MANILA, Philippines — The Department of Finance (DOF) is asking President Duterte to veto a provision in the newly approved sin tax bill, which prohibits government authorities from investigating alcohol and electronic cigarette firms without a court order.
In an interview, Finance Secretary Carlos Dominguez expressed concern over one of the provisions of the bill on alcohol and e-cigarette taxes, which was approved recently by the bicameral conference committee.
“There is a line there that says we cannot raid before the court order. You cannot check (warehouses) without a court order. I said, that’s not allowed,” Dominguez said, adding “that’s how we catch these guys.”
To repeal the provision, Dominguez said the DOF had sent a letter to Malacañang asking President Duterte to veto the item in the bill.
“I sent him a memo already, right after the bill was passed, toward the end of the year,” Dominguez said, adding that a line veto would be allowed as the bill is a tax measure.
The bill, which seeks to increase taxes on alcohol and e-cigarettes, was passed by Congress on Dec. 18 last year. If Duterte does not sign or take any action on the bill, it will lapse into law by Jan. 24, Dominguez said.
The ratified bill seeks to impose a specific tax rate of P35 per liter on fermented liquor by 2020, which will increase to P37 by 2021, P41 by 2023, and P43 in 2024, with a six percent indexation thereafter.
Distilled spirits will also be levied an ad valorem tax of 22 percent, plus a specific tax rate of P42 per liter in 2020, P47 in P2021, P52 in 2022, P59 in 2023, and P66 in 2024, with a six percent indexation thereafter.
The bill also raises the specific tax rate of sparkling and still wines to P50 per liter this year, also with a six percent indexation in the following years.
The specific tax rate for heated tobacco products will also be increased to P25 per pack in 2020, P27.50 by 2021, P30 by 2022, and P32.50 by 2023, with a five percent indexation after.
For vapes, salt nicotine products will have a specific tax rate of P37 per milliliter in 2020, P42 in 2021, P47 in 2022, and P52 in 2023, with a five percent increase every year afterwards.
Free base vape products will also be imposed a tax of P45 per milliliter this year, which will further increase to P50 in 2021, P55 in 2022, P60 in 2023, and five percent each year thereafter.
According to estimates from the Department of Finance (DOF), the approved bicam version is estimated to generate P22.2 billion in incremental revenues during the first year of implementation.
However, the DOF also said that the provision in the bill exempting all prescription medicine for high cholesterol, diabetes and hypertension from the value added tax would cut the projected revenues by P5.2 billion in 2020, resulting in a net incremental revenue of P17.1 billion.
The bulk or 60 percent of the additional collections will go to the Universal Health Care (UHC) program, 20 percent to the Health Facilities Enhancement Program (HFEP) of the Department of Health, and the remaining 20 percent to programs seeking to attain the country’s Sustainable Development Goals (SDGs).