Alcohol excise tax seen to raise P237 billion

MANILA, Philippines — A Senate bill which seeks to raise the excise taxes imposed on alcoholic beverages is expected to generate P236.6 billion in additional revenues over the next five years, according to the Department of Finance (DOF).

Finance Undersecretary Karl Kendrick Chua said Senate Bill 2197, as proposed by Sen. Manny Pacquiao, may increase the 2019 tax collections by P32.3 billion should it be implemented starting this year.

This is seen to steadily grow to P40 billion in 2020, P47.4 billion in 2021, P54.6 billion in 2022, and P62.4 billion in 2023, for a total additional revenues of P236.6 billion over a five-year period.

According to Chua, the recommended increase in alcohol taxes, much like the proposed hike in cigarette taxes, would help cover the P40 billion funding gap in the government’s Universal Health Care (UHC) Program.

Pacquiao echoed Chua, saying incremental revenues to be collected after imposing higher taxes on alcohol and tobacco products could become a source of continuous funding for the UHC program. 

“By increasing the tax on alcohol, along with tobacco, we can help the government raise funds that will ultimately benefit all our citizens. This would bring far greater good to our countrymen compared to whatever benefits alcohol may have to some consumers,” Pacquiao said.

On the bill’s inflationary impact, Chua said computations done by the DOF showed that Senate Bill 2197 would raise inflation by only 0.1 percentage points.

“If inflation is, let’s say, 3.2 percent this year as the Bangko Sentral ng Pilipinas (BSP) projects, then the additional inflation will be 0.1, so 3.3 percent,” Chua said.

Under SB 2197, an ad valorem tax equivalent to 25 percent of the net retail price per proof would be imposed on distilled spirits starting 2019.

In addition, the specific tax on distilled spirits would be adjusted to P40 per proof liter starting 2019, with a P5 per liter increase every year thereafter until 2022. Starting 2023, the specific tax will be increased by 10 percent every year.

The bill also seeks to increase the excise tax on sparkling wines or champagnes based on the net retail price per bottle of 750 milliliter volume capacity.

If the net retail price reaches P500 or less, an excise tax of P335 will be imposed. For sparkling wines or champagnes with a net retail price of more than P500 per 750 ml capacity, the excise tax will increase to P937.

Still wines and carbonated wines containing 14 percent alcohol or less will be imposed an excise tax of P40 per bottle, while those with more than 14 percent but not more than 25 percent alcohol by volume, would be taxed P80.

The tax rates for wines would increase by 10 percent every year thereafter effective 2020.

Fortified wines containing more than 25 percent of alcohol by volume would be taxed the same as distilled spirits.

Meanwhile, fermented liquors would be levied an excise tax rate of P40 per liter starting 2019, which would further increase by P5 per liter until 2022. The tax rates would then be increased by 10 percent every year thereafter.