Court junks TRO bid on sin tax

MANILA, Philippines - The government scored a minor victory after a lower court junked liquor makers’ request for the issuance of a temporary restraining order (TRO) against the implementation of the Sin Tax Law.

In a decision dated Jan. 16, the Manila Regional Trial Court (RTC) affirmed the Bureau of Internal Revenue (BIR)’s argument that no court has the authority to restrain the collection of taxes as provided under Section 218 of the National Internal Revenue Code (NIRC).

The Manila RTC also cited the absence of the petitioners’ clear legal right to be protected over the right of the state to collect taxes.

The court pointed out that a preliminary injunction or TRO may be issued only in the existence of a clear and unmistakable right to be protected, and an urgent necessity to prevent serious damages.

In its petition filed last week, the Distilled Spirits Association of the Philippines (DSAP), comprising the country’s biggest liquor manufacturers Emperador Distillers Inc., Tanduay Distillers Inc., Ginebra San Miguel and Destilleria Limtuaco Inc., sought the immediate issuance of a TRO, saying some provisions of the Sin Tax Law are unconstitutional and will result in the collapse of the local distilled spirits industry.

They said the implementation of the law would require them to pay excise taxes twice on ethyl alcohol used as raw materials and which was subsequently compounded, translating to very substantial losses.

Under the measure, locally produced compounded liquor is treated differently from imported liquor because the former is taxed twice, first on the raw material, and again on the finished product, whereas the latter is only taxed on the finished product.

The DSAP pointed out that most of them already paid about P1.7 billion in excise taxes on their ethyl alcohol inventory as of the effectivity of the law.

The petitioners alleged that the sale of alcoholic beverages may be considered a property right, citing the constitutional provision on the protection of life, liberty, and property.

The court, however, argued that the taxpayers’ property right should take a step back to the state’s “paramount” need to generate funds to sustain its functions.

“The BIR stands by its position which the court has affirmed. The petitioners will not incur irreparable damages if the law is implemented,” said BIR Commissioner Kim Jacinto-Henares.