Higher sin taxes take effect today

MANILA, Philippines - The New Year ushers in higher taxes on cigarettes, beer, liquor, wine, and other tobacco and alcohol products.

When he signed Republic Act No. 10351 on Dec. 20, President Aquino said, “Today, we are again making history: for the past 15 years, we have been trying to reform the tax structure of imposing excise tax on tobacco and alcohol products. After 15 long years, we have finally succeeded.”

“As the people’s servant, I shall personally ensure that this government shall implement the Sin Tax Reform Act of 2012 in a transparent and accountable manner starting Jan. 1, 2013,” he said.

Starting today, the tax on cigarettes packed by hand, which comprise the bulk of tobacco products sold in the country, is P12 per pack for those with a net retail price (excluding the excise tax and the 12-percent value added tax) of P11.50 and below. For those with a higher retail price, the tax is P25.

The rates will go up to P17 and P27 in 2014, P21 and P28 in 2015, and P25 and P29 in 2016. There will be a single rate of P30 per pack starting 2017, rising by four percent every year.

This means that the four categories of cigarettes based on their retail prices and tax rates under the old law have been reduced to just two, with the new law providing for a uniform tax treatment beginning in 2017.

The old levies ranged from P2 per pack for low-priced cigarettes to P28 for those classified as premium.

For fermented liquor (beer), the tax is P15 per liter if the net retail price is P50.60 and below per liter, and P20 per liter for those with a higher price.

The rates will rise to P17 and P21 in 2014, P19 and P22 in 2015, and P21 and P23 in 2016. A uniform tax of P23.50 will be imposed starting in 2017, which will increase by four percent every year.

For distilled spirits, the tax is 15 percent of net retail price plus P20 per proof liter, rising to 20 percent plus P20 in 2015.

In the case of wine, the tax is P200 per bottle of 750 ml (milliliter) if its net retail price is P500 or less, and P500 per if the wine costs more.

According to Sen. Franklin Drilon, principal author of the Senate version of the sin tax bill, additional sin tax collections for 2013 would amount to P33.96 billion, P42.82 billion in 2014, P50.63 billion in 2015, P56.86 billion in 2016, and P64.18 billion in 2017, for a total of P248.49 billion in five years.

Some 70 percent of such collections would come from tobacco products.

The law allocates 15 percent of incremental revenues for programs that would benefit tobacco farmers.

Of the remaining 85 percent, 80 percent “shall be allocated for universal health care under the national health insurance program, the attainment of the Millennium Development Goals (MDGs) and health awareness programs; and 20 percent shall be allocated nationwide, based on political and district subdivisions, for medical assistance and health enhancement facilities, the annual requirements of which shall be determined by the Department of Health.”

The 20 percent for medical assistance and hospitals to be distributed among “political and district subdivisions” is additional pork barrel funds for members of Congress.