2012 sin tax presentation oct10

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  • 1. SENATE OF THE PHILIPPINESCOMMITTEE ON WAYS & MEANS Senate Bill 3299 under Committee Report 411 October 10, 2012 O/S Recto
  • 2. The measure we are about todebate poses a deterrent that willKEEP PEOPLE FROM BEING SICK and will GENERATE REVENUESthat will TREAT THEM when they get sick. O/S Recto
  • 3. Taxation is what makesappropriations 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 8,908,788Source: Report of the Philippine Commission to the Secretary of War, FY 1912 O/S Recto
  • 6. Firemen andP8.6 B fire trucksExcise Taxes Paid (BJMP Budget) (2011) O/S Recto
  • 7. P1.5 B classroomsExcise Taxes Paid (2011) O/S Recto
  • 8. P1.0 B pension of senior citizensExcise Taxes Paid (2011) O/S Recto
  • 9. A government in need ofmoney 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 SPIRITSGin Whisky Brandy Rum Vodka Tequila Siok Tong WINESSparkling wine Champagne Still wine Fortified Wine FERMENTED LIQUOR Beer Lager Ale Porter Basi Tapuy O/S Recto
  • 11. 2011 Volume of RemovalsDISTILLED SPIRITS FERMENTED LIQUOR255 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 MSource: 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: DSAPSource: 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: DSAPSource: 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 dataSource: BIR O/S Recto
  • 17. Tax Burden of Selected Industries (2011) Alcohol Power 34%* 15% Telecoms Automobile 15% 4%*with BOC dataSource: BIR O/S Recto
  • 18. CURRENT TAX RATESDistilled Spirits1 . 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 RATESWines1. SPARKLING WINES/ CHAMPAGNES Net Retail Price, per bottle, regardless of proof: P500.00 or less P 183.42 More than P500.00 P 550.242. STILL WINES Less than 14% of alcohol by volume P 22.00 14% to 25% of alcohol by volume P 44.023. FORTIFIED WINES Same as distilled More than 25% of alcohol by volume spirits O/S Recto
  • 20. CURRENT TAX RATESFermented Liquor1. 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 20.572. Fermented liquor brewed and sold at micro breweries, pubs, restaurants P 20.57 O/S Recto
  • 21. 2011 Major Corporations ALCOHOLINDUSTRYSource: DSAP, August 2012 Source: BIR O/S Recto
  • 22. ALCOHOL INDUSTRYDistilled 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
  • 24. 200917.3 million smokers 2011 92 billion sticks/ 4.6 billion packs O/S Recto *Source: DOF
  • 25. 92% sold in sari-sari storesPer 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 BSource: 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 BTOTAL 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 RATESTobacco 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 RATESCigarettes 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 BSource: 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 BSource: 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
  • 36. Companies are justCOLLECTING AGENTSof the government. O/S Recto
  • 37. Under our system, it is the CONSUMERS, NOT THE MANUFACTURERS,who eventually shoulder theexcise tax, on account of its nature as a PASS-ON TAX. O/S Recto
  • 38. The ones who will ultimately bear theadditional tax burden are ORDINARY FOLKS. O/S Recto
  • 39. It is not BIG TOBACCOor the GIANT BREWERY who will pay but, SMALL PEOPLE. O/S Recto
  • 40. O/S Recto
  • 41. Cigarette smoking, like acigarette butt, should be crushed. But in the real world, IMPOSSIBLE. O/S Recto
  • 42. If we ban cigarettes, this government will weakenfrom lack of cigarette taxes. That would be the real FISCAL SHOCK. O/S Recto
  • 43. It seeks to getMORE BUCKS out of FEWER PACKS. O/S Recto
  • 44. A HIGHER TAX RATE DOES NOTautomatically result inHIGHER COLLECTIONS. O/S Recto
  • 45. The void will be filled by SMUGGLERS. O/S Recto
  • 46. COUNTRY CASE STUDIES ON ILLICIT TRADE o CANADA – high excise levels (22%), increased consumption of illicit cigarettes, undermined regulatory & fiscal objectives. o HUNGARY – sharp, above-inflation increase in excise rate led to increased revenues initially but eventually to a revenue decline. o IRELAND – 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 – 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 – 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 – continuous massive excise increases, increased government revenue, constant smoking incidence, illicit trade is more than ⅓ of total consumption. O/S Recto
  • 48. COUNTRY CASE STUDIES ON ILLICIT TRADE o SINGAPORE – 135% increase in 2005 over 2000, declining government revenues despite tax increase, smoking incidence was virtually unchanged from 2001, illicit trade grew. o SWEDEN – 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 – ‘duty escalator’ 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 “The 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.”o “The net incremental revenues should take into account the additional expenses on the part of the government to improve anti-smuggling efforts.” -- Dr. Benjamin Diokno O/S Recto
  • 50. Are we willing toOUTSOURCE even theMANUFACTURE 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 annexesHerald the imposition of a unitary tax rate Index tax increases to inflationEarmark portion of the proceeds to health care programs O/S Recto
  • 52. O/S Recto
  • 53. Newly-introduced products shall be initially classified using the suggested NRP as declared in the sworn statement submitted to the BIR. O/S Recto
  • 54. We believe that the variety of products sold shouldbeget a variation of taxes. O/S Recto
  • 55. We adopted aCONSERVATIVE FRAMEWORK that we believe hedges CLOSER TO REALITY. O/S Recto
  • 56. Reasonable Realistic andResponsible rendering of ourpower 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 BSource: DOF O/S Recto
  • 58. INCREMENTAL REVENUE (HB 5727 ORIGINAL) Revised Revenue Estimates (in Billion Php) Distilled Fermented Elasticity Cigarettes Total Spirits Liquor -0.584 16.54 6.71 18.61 41.85 -0.727 7.10 6.71 18.61 32.42 -0.870 -1.91 6.71 18.61 23.41 Assumptions: Average Industry Growth: 1.97% Cigarettes, 2.62% Fermented Liquor, 3.69% Distilled Spirits (1997-2011)Source: DOF O/S Recto
  • 59. O/S Recto
  • 60. Cut-offs increased by 8% O/S Recto
  • 61. O/S Recto
  • 62. Cut-offs increased by 8% O/S Recto
  • 63. INCREMENTAL REVENUE (SENATE COMM. REPORT) (in Billion Php) Distilled Fermented Year Cigarettes Total Spirits Liquor 2013 1.38Source: DOF O/S Recto
  • 64. O/S Recto
  • 65. INCREMENTAL REVENUE (SENATE COMM. REPORT) (in Billion Php) Distilled Fermented Year Cigarettes Total Spirits Liquor 2013 1.38 3.81Source: DOF O/S Recto
  • 66. O/S Recto
  • 67. O/S Recto
  • 68. 4 tiers 3 tiers 2 tiers O/S Recto
  • 69. O/S Recto
  • 70. NET RETAIL PRICE CUTOFFS CIGARETTES LOW MEDIUM HIGH< P15 P15-P18 > P18 O/S Recto
  • 71. O/S Recto
  • 72. INCREMENTAL REVENUE (SENATE COMM. REPORT) (in Billion Php) Distilled Fermented Year Cigarettes Total Spirits Liquor 2013 1.38 3.81 9.79Source: DOF O/S Recto
  • 73. INCREMENTAL REVENUE (SENATE COMM. REPORT) (in Billion Php) Distilled Fermented Year Cigarettes Total Spirits Liquor 2013 1.38 3.81 9.79 14.98Source: DOF O/S Recto
  • 74. HB 5727 (AMENDED) Range Attachment Cigarettes -5.6 B 5.8 B Alcohol 5.2 B TOTAL -0.4 B 11 B AttachmentYear: 2013Elasticity: -0.584 O/S Recto
  • 75. Cut-offs increased by 8% O/S Recto
  • 76. Our proposal is not just toearmark the incremental revenues but a portion of theENTIRE EXCISE TAX COLLECTIONS from alcohol and tobacco. O/S Recto
  • 77. This measure:+ P15 B incremental revenues on 2013 = P65 B O/S Recto
  • 78. O/S Recto
  • 79. 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 sectorEARMARKING 10% of total sin tax proceeds = P65 B P6.5 B to DOH •3.25 B to 16 regional hospitals = 200 M •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
  • 81. Extinction of vices cannot be affected through taxation. O/S Recto
  • 82. This bill is not the magic pill that willrestore the fiscal health of the government either. O/S Recto
  • 83. Other industries mustdo their share,not through a round ofnew taxes, but bySHUTTING DOWN THELOOPHOLESthrough which theircompanies breathe. O/S Recto
  • 84. Two of the HARDEST THINGS a Senate can do is to VOTE FOR WAR andVOTE FOR NEW TAXES. O/S Recto
  • 85. Lalo na sa isang batas na papataw ng buwis hindi sa mgadambuhalang kumpanya pero sa ordinaryong mamamayan. O/S Recto
  • 86. O/S Recto