These slides complement the Sponsorship Speech of Sen. Recto on the Ways & Means Committee version of the Sin Tax Bill increasing tax rates on tobacco & alcohol products.
1. SENATE OF THE PHILIPPINES
COMMITTEE ON WAYS & MEANS
Senate Bill 3299 under
Committee Report 411
October 10, 2012
O/S Recto
2. The measure we are about to
debate poses a deterrent that will
KEEP PEOPLE FROM BEING SICK
and will GENERATE REVENUES
that will TREAT THEM when they
get sick.
O/S Recto
3. Taxation
is what makes
appropriations
possible.
O/S Recto
4. BIR 2013 Collections P1.3T Billion
BIR 2013 Excise Tax
Collections P75 Billion
~P20.00
P1.00 for every P20.00
from sin products
O/S Recto
5. Taxes Collected (in Php) from Alcohol and Tobacco 100 Years Ago
1912
Distilled Spirits 3,049,684
Wines and Imitation Wines 173,391
Fermented Liquors 202,178
ALCOHOL Sub- Total 3,425,254
Smoking and Chewing Tobacco 283,025
Cigars 255,700
Cigarettes 4,378,680
TOBACCO Sub-Total 4,917,406
GRAND TOTAL 8,908,788
Source: Report of the Philippine Commission to the Secretary of War, FY 1912 O/S Recto
6. Firemen and
P8.6 B fire trucks
Excise Taxes Paid (BJMP Budget)
(2011)
O/S Recto
7. P1.5 B classrooms
Excise Taxes Paid
(2011)
O/S Recto
8. P1.0 B
pension of
senior citizens
Excise Taxes Paid
(2011)
O/S Recto
9. A government in need of
money would always prefer
a TAXABLE VICE, like
drinking, to a tax-exempt
virtue like staying sober.
O/S Recto
10. ALCOHOL INDUSTRY
Product Classifications
DISTILLED SPIRITS
Gin Whisky Brandy Rum Vodka Tequila Siok Tong
WINES
Sparkling wine Champagne Still wine Fortified Wine
FERMENTED LIQUOR
Beer Lager Ale Porter Basi Tapuy
O/S Recto
11. 2011 Volume of Removals
DISTILLED SPIRITS FERMENTED LIQUOR
255 million liter s 1.56 billion liter s or
4.7 billion bottles
17.4 liter s per per son
O/S Recto
12. ALCOHOL INDUSTRY
Gr oss Sales (2011)
TOTAL
P124 B
Fermented Liquor Distilled Spirits
P67 B P57 B
Wines
P 263 M
Source: BIR O/S Recto
13. ALCOHOL INDUSTRY
Tot al Taxes Paid (2011)
TOTAL
P42 B
Fermented Liquor Distilled Spirits
P30 B P12 B*
Wines
P 35 M** O/S Recto
*includes BOC data; Source: DSAP
Source: BIR ** excise tax only (no data for other taxes paid)
14. TAX BURDEN ON FERMENTED LIQUOR (2011)
Excise 19 B 28%
VAT 6 B 9%
Income &
other taxes 5 B 8%
TOTAL 30 B45%
O/S Recto
15. ALCOHOL INDUSTRY
Tot al Taxes Paid (2011)
TOTAL
P42 B
Fermented Liquor Distilled Spirits
P30 B P12 B*
Wines
P 35 M** O/S Recto
*includes BOC data; Source: DSAP
Source: BIR ** excise tax only (no data for other taxes paid)
16. TAX BURDEN ON DISTILLED SPIRITS (2011)
Excise 5.2 B 9%
VAT 5.2 B* 9%
Income &
other taxes 1.6 B 3%
TOTAL 12 B 21%
*with BOC data
Source: BIR O/S Recto
17. Tax Burden of Selected Industries (2011)
Alcohol Power
34%* 15%
Telecoms Automobile
15% 4%
*with BOC data
Source: BIR O/S Recto
18. CURRENT TAX RATES
Distilled Spirits
1 . F R O M LO C A L S O U RC E S
( s a p o f n i p a , c o c o n u t , c a s s av a , c a m o te o r b u r i
p a l m o r f ro m t h e j u i c e , s y r u p o r s u g a r o f t h e P 14.68
cane)
2 . F RO M R AW M AT E R I A L S OT H E R T H A N THOSE
E N U M E R AT E D A B OV E
N e t r e t a i l p r i c e ( N R P ) [ exc l u d i n g t h e exc i s e a n d
VAT ] p e r b o t t l e o f 7 5 0 m l v o l u m e c a p a c i t y i s :
Less than P250.00 P 158.73
P250.00 to P675.00 P 317. 4 4
More than P675.00 P 634.90
O/S Recto
19. CURRENT TAX RATES
Wines
1. SPARKLING WINES/ CHAMPAGNES
Net Retail Price, per bottle, regardless of proof:
P500.00 or less P 183.42
More than P500.00 P 550.24
2. STILL WINES
Less than 14% of alcohol by volume P 22.00
14% to 25% of alcohol by volume P 44.02
3. FORTIFIED WINES Same as distilled
More than 25% of alcohol by volume spirits
O/S Recto
20. CURRENT TAX RATES
Fermented Liquor
1. Beer, lager beer, ale, porter and other fermented
liquors except domestic fermented liquor (e.g. tuba,
basi, tupuy)
Net Retail Price, per liter of volume capacity :
Less than P14.50 (low) P 10.42
P 14.50 to P 22.00 (medium) P 15.49
More than P22.00 (high) P 20.57
2. Fermented liquor brewed and sold at micro
breweries, pubs, restaurants P 20.57
O/S Recto
22. ALCOHOL INDUSTRY
Distilled Spirits Fermented Liquor
Emperador
Distillers
San Miguel
Breweries Inc.
Ginebra
San Miguel, Inc.
Tanduay
Distillers
Asia Brewery Inc.
Destileria
Limtuaco & Co.
Source: DSAP, August 2012 Source: BIR O/S Recto
23. PERCENTAGE OF ALCOHOL EXPENDITURE
Family Income and Expenditure Sur vey (1994 -2009)
0.9 0.9
0.7 0.7 0.7 0.7
1994 1997 2000 2003 2006 2009
O/S Recto
25. 92% sold in sari-sari stores
Per capita consumption: 13 sticks
60% sold by tingi
Source: PMFTC (2012, 1st Half)
O/S Recto
26. TOBACCO INDUSTRY
Gr oss Sales (2011)
Manufactured Tobacco TOTAL Cigars
P827 M P75.6 M
P89.3 B
Cigarettes Packed by Hand (in 30s) Cigarettes Packed by Machine (in 20s)
P1.4 B P87 B
Source: BIR O/S Recto
27. TOBACCO INDUSTRY
Gr oss Sales (2011)
Manufactured Tobacco TOTAL Cigars
0.9% 0.08%
P89.3 B
Cigarettes Packed by Hand (in 30s) Cigarettes Packed by Machine (in 20s)
1.6% 97.4%
Source: BIR O/S Recto
28. TAX BURDEN ON TOBACCO
Excise 25.8 B
VAT 5.6 B
Income &
other taxes 4.2 B
TOTAL 35.6 B
O/S Recto
29. PERCENTAGE OF TOBACCO EXPENDITURE
Family Income and Expenditure Sur vey (1994 -2009)
1.4
1.3
1.1 1.1
0.9
0.8
1994 1997 2000 2003 2006 2009
O/S Recto
30. TAX BURDEN ON TOBACCO
Excise 29%
VAT 6%
of every
Income &
other taxes 5%
TOTAL 40%
O/S Recto
31. CURRENT TAX RATES
Tobacco Products & Cigar s
Tobacco Products
Tobacco not for chewing P 1.19
Tobacco for chewing P 0.94
Cigars
NRP per piece:
P500.00 OR LESS 10% OF THE NRP
More than P500.00 P 50.00 + 15% of the NRP in
excess of P 500.00
O/S Recto
32. CURRENT TAX RATES
Cigarettes
Cigarettes packed by hand (in 30s) P 2.72
Cigarettes packed by machine (in 20s)
Net Retail Price
Below P5.00 (Low) P 2.72
P5.00 to P6.50 (Medium) P 7.56
More than P6.50 to P10.00 (High) P 12.00
More than P10.00 (Premium) P 28.30
O/S Recto
33. CIGARETTES (PACKED BY MACHINE)
Removals Excise Taxes
Tier/ Tax Rate
(packs) Collected (Php)
Low
P2.72 3.0 B 8.1 B
Medium
P7.56 451 M 3.4 B
High
P12.00 1.15 B 13.9 B
Premium
P28.30 - -
Total 4.60 B 25.4 B
Source: DOF O/S Recto
34. CIGARETTES (PACKED BY MACHINE)
Removals Excise Taxes
Tier/ Tax Rate
(packs) Collected (Php)
Low
P2.72 3.0 B 8.1 B
Medium
P7.56 451 M 3.4 B
High
P12.00 1.15 B 13.9 B
Premium
P28.30 - -
Total 4.60 B 25.4 B
Source: DOF O/S Recto
35. 2011
Cigarettes
Philip Morris Fortune Tobacco
Corp. Inc. (PMFTC) 94.12%
Japan Tobacco International (JTI) 2.59%
Mighty Corp. 2.12%
La Suerte Cigar and
Cigarette Factory 0.66%
Associated Anglo-American
Tobacco Corp. 0.51%
British American Tobacco ---
Source: BIR O/S Recto
37. Under our system, it is the
CONSUMERS, NOT THE
MANUFACTURERS,
who eventually shoulder the
excise tax, on account of its
nature as a PASS-ON TAX.
O/S Recto
38. The ones who will
ultimately bear the
additional tax burden are
ORDINARY FOLKS.
O/S Recto
39. It is not BIG TOBACCO
or the GIANT BREWERY
who will pay but,
SMALL PEOPLE.
O/S Recto
46. COUNTRY CASE STUDIES ON ILLICIT TRADE
o CANADA β high excise levels (22%), increased
consumption of illicit cigarettes, undermined
regulatory & fiscal objectives.
o HUNGARY β sharp, above-inflation increase in
excise rate led to increased revenues initially but
eventually to a revenue decline.
o IRELAND β steep excise tax increase resulted in
swift emergence of illicit trade, virtually flat
cigarette duty revenues.
O/S Recto
47. COUNTRY CASE STUDIES ON ILLICIT TRADE
o MALAYSIA β staggering increase in excise tax (in
2011, 172% of 2004 rates) led to illicit trade growing to
almost 40% of the market.
o NEW YORK β excise duty hikes above underlying
inflation level led to a sharp drop in legal
volumes, decline in government revenues, decreased
smoking incidence and illicit trade reaching almost
40% of the market.
o ROMANIA β continuous massive excise
increases, increased government revenue, constant
smoking incidence, illicit trade is more than β of total
consumption.
O/S Recto
48. COUNTRY CASE STUDIES ON ILLICIT TRADE
o SINGAPORE β 135% increase in 2005 over
2000, declining government revenues despite tax
increase, smoking incidence was virtually
unchanged from 2001, illicit trade grew.
o SWEDEN β reduction in excise rates used to
counter extreme levels of illicit trade (late 1990s);
massive increase led to increased illicit trade (2007
and 2008) and reduction in total cigarette
consumption.
o UNITED KINGDOM β βduty escalatorβ tobacco
taxation led to down-shifting by
consumers, increased illicit trade, government
revenue loss but with no impact on smoking
O/S Recto
49. o βThe tax-induced increase in cigarettes will
certainly lead to smuggling or illicit trade. It might
even lead to some illegal cigarette manufacturing
within the country.β
o βThe net incremental revenues should take into
account the additional expenses on the part of
the government to improve anti-smuggling
efforts.β
-- Dr. Benjamin Diokno
O/S Recto
50. Are we willing to
OUTSOURCE even the
MANUFACTURE OF SIN to
distant lands?
O/S Recto
51. Use taxes as a deterrent to the
consumption of unhealthy products
Create predictable, dependable, and
reliable stream of revenues
Eliminate the annexes
Herald the imposition of a unitary tax rate
Index tax increases to inflation
Earmark portion of the proceeds to health
care programs
O/S Recto
56. Reasonable
Realistic and
Responsible rendering of our
power to tax the industry of
alcohol and cigarettes.
O/S Recto
57. INCREMENTAL REVENUE (HB 5727 ORIGINAL)
Original Revenue Estimates
Year Cigarettes Distilled Spirits Fermented Total
Liquor
2012 30.13 B 11.19 B 19.35 B 60.66 B
2013 36.10 B 26.51 B 21.68 B 84.28 B
2014 41.27 B 52.99 B 24.14 B 118.40 B
2015 43.36 B 58.35 B 26.73 B 128.45 B
2016 45.51 B 64.24 B 29.59 B 139.33 B
Total 196.37 B 213.27 B 121.49 B 531.12 B
Source: DOF O/S Recto
76. Our proposal is not just to
earmark the incremental revenues
but a portion of the
ENTIRE EXCISE TAX COLLECTIONS
from alcohol and tobacco.
O/S Recto
80. RA 7171
1B to provinces producing
burley and native tobacco
40% of total sin tax proceeds =
50%
P26 B to PhilHealth
P33 public health sector
EARMARKING
10% of total sin tax proceeds =
P65 B P6.5 B to DOH
β’3.25 B to 16 regional hospitals = 200 M
β’3.25 B to 618 district hospitals operated
by LGUs = 5.25 M
100 M for public information and
education campaign program
100 M for displaced workers
O/S Recto
82. This bill is not the
magic pill that will
restore the fiscal health
of the government
either.
O/S Recto
83. Other industries must
do their share,
not through a round of
new taxes, but by
SHUTTING DOWN THE
LOOPHOLES
through which their
companies breathe.
O/S Recto
84. Two of the
HARDEST THINGS
a Senate can do is to
VOTE FOR WAR and
VOTE FOR NEW TAXES.
O/S Recto
85. Lalo na sa isang batas
na papataw ng buwis
hindi sa mga
dambuhalang kumpanya
pero sa ordinaryong
mamamayan.
O/S Recto