Cigarette, alcohol taxes going up again

MANILA, Philippines - Bad news for smokers and drinkers: the New Year ushers in higher excise taxes on cigarettes, beer, liquor and other tobacco and alcohol products.

The taxes are going up again today. This  is the fourth year in a row that levies on the so-called sin products have increased under the Sin Tax Reform Bill passed by Congress in December 2012.

President Aquino signed the measure into law that same month.

Before that, the tax rates had not been adjusted since 1997.

Under the law, the excise tax on cigarettes packed by machine goes up by P4 from P21 in 2015 to P25 per pack this year, if their net retail price (excluding the excise tax and value added tax) is P11.50 and below per pack.

If the retail price is above P11.50, the tax is P29 per pack, up from P28.

When the Sin Tax Reform Law took effect on Jan. 1, 2013, the tax rates were P12 and P25.

In the case of cigarettes packed by hand, there is a uniform tax, which goes up by P3 per pack, from P18 to P21.

Most cigarettes are packed by machine. For cigars, the specific tax – initially pegged at P5 apiece and imposed starting Jan. 1, 2014 – is to be increased by four percent through a revenue regulation the secretary of finance is mandated to issue.

Aside from the specific tax, there is an ad valorem tax of 20 percent on the cigar’s net retail price.

For fermented liquors, the tax goes up to P21 per liter from P19, if the net retail price does not exceed P50.60 per liter. The levy is P23, up by P1, if the retail price is above P50.60.

Fermented liquors include beer, lager, ale, porter and similar products, except local concoctions like tuba, basi and tapuy.

The tax will also increase for other sin products like distilled spirits and wines.

In the past, certain tobacco and alcohol producers advanced their deliveries so these would not be covered by the higher tax.

According to the Bureau of Internal Revenue, sin tax collections from January to November this year amounted to P123.641 billion.

The bulk of the revenues came from cigarettes and other tobacco products (P86.338 billion), followed by fermented liquors (P25.246 billion), distilled spirits (P12.029 billion) and wines (P28 million).

Under the law, 15 percent of incremental collections will go to tobacco-producing provinces. The money is to be spent for the benefit of tobacco farmers.

The bulk of the remaining collections will go to the government’s universal health care program, which provides PhilHealth insurance coverage to millions of poor families.

Part of the increment is to be apportioned among congressional districts for medical assistance and health facilities.

The Sin Tax Reform Law amended the National Internal Revenue Code of 1997, the statute that many congressmen and senators were trying to change so that income tax rates could be adjusted for inflation.

The lawmakers abandoned such effort due to President Aquino’s repeated opposition to their proposal.

While Aquino had agreed and even pushed for the adjustment of tobacco and alcohol taxes for inflation, he is consistently opposing the move of his congressional allies to index income tax rates to inflation.

Because the rates have not been adjusted since 18 years ago, the Tax Management Association of the Philippines estimates that a worker who used to pay 10 percent in income tax now pays 20 percent.

Proponents of lower income tax plan to revive their move when Aquino steps down in June.