Tobacco, alcohol industries reject new sin tax bill


Posted at Feb 22 2012 06:56 PM | Updated as of Feb 23 2012 04:14 PM

MANILA, Philippines - The tobacco and alcohol industries are opposing a Department of Finance-backed measure to raise excise taxes, citing its negative impact on local businesses and jobs.

During the House ways and means committee hearing Wednesday, local players from the distilled spirits industry said the DoF is "shooting its foot" by pushing House Bill No. 5727 filed by Cavite Rep. Joseph Emilio Abaya.

Olivia Limpe-Aw, president of the Distilled Spirits Association of the Philippines Inc. (DSAP), said DoF’s plan to collect more than P62 billion revenues through the bill is "unrealistic" as it will give relief to imported brands, while taxing out of the market local products, from which the agency plans to mainly collect the taxes.

Limpe-Aw also said that Abaya’s bill is regressive as it intends to penalize local brands with more than 1,000% increase in tax on the third year, while imported brands will enjoy a decrease of more than 1,500%.

She said by the third year, the measure will slap local distilled spirits with an excise tax of P150 per proof liter or more than 10 times the current P14.68. On the other hand, imported premium brands will be gifted with a tax break and only need to pay P42.00 per proof liter or more than 15 times less than the current P634.90.

"It's difficult to comprehend why government is pushing for a measure that could potentially kill local industries while favoring imported brands. This move will also negatively affect the entire local economy," she lamented.

For his part, Rodel Atienza, president of the labor union of the country's biggest cigarette manufacturer PMFTC Inc., said that the bill will have severe effects on farmers, delivery personnel, small businesses and even sari-sari stores.

"Cigarette prices will skyrocket, production will slow down thereby affecting farmers' income. Factories will shut down, thus affecting jobs and destroying the industry," he warned.

Abaya's bill aims to remove the multiple tiers of the existing cigarette tax structure and replace these with a unitary tax. It proposes a P10 tax per cigarette pack this year, and this will increase to P22 in 2013 and P30 in 2014. Cigarettes are currently taxed as low as P12, depending on the brand.

Earlier, PMFTC president Chris Nelson also rejected Abaya's bill, saying higher taxes will not boost revenue or reduce smoking, but will only push smokers to untaxed cigarettes. He said illicit trade will cost the government P170 billion in revenue losses per year.