‘Sin taxes’ seen to raise P370 B in 5 years

MANILA, Philippines — The proposed bill raising taxes on alcohol, heated tobacco products and e-cigarettes is expected to raise close to P370 billion over the next five years, addressing funding gap for health care services, according to Finance Undersecretary Karl Kendrick Chua.

In a roundtable discussion, Chua told The STAR Package 2+ of the Duterte administration’s Comprehensive Tax Reform Program would help plug the funding gap for Universal Health Care.

Of the total additional revenues until 2024, about 65 percent or P240 billion would come from alcohol products, while 35 percent or P130 billion would be sourced from tobacco products.

Data provided by the Department of Finance (DOF) showed additional revenues from the proposed bill would increase gradually from P47.7 billion in 2020, P63 billion in 2021, P74.8 billion in 2022, P88.4 billion in 2023 and P95.6 billion in 2024.

Revenue estimate from the higher taxes on alcohol products would increase gradually from P32.1 billion in 2020 to P63.9 billion in 2024, while that for tobacco products would rise from P15.7 billion to P31.8 billion.

Both the finance department and the Department of Health urged the 17th Congress to pass laws which would further raise taxes on alcohol beverages and cigarettes to fully implement the Universal Health Care law signed by President Duterte in March.

Chua said a bill in Congress seeks to increase the current uniform tax on cigarettes and other tobacco products from P35 per pack of 20 to P45 per pack for 2020, P50 in 2021, P55 in 2022, P60 in 2023, and five percent indexation every year thereafter.

On the other hand, Congress also plans to impose a tax of P10 per pack of 20 of heated tobacco products in 2020 and five percent indexation onwards.

For e-cigarettes, lawmakers want to impose a tax ranging from P10 for every 10 milliliters to P50 for 50 milliliters plus P10 for every additional 10 milliliters.

Chua said the finance department is pushing for a uniform rate for heated tobacco products with that of cigarettes.

Likewise, a bill filed by Sen. Manny Pacquiao is pushing for the increase in the specific tax per liter for fermented liquors and ad valorem and specific taxes on distilled spirits to P40 in 2020, P45 in 2021, P50 in 2022, P55 in 2023 and a 10 percent indexation every year thereafter.

The current taxes on liquors are pegged at P24.4 per liter of volume capacity excluding excise on net retail price and value added tax and P34.07 per liter for liquors brewed and sold at microbreweries or small establishments regardless of net retail price.

On distilled spirits, the government currently slaps a P20 percent ad valorem rate on net retail price and P23.4 specific tax per proof liter.

Aside from discouraging alcohol consumption which could lead to a better health and social outcomes among the youth and the poor, Chua said the additional revenue would ensure financial sustainability for the Universal Health Care.

According to Chua, the proposed bill promotes public health and is consistent with the health objectives of the Duterte administration.

“Imposing higher excise taxes is still the most effective policy tool to increase prices, thereby discouraging the consumption of sin products, in particular, among the youth and the poor who are the most sensitive to price changes,” he said.

Chua said the additional revenue would help address the funding gap of about P403 billion for health care from 2020 to 2024. The annual cost of universal health care until 2024 is expected to reach P1.44 trillion.

After the passage of the sin tax bill, Chua said the funding gap would be reduced to only P44.6 billion as the bill on alcohol tax would contribute P251 billion and the enrolled bill on tobacco tax would yield P130 billion over a five-year period.