Veto sought on provision on raid in tax bill

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    The Department of Finance (DOF) is pushing for the removal of a provision in a proposed measure which prevents the government from raiding alcohol or e-cigarette companies without a court order.

    This provision is contained in a bill increasing excise tax on alcohol and e-cigarette products. The measure is pending President Duterte’s signature, but will lapse into law if not acted upon by January 24.

    The DOF is the main agency which seeks to increase the excise tax on alcohol and vaping and heated tobacco products (HTPs), the proceeds of which will be used to fund the Universal Health Care (UHC) program.

    Carlos Dominguez, DOF secretary, told reporters at the DOF office in Manila last Friday he has recommended to the President to line veto one provision included in the bill.

    “I want him to take out one line there (which states that) we cannot raid before (having a) court order. That cannot happen. (It says) you’re not allowed to check without the court order,” Dominguez said.

    “Let’s say, their inventory is wrong? How will we check? That’s allowed by law, why will you remove that? That’s how we catch these guys,” he added.

    Last December, Congress passed the measure which, the DOF estimates, will generate P22.2 billion additional revenue in the first year of implementation.

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

    “I sent him (the President) a memo already (recommending the line veto), right after the bill was passed, towards the end of the year,” he added.

    Asked who inserted the provision, Dominguez said: “(it was inserted in) the house. They think we do not read it line by line, we do. It’s unlawful now, but (since) they’re the ones who make the law, (with the provision), it will be lawful. That shouldn’t happen.”

    Under the proposal, for fermented liquors, a specific tax of P35 per liter will be imposed 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 be taxed with 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 at 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 be increased by five percent every year.