House unit studies alcohol, cigarette tax bids

MANILA, Philippines - The House of Representatives Committee on Ways and Means has given its technical working group (TWG) two weeks to study, compare and reconcile all four excise tax proposals for alcohol and cigarettes pending in the committee.

The TWG is composed of representatives from the Department of Finance (DOF), Bureau of Internal Revenue (BIR), National Tax Research Center (NTRC), Department of Health (DOH), Department of Education (DepEd), National Tobacco Administration (NTA), producers and manufacturers, consumers’ groups, tobacco farmers, the local government units especially tobacco-producing provinces, among others.

Rep. Hermilando Mandanas (2nd District, Batangas), committee chairman, said that upon completion of its study, the TWG would refer this to the committee for two or more meetings, after which the panel is expected to vote on the proposal.

The four excise tax measures pending before the committee are House Bill 2484 seeking to provide for an additional excise tax of 10 percent on alcohol products to generate funds for the information communication technology (ICT) program of public elementary and secondary schools, and construction of new school buildings, hiring of new teachers preferably with ICT proficiency, English, Math and Science Majors; and House Bill 2485 seeking to provide for an additional tax of P3 per pack of cigar and cigarettes to generate funds for the Philippine Health Insurance universal coverage of indigent families, barangay officials, health and day care workers.

Another measure is House Bill 2687 filed by Negros Oriental Representatives Jocelyn Limkaichong (First District), George Arnaiz (Second District) and Pryde Henry Teves (Third District) seeking to restructure the excise tax on alcohol and tobacco products; and House Bill 3059 filed by Mandanas seeking to promote an equitable sharing of costs and benefits among all stakeholders, parties affected, involved, or in one way or another connected with the alcohol and tobacco industries.

Finance Assistant Secretary Teresa Habitan has informed the committee that in 2009, the BIR collected P20.6 billion of excise taxes from alcohol products, P24.4 billion from tobacco products, for a total of P44.8 billion.

In terms of excise tax ratio to total revenue collection of BIR, Habitan said six percent of total BIR collection is attributable to excise taxes on alcohol and tobacco products. In 2003, the total collection from alcohol and tobacco products comprised 7.9 percent of the total BIR collection, of which 4.7 percent came from tobacco products and 3.2 percent from alcohol products.

Meanwhile, according to data from the Department of Finance, the increase in tax rates decreases volume of removals but increases revenue collection.

DOF data showed possible reasons for this: production as being practiced by the industry is frontloaded in the year prior to the effectivity of the tax increase; and the factor of elasticity, that consumption does not really decline by as much as the increase in the tax rates.