Press Release
December 11, 2012

Senate ratifies bicam report on sin taxes

The Senate on Tuesday ratified the bicameral conference committee report restructuring excise taxes on alcohol and tobacco products.

Senator Franklin Drilon, acting chair of the Senate Ways and Means Committee, lauded the ratification of Senate Bill No. 3299, saying that he expects the sin tax reform law to be effective by January 1, 2013.

"I am glad that we were able to approve this reform measure which everybody has been waiting for in the past 16 years. We have achieved something that we really needed in order to really move our excise tax system forward, and I am glad that I have the support of our chamber," said Drilon.

"The government is expected to generate P33.96 billion in additional revenues, in its first year of implementation in 2013, by increasing the taxes on sin products such as cigarettes and alcoholic beverages. Of the amount, P23.4 billion will come from increased taxes on tobacco, while P10.56 billion will be generated from taxes on fermented liquor and distilled spirits depending on its historical burden sharing," Drilon said.

Drilon also said that the final burden sharing between tobacco and alcohol products for 2013 will be 69 percent for tobacco and 31 percent for alcohol.

"It was a give and take situation and we came up with a compromise of approximately of 69-31 percent instead of 60-40 in the Senate and 87-31 on the part of the House," Drilon said.

The total rate of excise taxes that will be collected on a five-year period, starting 2013 and ending in 2017, is as follows:

For tobacco, the total increment for 2013 is P23.4 billion; P29.56 billion in 2014, P33.52 billion in 2015, P37.09 billion in 2016, and P40.9 billion in 2017 for a total of P164.47 billion. For fermented liquors or beer, it's P4.5 B in 2013, P6.99 B in 2014, P9.52 B in 2015, P12.06 B in 2016, and P15.646 B in 2017, or a total of P48.53 B incremental tax in the period of five years.

For distilled spirits, it is P6.06 B in 2013, P6.31 B in 2014, P7.59 B in 2015, P7.71 B in 2016, and P7.82 B in 2017, and therefore the five-year period would have a total of excise tax for the distilled spirit in the amount of P35.34 billion.

On a yearly basis, for the three products, the total excise tax collection for 2013 is expected at P33.96 billion, P42.82 billion in 2014, P50.63 billion in 2015, P56.86 billion in 2016, and P64.18 billion in 2017, or for a five-year period, the total incremental revenues for the three products would be P248.49 billion.

"Let me emphasize that insofar as the financial burden on the cigarette is concerned, we were able to achieve the Senate version. The Senate version imposed a P23.55B for cigarettes on year one, 2013," said Drilon, adding "what we came out with is P23.4B, so that the financial burden in cigarettes is lower than the financial burden that we approved of in bicam."

According to Drilon, after deducting the allocations under Republic Acts 7171and 8240, 80 percent of the remaining balance of the incremental revenue will be allocated for universal health care under the National Health Insurance Program; the attainment of the Millennium Development Goals and health awareness campaigns.

RA 7171 is the act promoting the development of farmers in the Virginia tobacco producing provinces, while RA 8240 amends certain sections of the National Internal Revenue Code.

"The taxes that will be collected for next year will cover another 5.2 million Filipino families, the second tier of the poorest sector of society. For this year, 5.2 million Filipino families have been covered by Philhealth. This is on top of 5.2 million poor Families already covered under the General Appropriations Act for 2013. By 2014, the entire budget of about P25 billion for Philhealth premiums to cover 10.4 million families will now come from the sin tax," explained Drilon.

"The remaining twenty percent will be allocated nationwide based on political and district subdivision for medical assistance and health enhancement facility programs, the annual requirement of which will be determined by the Department of Health," Drilon said.

Meanwhile, an amendment introduced by Senate President Juan Ponce Enrile, which calls for the strengthening of the measure's anti-smuggling provisions, was modified to apply only to cigarettes and distilled spirits. From Enrile's original amendment of 20 percent, Section 8 now reads that any manufacturer of tobacco products must source at least 15 percent of its tobacco leaf raw material supply locally, subject to adjustments based on international treaty commitments.

"This is a very relevant bill that we have passed. We hope to submit this to the President within the week, so that he can sign it into law before Christmas," Drilon added. (YVONNE ALMIRAÑEZ, PRIB)

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