Philippines:  Senate hearing starts on higher liquor tax rates

Mark Willingham Uncategorized

Philippines:  Senate hearing starts on higher liquor tax rates

Business World

By Camille A. Aguinaldo, Reporter

February 7, 2019

EVEN with the window fast closing on final legislative approval of any more tax reform in the current 17th Congress, the Senate Committee on Ways and Means on Wednesday started action on bills seeking to increase the excise tax rate on alcohol products.

Senator Juan Edgardo M. Angara, who heads the committee, said the panel will push for the passage of the measure, along with the tobacco excise tax hike proposal, before the current Congress ends.

“This is the first hearing. I think, unlike the tobacco [tax hike], this… will take a little bit longer… We’ll try our best… to push it this Congress… to come up with a version that may be acceptable to the plenary, in terms of both alcohol and tobacco,” he told reporters after the hearing.

The 17th Congress will take a Feb. 9-May 19 break and will have only May 20-June 7 to approve any bill. Measures that do not make it out of the legislative mill, via ratification, by then will have to start from scratch in the 18th Congress that begins in late July.

House Bill No. 8618, which bagged third-reading approval last Dec. 3, provides that fermented liquors be levied P28 per liter from the present P25.42. Meanwhile, Senate Bill No. 2197, which was similar to the Department of Finance (DoF) proposal, provides for a P40-per-liter tax rate.

Distilled spirits are to be levied a 22% ad valorem tax on the net retail price (NRP) per proof in the House version from the current 20%, while the Senate version provides for 25% ad valorem tax.

This is in addition to a specific tax per proof liter of P30 in the House version from the present P23.40, while the Senate version provides for a specific tax rate of P40 per proof liter.

Both versions of the bill provide for a higher levy on still and carbonated wines with more than 14% alcohol content to P80 per liter from the current P60. However, the indexation rate or the annual increase of tax rates of the House version was seven percent yearly, while the Senate sets it at 10%.

Collections from the excise tax on tobacco and alcohol products are being eyed as funding source of the implementation of the universal healthcare (UHC) program, which is expected to be enacted this year.

During the hearing, Finance Undersecretary Karl Kendrick T. Chua said the projected revenue impact of the Senate bill introduced by Senator Emmanuel D. Pacquiao was estimated to be around P32.3 billion in 2019, which he said would also gradually increase to P62.4 billion by 2023.

He also said the added excise tax on alcohol products as provided in the Senate bill would contribute just 0.1 percentage points to inflation. “The overall impact on inflation of the Pacquiao proposal is just 0.1 percentage point effect on inflation. If inflation is, let’s say, 3.2% this year as the central bank projects, then the additional inflation will be 0.1, so… 3.3,” he said.

For his part, Health Undersecretary Rolando D. Domingo said the proposed measures would also help curb excessive alcohol consumption or binge drinking, which he said was also associated with vehicle accidents, as well as domestic abuse and other crimes.

Mr. Angara scrutinized the ability of the Philippine Health Insurance Corporation (PhilHealth) and the Department of Health (DoH) to fully utilize its funding allocation to implement the UHC program.

He questioned the P40-billion funding gap in the program’s first year for implementation when the Senate was initially informed that funding issues of the program would arise only in the third year of the UHC programs’ implementation. “You’re asking Congress to fund this… But I have not heard a single point from your end as to how you would spend more efficiently. That’s why I said I want to attack it from both the revenue and expenditure side… every peso counts at this point,” he said. “(Health) Secretary Francisco T. Duque (III) said that there’s a P40 billion funding gap in year one of the UHC but in the sponsorship speech of the chairman of the Senate committee on health, he said that the funding gap will come in on the third year. That’s a speech given in October 2018. Why is there a discrepancy?”

Mr. Domingo also cited changes to the construction timetable. “One of the biggest changes is that the healthcare facilities would need additional P7 billion a year… We need about 20,000 barangay health centers so we’re targeting 2,000 every year for 10 years and 200 RHUs (rural health units),” he said.

Mr. Angara said the committee is also studying how the DoH will spend funds for the UHC program. “There should be a fit on the revenue and expenditure side… Let’s make sure every peso is spent well,” he said.