sin tax measure is part of a broader agenda of investing in the Filipino people. While reducing the economic, social, and personal costs of consuming alcohol, tobacco, and vape products, this measure is expected to help fund the first-class implementation of a first-class law, the Universal Health Care (UHC) Act,” Finance Undersecretary Karl Kendrick Chua said at a recent press conference at the Senate organized by the Sin Tax Coalition.
“With Senator (Pia) Cayetano and the Department of Health (DOH), the DOF takes the holistic view that we should not have to choose between raising revenues and improving health outcomes. A bill that significantly reduces the massive economic costs of alcohol abuse and e-cigarette consumption is a win for the Philippine economy, as much as a revenue-raising bill would be,” Chua added.
The DOF has expressed its full support for Senate Bill (SB) No. 1074, a measure sponsored by Senators Cayetano and Emmanuel Pacquiao and that significantly increases excise taxes on alcohol and e-cigarette products.
The House passed its version of this measure—House Bill (HB) No. 1206—in August and the Sin Tax Coalition hopes the Senate could pass SB 1074 in time for both chambers to come up with a consolidated bill for submission to President Duterte before lawmakers take their yearend break in December.
While raising revenues to narrow the funding gap for UHC, higher excise taxes on alcohol products are expected to cap the massive economic costs of alcohol consumption, which amounts to as much as 1.7 percent of Gross Domestic Product (GDP), according to preliminary DOF estimates.
The economic costs are exacerbated by non-communicable diseases associated with alcohol, such as liver disease, tuberculosis, and oral and throat cancers.
There are at least 39 main diseases associated with alcohol consumption, and the DOF estimates include the social costs of vehicular accidents linked to drunk driving.
Higher excise taxes on e-cigarettes are also being discussed alongside regulatory measures on flavoring and packaging, in light of recent deaths associated with vaping illness, now called “e-cigarette, or vaping, product use associated lung injury” (EVALI).
SB 1074 seeks to increase taxes on alcohol products with the following rate adjustments: Distilled spirits will be imposed an ad valorem tax of 20 percent on the net retail price per proof and a specific tax of P90 per proof liter on the first year of its implementation, which will be increased by P10 every year until the fourth year. The specific tax rate will increase by 10 percent every year thereafter.
For fermented liquor (beer) and alcopops, SB 1074 seeks a specific tax rate of P45 per liter on Year 1, increasing by P10 every year until Year 4. The specific tax rate will increase by 10 percent every year thereafter.
The rates for wine products will be a specific tax of P600 per liter for sparkling and P43 per liter for still and carbonated wines. These rates will increase by 10 percent every year thereafter.
For the heat-not-burn category of tobacco products, Cayetano proposed to increase the current rates of P10 per pack of 20 to P45 per pack on Year 1 to be at parity with the taxes on regular cigarettes.
For vapor products, there will be a distinction between salt nicotine and freebase based on typical consumption patterns relative to regular cigarettes.
From P10 per 10 mL or less, salt nicotine will increase to P45 per mL, while freebase will increase to P45 per 10 mL on the first year of implementation. These rates will increase by P5 every year until Year 4 then 5 percent every year thereafter.
According to Cayetano, her proposal for both alcohol and e-cigarettes is expected to raise incremental revenues of P47.9 billion to P61.2 billion in the first year of its implementation.
In five years, the total estimated incremental revenues from these products range from P356.9 billion to P478.4 billion.