DOF still wants higher ‘sin’ tax rates in original version

The Department of Finance (DOF) remains hopeful that the final version of the tax reform measure covering the so-called “sin” products would mirror the original version submitted by the Duterte administration to Congress.

As DOF lauds the swift action by the House of Representatives on House Bill (HB) No. 1026, Finance Secretary Carlos G. Dominguez III expressed his optimism that the lawmakers would still approve higher excise tax rates on alcohol, e-cigarettes and “vaping” products.

“Higher taxes on ‘sin’ products like liquor and cigarettes will provide steady revenue stream for the Duterte administration’s aggressive public investments in expanded social services like universal heath care (UHC),” Dominguez said.

Based on DOF estimates, the House committee on ways and means’ approved HB 1026 would yield 1252.6 billion in revenues between 2020 and 2024, lower by 36 percent compared with the Duterte administration-backed version of 1397.4 billion.

The lower estimated potential revenues was due to House lawmakers’ decision to adjust downwards the tax rates to be imposed on alcoholic beverages and ecigarettes.

The DOF proposed to set the tax rates on e-cigarettes and vapes at 145 starting next year until it reaches 163 by 2024. But the House ways and means committee adopted a much lower series of increases starting with 130 in 2019 to 147 after five years.

For femented liquors like beer and alcopops, the DOF wanted its specific tax per liter to increase in tranches between 2019 and 2024 starting at 140 to an ultimate

161. The lawmakers, however, approved that the tax shall begin with 132 next year until it reaches 141 within the next five years.

Specific excise tax rate on distilled spirits like brandy, rum, whiskey and gin, on the other hand, was set by the lawmakers at 135 beginning next year to 152 by

2024. This range is also below than the DOF’s 140 to 161 proposal for that same period.

The lawmakers also did not follow the DOF’s P25 proposal for distilled spirits’ ad valorem tax as they approved only 122.

Dominguez said the passage of the additional taxes on e-cigarettes such as heated tobacco and vapor products as well as alcohol will augment the funding requirement for the UHC program.