Apart from raising needed revenues for the government, taxes are also an effective tool to curb certain behaviors deemed unproductive or unhealthy. A case in point are sin taxes on alcohol and tobacco products.
In particular, Senate Bill (SB) No. 2197 filed by Senator Manny Pacquiao hopes to raise around P237 billion over a five-year period.
Under the Pacquiao Bill, an ad valorem tax equivalent to 25 percent of the net retail price (excluding the VAT and excise tax) per proof and a specific tax of P40 per proof liter will be imposed on distilled spirits starting 2019. The specific tax will increase by P5 per proof liter every year thereafter until 2022. Starting 2023, the specific tax will be increased by 10 percent every year.
Pacquiao’s bill also proposes a tax on sparkling wines and champagne of P335 for those costing P500 or less per 750 ml bottle and P937 for those costing more than P500.
Still wines and carbonated wines containing 14 percent alcohol or less will be taxed P40 per bottle, while those with more than 14 percent but not more than 25 percent alcohol by volume, will be taxed P80. The tax rates for wines will increase by 10 percent every year thereafter effective 2020.
For fermented liquors, the tax shall be P40 per liter, regardless of where they are sold or manufactured in 2019, and will increase by P5 per liter until 2022. The tax rates will then be increased by 10 percent every year thereafter under the Pacquiao bill.
Note that there are progressive increases in the taxes as the years come. This makes up for the possible reduction in drinkers and smokers, as the case may be. Theoretically, as sin taxes increases, more people will end up quitting the vice altogether, if not reducing their consumption.
This hopes to reduce the excessive consumption of alcoholic drinks, particularly binge drinking that is a leading cause of vehicular crash accidents, and crimes such as domestic abuse. Drunkards can do the darndest things.
In a statement, Finance Undersecretary Karl Kendrick Chua said that along with the tax on cigarettes, increasing the excise tax levied on alcohol products will help close the P40 billion funding gap in the universal health care (UHC) program.
In the same statement, Chua explained that inflation will be benign.
“If inflation is, let’s say, 3.2 percent this year as the Bangko Sentral ng Pilipinas (BSP) projects, then the additional inflation will be 0.1, so 3.3 percent,” Chua said during a recent Senate hearing.
Ironically, the taxes gained from such unhealthy habits will promote health! We wish the bill smooth sailng through congress.