DOF sees passage of tax law

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    The Department of Finance (DOF) is optimistic the remaining packages under the tax reform program will be passed into law this year.

    This even as the agency still waits for the status of the measure that will raise the excise tax on alcoholic beverages and vaping and heated tobacco products (HTPs) which, as of press time, is pending the President’s approval.

    Antonio Joselito Lambino, DOF assistant secretary, said last Friday the agency is “standing by” for information regarding the bill which seeks to further hike excise taxes for the said products.

    Karl Kendrick Chua, DOF undersecretary, also said in a text message the DOF will have to check the status of the bill. The DOF had hoped the measure is ready for implementation by January 1, 2020, since the tax year follows the calendar year.

    Meanwhile, Chua said the DOF will push for the remaining tax measures this year, as planned.

    “Regarding the remaining packages, we are confident that all will be passed this year,” Lambino, for his part, said.

    Last December, Congress passed a measure which, the DOF estimates, will generate P22.2 billion additional revenue in the first year of implementation. It is pending the President’s signature.

    Over a five-year period from 2020 to 2024, the DOF estimates revenues totaling P137.2 billion.

    Under the proposal, a specific tax of P35 per liter will be imposed for fermented liquors in 2020, which will subsequently increase by P2 per liter per year until it reaches P43 per liter in 2024. Thereafter, the rate will increase by six percent every year.

    Distilled spirits will have a 22 percent ad valorem tax on top of a specific tax of P42 per proof liter this year, which will increase to P47 per proof liter in 2021, P52 per proof liter in 2022, P59 per proof liter in 2023, and P66 per proof liter in 2024. Thereafter, the rate will increase by six percent every year.

    Alcopops will be taxed similar to the rates for distilled spirits.

    For wines, both still and sparkling, the specific tax is P50 per liter this year and will increase by six percent yearly thereafter.

    HTPs will be taxed with new rates of P25 per pack in 2020, P27.50 in 2021, P30 in 2022, P32.50 in 2023, and five percent yearly thereafter.

    A tax of P45 per 10 milliliter of conventional freebase vapor products will be imposed in 2020, P50 in 2021, P55 in 2022, P60 in 2023. Thereafter, the rate will increase by five percent every year.

    For salt nicotine vapor products, the tax of P37 per millimeter will be imposed on the first year, and additional P5 per ml per year until the rate reaches P52 per ml in 2024.

    Thereafter, the tax will increase by five percent every year.

    The ratified bill also includes a provision that would exempt the sale and importation of all prescription medicines for high cholesterol, diabetes and hypertension from the value-added tax (VAT).

    This VAT exemption would then be extended to include medicines for mental illness, cancer, kidney diseases and tuberculosis by 2023.

    Chua said last month the DOF is studying the revenue impact of these VAT exemptions as preliminary data suggests the projected revenue loss from this tax break can reach P5.2 billion on the first year of implementation or a total of P35.1 billion by the end of 2024.

    With this, the net incremental revenue of the ratified bill is P17.1 billion in 2020, and a total of P102.1 billion by 2024.

    The ratified bill also prohibits the sale of HTPs and vaping products to non-smokers and those below 21 years old.

    Last July, the President signed Republic Act (RA) No. 11346 which increased the excise tax on cigarettes from P35 per pack last year to P45 starting last January 1.

    This will be followed by a P5 increase every year until the rate reaches P60 in 2023. Starting 2024, the rate will increase by five percent every year.

    RA 11346 also imposed a new tax on electronic cigarettes including HTPs and vapor products.

    The law imposes a minimum P10 excise tax for 0-10 ml of liquid solution or gel which started last January 1. Every 10.01-20 ml is taxed P20; 20.01-30 ml, P30; 30.01-40 ml, P40; 40.01-50 ml, P50; and for more than 50 ml, P50 plus P10 for every additional 10 ml. The rate will increase by five percent every year starting January 1, 2021.

    RA 11346 is seen to generate P15.5 billion for 2020.