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Philippines Congress Ratifies Revised Sin Tax Bill

By Mary Swire, Tax-News.com, Hong Kong

13 December 2012


The Congress of the Philippines has ratified an excise reform on alcohol and tobacco widely described as the "Sin Tax Bill," following agreed revisions that reconcile House and Senate versions.

The final version includes a unitary tax regime by 2107 and a rise in excise on tobacco from 29% to 63% by the same year.

Measures affecting alcohol include a tax of PHP20 (USD0.49) per liter for distilled spirits and fortified wines (defined as being more than 25% alcohol) from 2013, plus an ad-valorem tax of 15%. This tax will rise to 20% in 2015, and the PHP20 tax added to the net retail price will rise yearly by 4% from 2016.

Still and carbonated wines will see rises of PHP30 or PHP60 depending on whether alcohol content is above 14%, while sparkling wines, champagnes, and fermented drinks will have hikes based on retail price. All fermented drinks will be at a unitary rate of PHP23.50 per liter by 2017.

Excise on tobacco will rise from 29% to 63% by 2017. From 2013, cigars will be taxed at 20% VAT plus a specific tax of PHP5 per cigar, with the PHP5 tax rising by 4% each year. Cigarettes packed by machine will be taxed more highly than cigarettes packed by hand, and the rate for machine-packed cigarettes will relate to net retail price. By 2017, a unitary rate of PHP30 per pack will apply to machine-packed cigarettes. The Bill also replaces a price classification for tobacco which had formerly been frozen at 1996 prices, and removes arrangements that have favored brands introduced at an earlier date.

According to a statement by Finance Secretary Cesar V. Purisima, the new rates for tobacco are close to the international standard recommended by the World Health Organization and the World Bank, while the rates for distilled spirits are compliant with the World Trade Organization. Purisma regards the Bill as bringing "to closure this 16-year struggle for a better excise tax regime on tobacco and alcohol." Despite warnings that projected revenues from the tax hikes were over-optimistic, Purisma reaffirmed expectations that the reform will bring in more than PHP30bn over the next year.

Some lawmakers warn that the changes will harm tobacco farmers and encourage smuggling. However, the Bill specifies that manufacturers must procure 15% of their tobacco from locally-grown sources, and it includes the provision that "unique, secure and non-removable identification markings" must be added to the products.

TAGS: public health | law | Philippines | excise duty | food | legislation | retail | trade

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