Liquor companies drag govt to court over new 'sin tax' law 

The Distilled Spirits Association of the Philippines (DSAP) is asking a Manila Regional Trial Court to stop the government from enforcing the new sin tax law on grounds that it constitutes double taxation against liquor companies.

 

Putting in place the implementing rules of Republic Act No. 10351  or the new excise tax law violates the National Internal Revenue Code and the 1987 Constitution and would cause grave and irreparable damage to the local distilled spirits industry, DSAP noted in its petition for a temporary restraining order against the Department of Finance and the Bureau of Internal Revenue.

 

The new excise taxes on sin products took effect on Jan. 1, after President Benigno Aquino III signed The Sin Tax Reform bill into into law on Dec. 20.

 

DSAP groups Destileria Limtuaco & Company Inc., Emperador Distillers Inc., Ginebra San Miguel Inc., and Tanduay Distillers Inc. – the country's top producers of distilled spirits.

 

It is urgent and necessary for the court to issue a TRO against the DOF and BIR, the group claimed, noting that the regulation in invalid. “Under the circumstances, the prohibition on the claim for tax credit/refund of specific taxes paid on ethyl alcohol subsequently used as raw materials would mean very substantial losses to petitioners.”

 

Some of the companies in the distilled spirits industry already paid government approximately Php1.7 billion as excise taxes on its ethyl alcohol inventory as of the effectivity of the new law.  

 

DSAP claimed that the imposition of another excise tax on compounded liquors produced from ethyl alcohol for which excise tax had been paid would translate to very substantial losses not only to the petitioner companies but to the entire distilled spirits industry as well. 

 

The group cited  sec. 12 of the assailed regulation , which requires the manufacturers of compounded liquors to pay excise tax on ethyl alcohol used as raw material and at the same time to pay excise tax on the same ethyl alcohol which was compounded.

 

“There is double taxation when two taxes of the same kind or character [are] imposed on the same subject matter for the same purpose by the same taxing authority within the same jurisdiction during the same taxing period,” DSAP claimed.

 

“ Locally-produced compounded liquor are treated differently from imported liquor in that the former is taxed twice, first on the raw material, and again, on the finished product, whereas the latter is only taxed on the finished product...” the group also claimed. 

 

In an interview with reporters last months, BIR Commissioner Kim Jacinto-Henares explained the gradual shift toward unitary taxation, saying that in a matter of years a uniform four-percent additional tax will be collected on tobacco and alcohol products.

 

“Distilled spirits... the first two years... Its specific tax, I believe... P20 plus 15 percent of net retail price per proof – that’s 2013, 2014. Come January 1, 2015, it is P20 per proof liter plus 20 percent of net retail price per proof. Then, in 2016, the P20 per specific portion...  Yun yung increase nang increase ng 4 percent per annum, plus ‘yung 20 percent na net retail price,” she said. The government stands to gain an estimated P33.96 billion in additional revenues during the first year of the new sin tax law. — VS, GMA News