PH may increase alcohol, tobacco tax take

Posted at 08/17/2011 11:35 AM | Updated as of 08/17/2011 12:49 PM

MANILA, Philippines - The government will push a proposal to index taxes on alcohol and tobacco products to inflation that could raise around P60 billion in revenues as one of 13 priority bills in Congress this year, President Benigno Aquino said on Tuesday.

Other priority legislation includes a responsible parenthood bill, which covers reproductive health and is opposed by the Catholic Church, and amendments to the Human Security Act and Data Privacy Act, Aquino said in a televised briefing.

The "sin tax" changes could double the government's annual collections from alcohol and tobacco to around P60 billion ($1.4 billion) in the first year, he said. That is around about one-fifth of this year's projected budget deficit.

The changes may also address some concerns of the World Trade Organization (WTO), Aquino said, without elaborating. The WTO has ruled Philippine taxes on imported alcoholic drinks were discriminatory.

"You also want to simplify the process of collecting the taxes," Aquino told reporters.

"The methods of production, for instance, of liquor is an issue, there are also WTO concerns, so these will all be tackled by the various committees in charge of reviewing the sin taxes."

On Monday, both the United States and European Union urged the Southeast Asian nation to quickly comply with the WTO ruling that its alcohol tax discriminated against foreign brands.

Trade Secretary Gregory Domingo said the Philippines would appeal the WTO ruling.

The proposed changes would see a multi-tiered tax structure for tobacco products replaced with two rates during the first year of new tax, and a uniform rate in the second year. The tax would be indexed to inflation from the third year.

For alcohol products, the bill proposes a uniform rate for three years before the tax is indexed to inflation.

However, the revised alcohol tax still provides for a different tariff on products made using local materials -- a provision which the WTO says is discriminatory.

Brussels and Washington complained in separate cases filed at the WTO that the Philippines had violated global trade rules by taxing foreign alcoholic beverages at rates 10 to 40 times higher than brands made in the Philippines from home-grown materials such as sugar and palm.