Proposed sin tax measure discriminates against low-priced brands, says ABI

MANILA, Philippines - Asia Brewery Inc. (ABI), the beer company owned by Lucio Tan, said the proposed sin tax measure, currently being discussed before the Senate ways and means committee, discriminate against low-priced brands.

In his presentation to the committee during a hearing on Thursday, ABI vice president Enrique Martinez said low-priced brands like Gold Eagle, Beer Na Beer and Colt 45 will have the biggest tax increase of 107 percent and 140 percent under Senate Bills 2763 and 3249, respectively.

Senate Bill 2763 was filed by Senator Panfilo Lacson while Senate Bill 3249 was filed by Senator Miriam Defensor-Santiago. Both measures seek to raise taxes on alcohol and cigarettes and to shift the system into a unitary regime.

The House of Representatives has already approved its version of a new sin tax measure, which seeks to raise P31.35 billion in the first year of implementation.

“The pending bills are discriminatory to consumers with low income and the excessive tax increase will also encourage smuggling and counterfeiting,” Martinez said in his presentation.

This, he claims, would result in lower sales volume.

House Bill 5727, authored by Cavite Rep. Joseph Abaya and approved by the House of Representatives is also among the measures being discussed by the committee.

This imposes a 32 percent tax increase on the low-priced brands while the mid and high-priced beer products are exempted from any tax increase in 2013.

“What exacerbates the discrimination against the low-priced brands is that mid-priced brands will only have a tax increase of 39 percent under Senate Bill 2763 and 61 percent under Senate Bill 3249, while the high-priced imported brands will have the smallest tax increase of only five percent under Senate Bill 2763 and 21 percent under Senate Bill 3249,” Asia Brewery said in a separate statement.

Asia Brewery also criticized the tax bracket cut-off price of P50.60 in House Bill 5727 as too high. The cut-off price of P50.60 will be used in reclassifying beer brands into higher tax brakets.

It said the choice of the cut-off price of P50.60 failed to consider that there were two cut-off prices in 1997 – P14.50 and P22.

 “Only the P22 cut-off price between the mid and high tax brackets was inflated to P50.60 using an inflation factor of 2.3 times. The P14.50 cut-off price between the low and mid tax brackets was not considered,” the company said.

This, Asia Brewery said would mean that major beer brands that account for over 60 percent of the beer market would not be reclassified to a higher tax bracket.

“In fact, popular mid- and high-priced brands will be reclassified to the low tax bracket and escape any increase in taxes in 2013,” it said.

Asia Brewery said it supports the retention of the 3-tiered specific tax system and the maintenance of the current tax classification of beer brands in the market.