SUMMARY
This is AI generated summarization, which may have errors. For context, always refer to the full article.
MANILA, Philippines – Since the Aquino government is pushing a sin tax reform bill to raise revenues, its allies in the House of Representatives are going all out in asking for support for House Bill 5727.
The main author of Palace-backed HB 5727, Cavite Rep. Joseph Emilio A. Abaya, stressed that this version would raise more revenues for government than any of the 10 other proposed reform bills.
Currently, the excise tax structure on sin products, like alcohol and tobacco, involves a 4-tier system that favors local brands over foreign ones.
According to Abaya, the following are the key points of HB 5727’s proposed reforms:
1. Ditch price freezes for old brands
Currently legacy brands, present in the Philippines before 1996, are taxed based on their 1996 price per pack, while newer brands are taxed based on their current, higher price per pack.
Under the Abaya bill, all brands would eventually pay the same excise tax of P30 per pack. The complex multi-tiered system would fall to the wayside.
The change would be gradually phased in over 2 years for brands who are taxed the least and will feel the increase most.
Current for tobacco
Net retail price | Tax per pack |
---|---|
P10 and above | P28.30 |
P6.50-P10 | P12.00 |
P5-P6.50 | P7.56 |
P5 and below | P2.72 |
Abaya reform for tobacco
Net retail price | Year 1 tax per pack | Year 2 tax per pack | Year 3 tax per pack |
---|---|---|---|
P10 and above | P30.00 | P30.00 | P30.00 |
P10 and below | P14.00 | P22.00 | P30.00 |
The bill would increase the cost of cigarettes, which Abaya sees as a necessity for curbing smoking among children and the poor.
“A 10% increase in price will result in a 5.8% decrease in use,” said Abaya.
2. Index taxes to inflation
Pegging taxes to inflation insures that taxes are adjusted to reflect yearly fluctuations in the price of goods and services.
Imagine a pack of cigarettes costs P4.50 in 1995 and is taxed P2.72. In today’s dollars, the same cigarettes could cost P5.50, but not indexing to inflation means the government would continue to get only P2.72.
3. 15% of incremental revenues goes into farmers’ pockets
Abaya explained that his bill would raise more money, meaning more money for farmers.
“Fifteen percent of the excise tax collected is plowed back to the farmers. I think current collection is around P3.9 billion but with this it will increase 195% so you are looking at P7.5 billion plowed back to the farmers,” said Abaya.
4. Help finance the Universal Health Care Program
Abaya also said that, unlike some of the other reform bills proposed, HB 5727 specifically allocates the lion’s share of collections toward funding the Universal Health Care Program.
In its current form the bill would raise P60.7 billion in taxes for the government during its first year of being implemented.
Health Secretary Ona has said P56.2 billion would be allotted to pay for Universal Health Care Coverage that would benefit all provinces.
For alcohol products, Abaya said HB 5727 calls for:
1. Taxing based on alcohol content not raw materials
Abaya explained that using alcohol content as the basis of classification is not only more accepted worldwide but would make the Philippines compliant with World Trade Organization standards.
In 2011, WTO ruled that the Philippines’ current alcohol taxes break rules for free trade.
Currently alcohol is taxed based on the drink’s raw materials, with a low tax of only P14.68 per proof liter on beverages with coconut, cassava, camote, or cane sugar.
The Abaya Bill would phase alcohol towards a uniform tax rate over 2 to 3 years.
Current for distilled spirits
Net retail price based on 750 ml volume capacity | Tax per proof liter |
---|---|
Above P675.00 | P634.89 |
P250-P675 | P317.45 |
Below P250 | P158.72 |
* Spirits produced from nipa sap, coconut, cassava, camote or buri plam or from cane sugar are taxed P14.68 per proof liter. Above prices are for products from other raw materials.
Abaya reform for distilled spirits
Alcohol content | Year 1 Tax per proof liter | Year 2 Tax per proof liter | Year 3 Tax per proof liter |
---|---|---|---|
More than 45% alcohol volume | P317.45 | P233.73 | P150.00 |
Less than 45% alcohol volume | P42.00 | P80.00 | P150.00 |
Current for fermented liquor
Net retail price per liter of volume capacity |
Tax per liter |
---|---|
Above P22 | P20.57 |
P14.50-P22 | P15.49 |
Below P14.5 | P10.42 |
Abaya Reform for fermented liquor
Alcohol content | Year 1 per liter | Year 2 per liter | Year 3 per liter |
---|---|---|---|
All fermented liquor | P25.00 | P25.75 | P26.52 |
2. Indexing to inflation
Following the implementation of a unitary tax rate of P150 on distilled spirits, the tax will rise or fall based on fluctuations in inflation.
3. Discouraging youth and poor from drinking
Abaya admitted that when it comes to curbing excessive use, price hikes for alcohol are not as effective as cost increases on tobacco. Still he explained there might be a 2% drop in consumption for every 10% increase in price.
He said a beer like Redhorse could go from P65.49 per liter bottle to about P81.82 in the first year of implementation. While a distilled spirit, like Tanduay, would increase from P125.68 per liter bottle to P150.16.
4. Raising money for health care
Of the P60.7 billion that would be raised in revenues, P30.6 billion or 50.4% will come from taxes on spirits and liquor. The bulk of those funds will pay for health care for the poorest Filipinos.
Abaya and his supporters hope the bill will be passed before the House of Representatives adjourns or goes on recess June 7, 2012.
The bill will increase the cost of alcohol and tobacco. It will also give government more money for health services. – Rappler.com
Add a comment
How does this make you feel?
There are no comments yet. Add your comment to start the conversation.