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In November, Malacanang Palace downplayed concerns that the sin tax reform measure would lead to massive unemployment in the tobacco industry and encourage smuggling, as reported in the BusinessMirror. That report quoted Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office saying, “That’s a common argument brought up in almost every country where sin taxes are about to be increased. But the evidence will show that after a period of adjustment, tobacco company incomes recover.” For its part, the Distilled Spirits Association of the Philippines (DSAP), an organization composed of some of the country’s top liquor makers, is seeking a temporary restraining order on the implementation of the sin tax reform law, ABS-CBN reported on Jan. 9. The DSAP claimed the implementing rules of the sin tax reform law constitutes “double taxation,” since “it effectively taxes distilled spirits twice – first as a raw material, and again, as a finished product.” New schedules of ad valorem tax and specific tax are provided for distilled spirits, wines, and fermented liquor in the BIR guidelines. According to the BIR guidelines on sin tax rates, fermented liquor (beer) tax is ₱15 per liter if the net retail price is ₱50.60 and below per liter, and ₱20 per liter for those with a higher price. For distilled spirits, the tax is 15% of net retail price plus ₱20 per proof liter. For wine, the tax is ₱200 per bottle of 750 ml if its net retail price is ₱500 or less, and ₱500 per if the wine costs higher. The DSAP also claimed the sin tax law “deprives local manufacturers of equal protection and violated the rule on uniformity of taxation under the Constitution.” Likewise, DSAP said the BIR’s guidelines on sin tax law were promulgated without public participation.
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According to the Sin Tax Reform Act, additional revenues will go to programs for tobacco farmers, and to the country’s universal health care program under the national health insurance program, and other health programs such as medical assistance, hospitals and health-enhancement facilities. Tax hikes on cigarettes are expected to serve as a strong disincentive to smoke. Findings from the 2009 Philippines’ Global Adult Tobacco Survey by the World Health Organization revealed there are an estimated 17 million smokers in the Philippines, and that an average of 10 Filipinos die from a tobaccorelated disease every hour. The BIR says reforming sin taxes would also convince credit-rating agencies to upgrade the country’s ranking to investment grade, thereby encouraging foreign direct investments into the country, according to a November Philippine Daily Inquirer report. All major credit firms — Moody’s Investors Service, Fitch Ratings and Standard & Poor’s — currently rate the Philippines a notch below investment grade.
• January 14-27, 2013
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