2012 sin tax presentation oct10
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Transcript of 2012 sin tax presentation oct10
COMMITTEE ON WAYS & MEANS
SENATE OF THE PHILIPPINES
Senate Bill 3299 under
Committee Report 411
O/S Recto
October 10, 2012
The measure we are about to debate poses a deterrent that willKEEP PEOPLE FROM BEING SICK
and will GENERATE REVENUESthat will TREAT THEM when they
get sick.
O/S Recto
Taxationis what makes
appropriationspossible.
O/S Recto
P1.3T BillionBIR 2013 Collections
P75 BillionBIR 2013 Excise Tax
Collections
~P20.00
P1.00 for every P20.00 from sin products
O/S Recto
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 8,908,788
Taxes Collected (in Php) from Alcohol and Tobacco 100 Years Ago
Source: Report of the Philippine Commission to the Secretary of War, FY 1912 O/S Recto
Firemen and
fire trucks
(BJMP Budget)
P8.6 BExcise Taxes Paid
(2011)
O/S Recto
P1.5 BExcise Taxes Paid
(2011)
classrooms
O/S Recto
P1.0 BExcise Taxes Paid
(2011)
pension of
senior citizens
O/S Recto
A government in need of money would always prefer
a TAXABLE VICE, like drinking, to a tax-exempt virtue like staying sober.
O/S Recto
DISTILLED SPIRITSGin Whisky Brandy Rum Vodka Tequila Siok Tong
WINESSparkling wine Champagne Still wine Fortified Wine
ALCOHOL INDUSTRYProduct Classifications
FERMENTED LIQUORBeer Lager Ale Porter Basi Tapuy
O/S Recto
2011 Volume of Removals
DISTILLED SPIRITS FERMENTED LIQUOR
1.56 bi l l ion l i ter s or
4.7 bi l l ion bott les255 mil l ion l i ter s
17.4 l i ter s per per son
O/S Recto
G r o s s S a l e s ( 2 011 )ALCOHOL INDUSTRY
Fermented Liquor Distilled Spirits
P67 B P57 B
TOTAL
P124 B
WinesP 263 M
Source: BIR O/S Recto
To t al Ta x e s Pa i d ( 2 011 )ALCOHOL INDUSTRY
Fermented Liquor Distilled Spirits
P30 B P12 B*
TOTAL
P42 B
WinesP 35 M** *includes BOC data; Source: DSAP
** excise tax only (no data for other taxes paid)Source: BIR
O/S Recto
TAX BURDEN ON FERMENTED LIQUOR (2011)
Excise
VAT
TOTAL
Income &other taxes
19 B
6 B
30 B
5 B
28%
9%
8%
45%
O/S Recto
To t al Ta x e s Pa i d ( 2 011 )ALCOHOL INDUSTRY
Fermented Liquor Distilled Spirits
P30 B P12 B*
TOTAL
P42 B
WinesP 35 M** *includes BOC data; Source: DSAP
** excise tax only (no data for other taxes paid)Source: BIR
O/S Recto
TAX BURDEN ON DISTILLED SPIRITS (2011)
Excise
VAT
TOTAL
5.2 B
5.2 B*
12 B
Income &other taxes 1.6 B
9%
9%
3%
21%
*with BOC data
Source: BIRO/S Recto
*with BOC data
Source: BIR
Alcohol
34%*
Telecoms
15%
Power
15%
Automobile
4%
Tax Burden of Selected Industries (2011)
O/S Recto
Distil led SpiritsCURRENT TAX RATES
1. FROM LOCAL SOURCES
(sap of nipa , coconut , cassava, camote or bur i
pa lm or f rom the ju ice, syrup or sugar of the
cane)
P 14.68
2. FROM RAW MATERIALS OTHER THAN THOSE
ENUMERATED ABOVE
Net reta i l pr ice (NRP) [exc lud ing the exc ise and
VAT] per bot t le of 750 ml vo lume capac i ty is :
Less than P250.00
P250.00 to P675.00
More than P675.00
P 158.73
P 317.44
P 634.90
O/S Recto
WinesCURRENT TAX RATES
1. SPARKLING WINES/ CHAMPAGNES
Net Retail Price, per bottle, regardless of proof:
P500.00 or less
More than P500.00
P 183.42
P 550.24
2. STILL WINES
Less than 14% of alcohol by volume
14% to 25% of alcohol by volume
P 22.00
P 44.02
3. FORTIFIED WINES
More than 25% of alcohol by volume
Same as distilled
spirits
O/S Recto
Fermented LiquorCURRENT TAX RATES
1. 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 14.50 to P 22.00 (medium)
More than P22.00 (high)
P 10.42
P 15.49
P 20.57
2. Fermented liquor brewed and sold at micro
breweries, pubs, restaurants P 20.57
O/S Recto
Source: DSAP, August 2012
2011 Major Corporat ions
ALCOHOLINDUSTRY
Source: BIR
O/S Recto
EmperadorDistillers
GinebraSan Miguel, Inc.
TanduayDistillers
DestileriaLimtuaco & Co.
ALCOHOL INDUSTRYDistilled Spirits Fermented Liquor
Source: DSAP, August 2012
San Miguel Breweries Inc.
Asia Brewery Inc.
Source: BIR O/S Recto
PERCENTAGE OF ALCOHOL EXPENDITURE
0.9 0.9
0.7 0.7 0.7 0.7
1994 1997 2000 2003 2006 2009
F a m i l y I n c o m e a n d E x p e n d i t u r e S u r v e y ( 1 9 9 4 - 2 0 0 9 )
O/S Recto
*Source: DOF
201192 billion sticks/4.6 billion packs
200917.3 million smokers
O/S Recto
92% sold in sari-sari stores
60% sold by tingiSource: PMFTC (2012, 1st Half)
Per capita consumption: 13 sticks
O/S Recto
G r o s s S a l e s ( 2 011 )TOBACCO INDUSTRY
Manufactured Tobacco
P827 MTOTAL
P89.3 B
Source: BIR
Cigars
P75.6 M
Cigarettes Packed by Machine (in 20s)
P87 BCigarettes Packed by Hand (in 30s)
P1.4 B
O/S Recto
G r o s s S a l e s ( 2 011 )TOBACCO INDUSTRY
Manufactured Tobacco TOTAL
P89.3 B
Source: BIR
Cigars
Cigarettes Packed by Machine (in 20s)Cigarettes Packed by Hand (in 30s)
97.4%1.6%
0.9% 0.08%
O/S Recto
TAX BURDEN ON TOBACCO
Excise
VAT
TOTAL
25.8 B
5.6 B
35.6 B
Income &other taxes 4.2 B
O/S Recto
PERCENTAGE OF TOBACCO EXPENDITURE
F a m i l y I n c o m e a n d E x p e n d i t u r e S u r v e y ( 1 9 9 4 - 2 0 0 9 )
1.41.3
1.1 1.1
0.9
0.8
1994 1997 2000 2003 2006 2009
O/S Recto
TAX BURDEN ON TOBACCO
Excise
VAT
TOTAL
Income &other taxes
29%
6%
5%
40%
of every
O/S Recto
Tobacco Products & Cigar sCURRENT TAX RATES
Tobacco Products
Tobacco not for chewing
Tobacco for chewing
P 1.19
P 0.94
Cigars
NRP per piece:
P500.00 OR LESS
More than P500.00
10% OF THE NRP
P 50.00 + 15% of the NRP in
excess of P 500.00
O/S Recto
CigarettesCURRENT TAX RATES
Cigarettes packed by hand (in 30s) P 2.72
Cigarettes packed by machine (in 20s)
Net Retail Price
Below P5.00 (Low)
P5.00 to P6.50 (Medium)
More than P6.50 to P10.00 (High)
More than P10.00 (Premium)
P 2.72
P 7.56
P 12.00
P 28.30
O/S Recto
CIGARETTES (PACKED BY MACHINE)
Tier/ Tax Rate
Low
P2.72
Medium
P7.56
High
P12.00
Premium
P28.30
Total
Source: DOF
Removals
(packs)
3.0 B
451 M
1.15 B
-
4.60 B
Excise Taxes
Collected (Php)
8.1 B
3.4 B
13.9 B
-
25.4 B
O/S Recto
CIGARETTES (PACKED BY MACHINE)
Tier/ Tax Rate
Low
P2.72
Medium
P7.56
High
P12.00
Premium
P28.30
Total
Source: DOF
Removals
(packs)
3.0 B
451 M
1.15 B
-
4.60 B
Excise Taxes
Collected (Php)
8.1 B
3.4 B
13.9 B
-
25.4 B
O/S Recto
2011
Cigarettes
Philip Morris Fortune Tobacco Corp. Inc. (PMFTC)
Japan Tobacco International (JTI)
Mighty Corp.
La Suerte Cigar andCigarette Factory
Associated Anglo-American Tobacco Corp.
British American Tobacco
Source: BIR
94.12%
2.59%
2.12%
0.66%
0.51%
---
O/S Recto
Companies are just COLLECTING AGENTSof the government.
O/S Recto
Under our system, it is the CONSUMERS, NOT THE
MANUFACTURERS,who eventually shoulder the excise tax, on account of its
nature as a PASS-ON TAX.
O/S Recto
The ones who will ultimately bear the
additional tax burden are ORDINARY FOLKS.
O/S Recto
It is not BIG TOBACCO or the GIANT BREWERY
who will pay but,SMALL PEOPLE.
O/S Recto
O/S Recto
Cigarette smoking, like a
cigarette butt, should be crushed.
But in the real world, IMPOSSIBLE.
O/S Recto
If we ban cigarettes, this government will weaken
from lack of cigarette taxes.That would be the real
FISCAL SHOCK.
O/S Recto
It seeks to getMORE BUCKS out of
FEWER PACKS.
O/S Recto
A HIGHER TAX RATE
DOES NOTautomatically result in HIGHER COLLECTIONS.
O/S Recto
The void will be filled bySMUGGLERS.
O/S Recto
COUNTRY CASE STUDIES ON ILLICIT TRADE
o CANADA – high excise levels (22%), increasedconsumption of illicit cigarettes, underminedregulatory & fiscal objectives.
o HUNGARY – sharp, above-inflation increase inexcise rate led to increased revenues initially buteventually to a revenue decline.
o IRELAND – steep excise tax increase resulted inswift emergence of illicit trade, virtually flatcigarette duty revenues.
O/S Recto
o MALAYSIA – staggering increase in excise tax (in2011, 172% of 2004 rates) led to illicit trade growing toalmost 40% of the market.
o NEW YORK – excise duty hikes above underlyinginflation level led to a sharp drop in legalvolumes, decline in government revenues, decreasedsmoking incidence and illicit trade reaching almost40% of the market.
o ROMANIA – continuous massive exciseincreases, increased government revenue, constantsmoking incidence, illicit trade is more than ⅓ of totalconsumption.
COUNTRY CASE STUDIES ON ILLICIT TRADE
O/S Recto
o SINGAPORE – 135% increase in 2005 over2000, declining government revenues despite taxincrease, smoking incidence was virtuallyunchanged from 2001, illicit trade grew.
o SWEDEN – reduction in excise rates used tocounter extreme levels of illicit trade (late 1990s);massive increase led to increased illicit trade (2007and 2008) and reduction in total cigaretteconsumption.
o UNITED KINGDOM – ‘duty escalator’ tobaccotaxation led to down-shifting byconsumers, increased illicit trade, governmentrevenue loss but with no impact on smokingincidence levels.
COUNTRY CASE STUDIES ON ILLICIT TRADE
O/S Recto
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
Are we willing to OUTSOURCE even the
MANUFACTURE OF SIN to distant lands?
O/S Recto
Use taxes as a deterrent to the consumption of unhealthy products
Create predictable, dependable, and reliable stream of revenues
Eliminate the annexes
Herald the imposition of a unitary tax rate
Index tax increases to inflation
Earmark portion of the proceeds to health care programs
O/S Recto
O/S Recto
Newly-introduced products shall be
initially classified using the suggested
NRP as declared in the sworn
statement submitted to the BIR.
O/S Recto
We believe that the variety of products sold should
beget a variation of taxes.
O/S Recto
We adopted aCONSERVATIVE FRAMEWORK
that we believe hedges CLOSER TO REALITY.
O/S Recto
ReasonableRealistic and
Responsible rendering of our power to tax the industry of
alcohol and cigarettes.
O/S Recto
INCREMENTAL REVENUE (HB 5727 ORIGINAL)
Year Cigarettes Distilled Spirits Fermented
Liquor
Total
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 B
O r i g i n a l R e v e n u e E s t i m a t e s
Source: DOF O/S Recto
INCREMENTAL REVENUE (HB 5727 ORIGINAL)
Elasticity CigarettesDistilled
Spirits
Fermented
LiquorTotal
-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
R e v i s e d R e v e n u e E s t i m a t e s ( i n B i l l i o n P h p )
Source: DOF
Assumptions:
Average Industry Growth: 1.97% Cigarettes, 2.62% Fermented Liquor, 3.69% Distilled Spirits
(1997-2011)
O/S Recto
O/S Recto
Cut-offs increased by 8%
O/S Recto
O/S Recto
Cut-offs increased by 8%
O/S Recto
INCREMENTAL REVENUE (SENATE COMM. REPORT)
YearDistilled
Spirits
Fermented
LiquorCigarettes Total
2013
Source: DOF
1.38
( i n B i l l i o n P h p )
O/S Recto
O/S Recto
INCREMENTAL REVENUE (SENATE COMM. REPORT)
YearDistilled
Spirits
Fermented
LiquorCigarettes Total
2013 1.38
Source: DOF
3.81
( i n B i l l i o n P h p )
O/S Recto
O/S Recto
O/S Recto
4 tiers 3 tiers 2 tiers
O/S Recto
O/S Recto
NET RETAIL PRICE CUTOFFS
CIGARETTES
LOW
< P15M E DI U M
P15-P18H I G H
> P18
O/S Recto
O/S Recto
INCREMENTAL REVENUE (SENATE COMM. REPORT)
YearDistilled
Spirits
Fermented
LiquorCigarettes Total
2013 1.38 3.81
Source: DOF
9.79
( i n B i l l i o n P h p )
O/S Recto
INCREMENTAL REVENUE (SENATE COMM. REPORT)
YearDistilled
Spirits
Fermented
LiquorCigarettes Total
2013 1.38 3.81 9.79 14.98
Source: DOF
( i n B i l l i o n P h p )
O/S Recto
HB 5727 (AMENDED)
Range
Cigarettes -5.6 B 5.8 B
Alcohol 5.2 B
TOTAL -0.4 B 11 B
Year: 2013Elasticity: -0.584
Attachment
Attachment
O/S Recto
Cut-offs increased by 8%
O/S Recto
Our proposal is not just to earmark the incremental revenues
but a portion of theENTIRE EXCISE TAX COLLECTIONS
from alcohol and tobacco.
O/S Recto
+ P15 B incremental revenues on 2013
= P65 B
This measure:
O/S Recto
O/S Recto
O/S Recto
P65 B
RA 7171
1B to provinces producing burley and native tobacco
40% of total sin tax proceeds = P26 B to PhilHealth
10% of total sin tax proceeds = P6.5 B to DOH
•3.25 B to 16 regional hospitals
•3.25 B to 618 district hospitals operated by LGUs
100 M for public information and education campaign program
100 M for displaced workers
EARMARKING
50% of total sin tax proceeds = P33 B to public health sector
= 200 M
= 5.25 M
O/S Recto
Extinction of vices cannotbe affected through
taxation.
O/S RectoO/S Recto
This bill is not the magic pill that will
restore the fiscal health of the government
either.
O/S Recto
Other industries must do their share, not through a round of new taxes, but bySHUTTING DOWN THELOOPHOLESthrough which their companies breathe.
O/S Recto
Two of theHARDEST THINGS
a Senate can do is toVOTE FOR WAR and
VOTE FOR NEW TAXES.
O/S Recto
Lalo na sa isang batasna papataw ng buwis
hindi sa mgadambuhalang kumpanya
pero sa ordinaryongmamamayan.
O/S Recto
O/S Recto