DOF backs Pacquiao proposal to increase alcohol excise tax

THE Department of Finance (DOF) is supporting the measure of Sen. Emmanuel D. Pacquiao in line with raising excise tax on alcoholic beverages, which is seen to provide additional revenues for the government of around P237 billion over a five-year period and minimize binge drinking.

According to the DOF, Senate Bill (SB) 2197 will raise around P32.3 billion in the first year of its implementation in 2019, P40 billion in 2020, P47.4 billion in 2021, P54.6 billion in 2022 and P62.4 billion in 2023, for a total of P236.6 billion.

Finance Undersecretary Karl Kendrick T. Chua said computations done by the DOF’s Strategy, Economics and Results Group (SERG) show that the inflationary impact of increasing the excise tax on alcohol products under the measure would only be 0.1 percentage points.

“If inflation is, let’s say, 3.2 percent this year as the Bangko Sentral ng Pilipinas [BSP] projects, then the additional inflation will be 0.1, so 3.3 percent,” Chua said.

He also explained that like the proposed hike in cigarette taxes, increasing the excise tax levied on alcohol products will also help close the P40-billion funding gap in the universal health care (UHC) program.

Under SB 2197, an ad valorem tax equivalent to 25 percent of the net retail price per proof liter and a specific tax of P40 per proof liter will be imposed on distilled spirits starting this year. The specific tax will increase by P5 per proof liter every year thereafter until 2022. Starting 2023, the specific tax will be increased by 10 percent every year.

The bill also proposes a tax on sparkling wines and champagne of P335 for those costing P500 or less per 750-millimeter bottle and P937 for those costing more than P500. Still wines and carbonated wines containing 14 percent alcohol or less will be taxed P40 per bottle, while those with more than 14 percent but not more than 25 percent alcohol by volume will be taxed P80. The tax rates for wines will increase by 10 percent every year thereafter effective in 2020.

For fermented liquors, the tax shall be P40 per liter, regardless of where they are sold or manufactured in 2019, and will increase by P5 per liter until 2022. The tax rates will then be increased by 10 percent every year thereafter under the Pacquiao’s bill.

During the Senate hearing on the measure last month, Health Undersecretary Rolando Enrique D. Domingo also said that higher alcohol excise taxes would help curb binge drinking, which often leads to vehicular accidents and the commission of crimes.

Citing Department of Health (DOH) data, Pacquiao said “there were 2,690 transport and vehicular crash-related injuries that were alcohol-related” in 2015.

The DOF’s proposal to increase excise taxes on alcohol products falls under its Package 2 Plus of the Comprehensive Tax Reform Program.