Philippine Senate Approves Higher Taxes On Cigarettes, Alcohol

by
Reuters
The Philippine Senate gave final approval on Tuesday to higher alcohol and tobacco taxes intended to raise an extra 40 billion pesos ($970 million), the first tax measure to be passed under President Benigno Aquino.

The Philippine Senate gave final approval on Tuesday to higher alcohol and tobacco taxes intended to raise an extra 40 billion pesos ($970 million), the first tax measure to be passed under President Benigno Aquino.

It has taken more than a decade for a government to approve a measure simplifying and raising taxes on these "sin" products, making available more funds for public health insurance and services.

Senators cleared the bill on third and final reading by a 15-to-2 vote, sending it to a joint congressional committee that will reconcile the legislation with a version passed earlier by the lower chamber of Congress. The bill will then be sent back to both chambers for final approval before is it is signed into law by Aquino.

"I praise our colleagues for voting swiftly on this important measure, because any delay will only put to further damage the lives of more than 17 million Filipinos, four million of which are youths, who now are cigarette smokers," Senator Franklin Drilon, acting chairman of the Senate ways and means committee said in a statement.

Expected revenues in the first year of implementation based on the Senate bill are lower than the government's 60-billion-pesos target, but higher than around 30 billion pesos approved by the lower house.

Of the 40 billion pesos additional revenue, 60 percent will come from increased taxes on tobacco while the rest will come from taxes on fermented liquor and distilled spirits.

The Senate version mandates a gradual shift in the excise tax on tobacco from the current multi-tiered system to three tiers starting in 2013, and to a single rate by 2017. However, the bill proposes a two-tier system for alcoholic beverages.

Based on the Senate's estimate, the measure should yield 39.5 billion pesos in extra revenues in 2013; 45.7 billion in 2014; 52.3 billion in 2016; and 64.4 billion in 2017.

Starting in 2018, the tax rate will be increased annually by 4 percent.

The approval of the bill should also boost the country's chances of winning its first investment grade rating before Aquino ends his term in 2016, allowing it to lower its borrowing costs and widen the base of potential investors.

($1 = 41.1850 Philippine pesos) (Reporting by Karen Lema; Editing by Ruth Pitchford)