House approves measure increasing sin taxes
The House of Representatives last night approved on third and final reading separate bills seeking to increase the excise tax on tobacco and alcohol products.
Congressmen likewise approved on third and final reading House Bill 8645, the proposed “Passive Income and Financial Intermediary Taxation Act” which seeks to redesign financial sector taxation to make it “simpler, fairer and more efficient.”
With 187 voting in the affirmative, seven in the negative, HB 8677 which proposes to impose additional 12.50 excise tax on tobacco products was approved on final reading.
In a separate voting that registered 189 for and 7 against, HB 8618, the bill that proposes to raise excise tax on alcohol products by P6.60, was passed on third and final reading.
In HB 8645, which will amend Sections 22, 24-30, 32, 34, 37-39, 42, 51-52, 54, 56, 57, 73, 108, 121-123, 174, 176, 179, 181-191, 194, 195-199 of the National Internal Revenue Code (NIRC) of 1997, the voting was 190 for and 7 against. The measure, which is expected to provide neutrality in tax treatment across financial institutions and financial instruments, will also repeal Sections 127, 175, 177, 178, 189, 192 and 193 of the NIRC.
Nueva Ecija Rep. Estrellita Suansing, chairperson of the House Committee on Ways and Means, said HB 8677, which consolidated two separate measures, will implement the P2.50 excise tax adjustment on tobacco products starting July, 2019.
Suansing disclosed that under HB 8677, the schedule of cigarette excise tax will be as follows: “137.50 in 2019, 140 in 2020, 142.50 in 2021, 145 in 2022 and then four-percent increase every year thereafter, starting 2023, every July.”
The bill practically extended the excise tax provisions of Republic Act 109634, the Tax Reform for Acceleration and Inclusion (TRAIN) which imposed a unitary excise tax on cigarettes of 132.50 per pack effective January 1, 2018, from last year’s 130 per pack.
Under the law, the cigarette excise tax rates shall be increased to 135 a pack from July 1, 2018 to Dec. 31, 2019; 137.50 from Jan. 1, 2020, to Dec. 31, 2021, and 140 from Jan. 1, 2022, to Dec. 31, 2023.
HB 8618 provides that starting January, 2019, an ad valorem rate of 22 percent, including specific tax rates per proof liter of 130, 135, 140, 145 from 2019 to 2022, respectively, will be imposed on distilled spirits; and it will be increased by 7 percent annually starting 2023.
Currently, Republic Act 10351 or Excise Tax Reform Law is imposing distilled spirits a 122.40 specific tax and an ad valorem tax of 20 percent.
The lower chamber also approved a shift to a unitary rate of 1650 plus ad valorem of 15 percent for sparkling wines, compared to the two-tiered system under RA 10351. It will be increased by 7 percent annually starting 2023.
Meanwhile, Suansing said HB 8645 will minimize arbitrage opportunities and promote capital market development and tax competitiveness within the contest of financial globalization, increased capital mobility and financial inclusion.
HB 8645 replaces the variable final taxes on individuals and corporations having income subject to final tax and other interest income into a unitary rateof 15 percent.
It also reduces annually the 0.6 percent final tax on stock transaction on listed stock until it reaches 0.1 percent and removes the 1.2 and 4 percent on initial public offering tax on stock transactions tax on listed stocks.