Higher taxes on alcohol looms

November 18, 2018

CONGRESS is likely to impose higher excise taxes on alcohol until it reaches parity with the taxes paid by tobacco industry.

Based on proposals being finalized by the technical working group of House ways and means committee, excise for alcohol will increase with fermented liquor or beer bringing in the most incremental revenues

Excise tax on beer will increase to P40 per liter from the current P24.44 per liter if the draft proposal of Department of Finance (DoF) will be followed

At that tax rate, government will rake in P22.9-billion in revenues in 2019; P26.9-billion in 2020; P30.3-billion in 2021 and P33.3-billion in 2022 or for a total of P113.4-billion.

Finance Assistant Secretary Teresa Habitan told the TWG panel that consumption of alcohol has remained strong and stable and could have more room for tax increase.

Habitan said the DoF wants to bring the tax burden of both alcohol and tobacco to 50-50% from the current 60-40% tax sharing with the biggest tax burden going to tobacco.

Tobacco has been absorbing the lion’s share of the tax burden slapped on so-called ‘sin products” every time taxes are increased compared to minimal tax hikes for alcohol.

Rizal Rep. Michael John Duavit, a panel member, however objected to putting alcohol at tax parity with tobacco noting that tobacco is more lethal than alcohol. Duavit cautioned DoF and the committee against drastic tax hikes which could affect poor consumers.

He said expansion plans of alcohol firms will also be put on hold if higher tax is imposed.

Habitan, however, pointed out that the tobacco currently has the biggest tax burden.

Some House members proposed a moderate increase for fermented liquor to P28 per liter on the first year instead of DoF’s P40 per liter.

The DoF said at P28 per liter tax, government will only collect P2.4-billion in taxes for 2019 instead of P22.9B. Industry representatives nevertheless batted for a status quo arguing that the consumers will be at the losing end since they will just pass on the increase in tax.

There are also Senate proposals to increase tobacco tax anew to P60 to a high of P90 per pack.