Sin tax bill ratified by Congress, set for Duterte signature

The Senate and the House of Representatives ratified Wednesday evening the bicameral conference committee report on the bill seeking to increase excise taxes on alcoholic drinks, heated tobacco products, and vapor cigarettes beginning January 1, 2020.

The measure seeks to reduce consumption on alcohol and tobacco products while generating revenue for the government to fund the Universal Health Care (UHC) law.

The bill will be sent to Malacanang for the signature of President Rodrigo Duterte.  Congress will go on a holiday break starting this week.

If enacted into law, the measure is set to generate around P24.9 billion in revenues for the government.

The tax rates approved by the bicam panel are the following:

• Fermented Liquor (specific tax rate): P35 in 2020, P37 in 2021, P39 in 2022, P41 in 2023, and P43 in 2024, with a 6% indexation thereafter.
• Distilled Spirits (specific tax rate with 22% ad valorem tax): P42 in 2020, P47 in 2021, P52 in 2022, P59 in 2023, and P66 in 2024, with a 6% indexation thereafter.
• Sparkling and still wines (specific tax rate):  P50 in 2020, with a 6% indexation thereafter.
• Heated Tobacco Products or HTPs (specific tax rate): P25 in 2020, P27.50 in 2021, P30 in 2022, and P32.50 in 2023, with a 5% indexation thereafter
• Salt Nicotine (specific tax rate): P37 in 2020, P42 in 2021, P47 in 2022, P52 in 2023, with a 5% indexation thereafter
• Free Base (specific tax rate): P45 in 2020, P50 in 2021, P55 in 2022, P60 in 2023, with a 5% indexation thereafter.

Revenues from the higher sin taxes would be earmarked to the Universal Health Care (UHC) program (60 percent); Health Facilities Enhancement Program (HFEP) of the Department of Health (20 percent); and programs seeking to attain the country's Sustainable Development Goals (20 percent).

The bill includes a provision making the medicines for heart disease, diabetes, and cholesterol free of value-added tax (VAT) starting January 2020.

Medicines for mental health, cancer, tuberculosis, and kidney diseases will also be VAT-free starting January 2023.

House Committee on Ways and Means chair Joey Salceda said the fiscal implication of making the medicines VAT-free is from P4.1 billion to P6 billion.

During his fourth State of the Nation Address, Duterte urged Congress to immediately pass the remaining packages of his tax reform programs including those for alcohol and tobacco.

He also called on the legislative branch to urgently approve the second package of the administration's comprehensive tax reform program, or the proposed "Tax Reform for Attracting Better and High-quality Opportunities" law.—LDF, GMA News