Domestic manufacturers of distilled spirits have warned that over-taxing their products may price these out of the market, dampen consumption and generate lower revenue as a result.
A paper dated Sept. 13 and submitted to the Senate ways and means committee said local distillers support increases in specific and ad valorem rates similar to levels in House Bill No. 1026, the second package of the Duterte administration’s tax reform program.
It was signed by Olivia Limpe-Aw, head of the Distilled Spirits Association of the Philippines.
The Senate committee is conducting public hearings on added increases in excise on e-cigarettes and alcoholic drinks as part of package 2 of the tax reform program.
The House had already passed its version of the proposed tax measure which imposes a tax rate of P30 per proof, or level of alcohol content, and P5 more per year until 2023 before imposing a 7 percent annual increase henceforth.
HB No. 1026 will also raise ad valorem rates to 22 percent of net retail price without yearly escalation.
But the Department of Finance (DOF) wanted the increase in specific tax per proof liter at a higher P40 next year, and the ad valorem tax also at a bigger 25 percent.
in the industry’s position paper, Limpe-Aw said that bigger tax hikes were likely to cripple demand, citing the Nielsen Retail Index.
It said in a span of one year—2017 and 2028–prices of alcoholic drinks and tobacco products had increased by 20 percent “while no other major household expenditure had increased by 7 percent.”
“The effects of these are decreased consumption of alcoholic beverages that seem to be decreasing at a higher rate from down 3.4 percent in 2017 to down 5.1 percent in 2018,” Limpe-Aw said.
“Higher increases in tax may lead to decreased revenues and tax yield will also decline,” Limpe-Aw added.
The Tax Reform for Acceleration and Inclusion (Train) Act and the Sin Tax Reform Law of 2012 have been jacking up excise on cigarette and alcohol products, but at rates that the government had said were still low and could be further increased./TSB
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