House shelves hearing on 'sin' taxes

MANILA, Philippines - The House of Representatives has decided to shelve hearings on the proposed restructuring of taxes on the so-called “sin” products like cigarettes and liquor.

Speaker Feliciano Belmonte Jr. told reporters yesterday that he made the decision after meeting with representatives of the Distilled Spirits Association of the Philippines on Tuesday.

“I assured them that we will not make a decision now. We will hold off hearings,” he said.

He said the House will not hold hearings until the World Trade Organization rules on the plan of the Philippines to appeal WTO’s ruling finding local liquor taxes as “discriminatory” against foreign or imported brands.       

“Meantime, we will try to have a presence in the hearings of the WTO, where the appeal will be lodged,” he said.

Two weeks ago, presidential spokesman Edwin Lacierda said the government would appeal the WTO ruling.

Local producers of liquor and distilled spirits have written Belmonte and Batangas Rep. Hermilando Mandanas to appeal to them to desist from considering proposals to restructure “sin” taxes until the planned Philippine appeal is acted upon.

Business tycoons Ramon Ang of San Miguel Corp., Lucio Tan of Tanduay Distillers, Inc., Andrew Tan of Emperador Distillers, and Olivia Limpe-Aw of Distileria Limtuaco signed the letters. Their companies are the biggest distillers and alcohol producers in the country.

The four said any move by the House to consider bills seeking to restructure excise tax rates could jeopardize the appeal for the reversal of the adverse WTO ruling.

They said an important economic interest of the country is at stake, claiming that the WTO ruling “threatens the very survival of the distilled spirits manufacturing sector, including allied and downstream industries.”

They said in 2010, local distillers produced 66 million cases of distilled spirits worth P50 billion or more than $1 billion.

“Over a million families depend on our industry, which includes alcohol distillery workers, bottling factory workers, sales people, merchandisers, delivery personnel, and on upstream industries like the sugar industry,” they stressed.

They pointed out that local producers also provide livelihood to at least 700,000 retail store operators and thousands of junkshop owners.

The country is a signatory to WTO agreements calling for the dismantling of tariff barriers to promote global trade.

The House intends to review excise taxes on the so-called “sin” products like cigarettes and liquor to generate additional revenues for the national coffers.

Addressing his colleagues on July 25, when the second regular congressional session opened, Belmonte said the House would not impose new taxes but would instead put in place tax reforms that would increase revenues.

“The prevailing multi-tax rate classification of cigarette and alcohol products and the pegging of sin taxes to 1996 price levels have convoluted the tax system and shrunk the tax base, dampening the government’s revenue efforts and essentially depriving the public of resources which could have been used to fund the most basic of services,” he said. “Restructuring sin taxes - in lieu of imposing new ones - will generate additional revenues which can fund the requirements of universal health care,” Belmonte said.

There are proposals in the House to reduce the present four tax rates to two and eventually to one, and base them on present price levels. There would also be an inflation-based indexation scheme.