1. SENATE OF THE PHILIPPINES
COMMITTEE ON WAYS & MEANS
Senate Bill 3299 under
Committee Report 411
October 10, 2012
O/S Recto

2. The measure we are about to
debate poses a deterrent that will
KEEP PEOPLE FROM BEING SICK
and will GENERATE REVENUES
that will TREAT THEM when they
get sick.
O/S Recto

3. Taxation
is what makes
appropriations
possible.
O/S Recto

4. BIR 2013 Collections P1.3T Billion
BIR 2013 Excise Tax
Collections P75 Billion
~P20.00
P1.00 for every P20.00
from sin products
O/S Recto

5. Taxes Collected (in Php) from Alcohol and Tobacco 100 Years Ago
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
Source: Report of the Philippine Commission to the Secretary of War, FY 1912 O/S Recto

6. Firemen and
P8.6 B fire trucks
Excise Taxes Paid (BJMP Budget)
(2011)
O/S Recto

7. P1.5 B classrooms
Excise Taxes Paid
(2011)
O/S Recto

8. P1.0 B
pension of
senior citizens
Excise Taxes Paid
(2011)
O/S Recto

9. 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

10. ALCOHOL INDUSTRY
Product Classifications
DISTILLED SPIRITS
Gin Whisky Brandy Rum Vodka Tequila Siok Tong
WINES
Sparkling wine Champagne Still wine Fortified Wine
FERMENTED LIQUOR
Beer Lager Ale Porter Basi Tapuy
O/S Recto

11. 2011 Volume of Removals
DISTILLED SPIRITS FERMENTED LIQUOR
255 million liter s 1.56 billion liter s or
4.7 billion bottles
17.4 liter s per per son
O/S Recto

12. ALCOHOL INDUSTRY
Gr oss Sales (2011)
TOTAL
P124 B
Fermented Liquor Distilled Spirits
P67 B P57 B
Wines
P 263 M
Source: BIR O/S Recto

13. ALCOHOL INDUSTRY
Tot al Taxes Paid (2011)
TOTAL
P42 B
Fermented Liquor Distilled Spirits
P30 B P12 B*
Wines
P 35 M** O/S Recto
*includes BOC data; Source: DSAP
Source: BIR ** excise tax only (no data for other taxes paid)

14. TAX BURDEN ON FERMENTED LIQUOR (2011)
Excise 19 B 28%
VAT 6 B 9%
Income &
other taxes 5 B 8%
TOTAL 30 B45%
O/S Recto

15. ALCOHOL INDUSTRY
Tot al Taxes Paid (2011)
TOTAL
P42 B
Fermented Liquor Distilled Spirits
P30 B P12 B*
Wines
P 35 M** O/S Recto
*includes BOC data; Source: DSAP
Source: BIR ** excise tax only (no data for other taxes paid)

16. TAX BURDEN ON DISTILLED SPIRITS (2011)
Excise 5.2 B 9%
VAT 5.2 B* 9%
Income &
other taxes 1.6 B 3%
TOTAL 12 B 21%
*with BOC data
Source: BIR O/S Recto

17. Tax Burden of Selected Industries (2011)
Alcohol Power
34%* 15%
Telecoms Automobile
15% 4%
*with BOC data
Source: BIR O/S Recto

18. CURRENT TAX RATES
Distilled Spirits
1 . F R O M LO C A L S O U RC E S
( s a p o f n i p a , c o c o n u t , c a s s av a , c a m o te o r b u r i
p a l m o r f ro m t h e j u i c e , s y r u p o r s u g a r o f t h e P 14.68
cane)
2 . F RO M R AW M AT E R I A L S OT H E R T H A N THOSE
E N U M E R AT E D A B OV E
N e t r e t a i l p r i c e ( N R P ) [ exc l u d i n g t h e exc i s e a n d
VAT ] p e r b o t t l e o f 7 5 0 m l v o l u m e c a p a c i t y i s :
Less than P250.00 P 158.73
P250.00 to P675.00 P 317. 4 4
More than P675.00 P 634.90
O/S Recto

19. CURRENT TAX RATES
Wines
1. SPARKLING WINES/ CHAMPAGNES
Net Retail Price, per bottle, regardless of proof:
P500.00 or less P 183.42
More than P500.00 P 550.24
2. STILL WINES
Less than 14% of alcohol by volume P 22.00
14% to 25% of alcohol by volume P 44.02
3. FORTIFIED WINES Same as distilled
More than 25% of alcohol by volume spirits
O/S Recto

20. CURRENT TAX RATES
Fermented Liquor
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 10.42
P 14.50 to P 22.00 (medium) P 15.49
More than P22.00 (high) P 20.57
2. Fermented liquor brewed and sold at micro
breweries, pubs, restaurants P 20.57
O/S Recto

21. 2011 Major Corporations
ALCOHOLINDUSTRY
Source: DSAP, August 2012 Source: BIR
O/S Recto

22. ALCOHOL INDUSTRY
Distilled Spirits Fermented Liquor
Emperador
Distillers
San Miguel
Breweries Inc.
Ginebra
San Miguel, Inc.
Tanduay
Distillers
Asia Brewery Inc.
Destileria
Limtuaco & Co.
Source: DSAP, August 2012 Source: BIR O/S Recto

23. PERCENTAGE OF ALCOHOL EXPENDITURE
Family Income and Expenditure Sur vey (1994 -2009)
0.9 0.9
0.7 0.7 0.7 0.7
1994 1997 2000 2003 2006 2009
O/S Recto

24. 2009
17.3 million smokers
2011
92 billion sticks/
4.6 billion packs
O/S Recto
*Source: DOF

25. 92% sold in sari-sari stores
Per capita consumption: 13 sticks
60% sold by tingi
Source: PMFTC (2012, 1st Half)
O/S Recto

26. TOBACCO INDUSTRY
Gr oss Sales (2011)
Manufactured Tobacco TOTAL Cigars
P827 M P75.6 M
P89.3 B
Cigarettes Packed by Hand (in 30s) Cigarettes Packed by Machine (in 20s)
P1.4 B P87 B
Source: BIR O/S Recto

27. TOBACCO INDUSTRY
Gr oss Sales (2011)
Manufactured Tobacco TOTAL Cigars
0.9% 0.08%
P89.3 B
Cigarettes Packed by Hand (in 30s) Cigarettes Packed by Machine (in 20s)
1.6% 97.4%
Source: BIR O/S Recto

28. TAX BURDEN ON TOBACCO
Excise 25.8 B
VAT 5.6 B
Income &
other taxes 4.2 B
TOTAL 35.6 B
O/S Recto

29. PERCENTAGE OF TOBACCO EXPENDITURE
Family Income and Expenditure Sur vey (1994 -2009)
1.4
1.3
1.1 1.1
0.9
0.8
1994 1997 2000 2003 2006 2009
O/S Recto

30. TAX BURDEN ON TOBACCO
Excise 29%
VAT 6%
of every
Income &
other taxes 5%
TOTAL 40%
O/S Recto

31. CURRENT TAX RATES
Tobacco Products & Cigar s
Tobacco Products
Tobacco not for chewing P 1.19
Tobacco for chewing P 0.94
Cigars
NRP per piece:
P500.00 OR LESS 10% OF THE NRP
More than P500.00 P 50.00 + 15% of the NRP in
excess of P 500.00
O/S Recto

32. CURRENT TAX RATES
Cigarettes
Cigarettes packed by hand (in 30s) P 2.72
Cigarettes packed by machine (in 20s)
Net Retail Price
Below P5.00 (Low) P 2.72
P5.00 to P6.50 (Medium) P 7.56
More than P6.50 to P10.00 (High) P 12.00
More than P10.00 (Premium) P 28.30
O/S Recto

33. CIGARETTES (PACKED BY MACHINE)
Removals Excise Taxes
Tier/ Tax Rate
(packs) Collected (Php)
Low
P2.72 3.0 B 8.1 B
Medium
P7.56 451 M 3.4 B
High
P12.00 1.15 B 13.9 B
Premium
P28.30 - -
Total 4.60 B 25.4 B
Source: DOF O/S Recto

34. CIGARETTES (PACKED BY MACHINE)
Removals Excise Taxes
Tier/ Tax Rate
(packs) Collected (Php)
Low
P2.72 3.0 B 8.1 B
Medium
P7.56 451 M 3.4 B
High
P12.00 1.15 B 13.9 B
Premium
P28.30 - -
Total 4.60 B 25.4 B
Source: DOF O/S Recto

35. 2011
Cigarettes
Philip Morris Fortune Tobacco
Corp. Inc. (PMFTC) 94.12%
Japan Tobacco International (JTI) 2.59%
Mighty Corp. 2.12%
La Suerte Cigar and
Cigarette Factory 0.66%
Associated Anglo-American
Tobacco Corp. 0.51%
British American Tobacco ---
Source: BIR O/S Recto

36. Companies are just
COLLECTING AGENTS
of the government.
O/S Recto

37. 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

38. The ones who will
ultimately bear the
additional tax burden are
ORDINARY FOLKS.
O/S Recto

39. It is not BIG TOBACCO
or the GIANT BREWERY
who will pay but,
SMALL PEOPLE.
O/S Recto

40. O/S Recto

41. Cigarette
smoking, like a
cigarette butt, should
be crushed.
But in the real
world, IMPOSSIBLE.
O/S Recto

42. If we ban cigarettes, this
government will weaken
from lack of cigarette taxes.
That would be the real
FISCAL SHOCK.
O/S Recto

43. It seeks to get
MORE BUCKS out of
FEWER PACKS.
O/S Recto

44. A HIGHER TAX RATE
DOES NOT
automatically result in
HIGHER COLLECTIONS.
O/S Recto

45. The void will be filled by
SMUGGLERS.
O/S Recto

46. COUNTRY CASE STUDIES ON ILLICIT TRADE
o CANADA – high excise levels (22%), increased
consumption of illicit cigarettes, undermined
regulatory & fiscal objectives.
o HUNGARY – sharp, above-inflation increase in
excise rate led to increased revenues initially but
eventually to a revenue decline.
o IRELAND – steep excise tax increase resulted in
swift emergence of illicit trade, virtually flat
cigarette duty revenues.
O/S Recto

47. COUNTRY CASE STUDIES ON ILLICIT TRADE
o MALAYSIA – staggering increase in excise tax (in
2011, 172% of 2004 rates) led to illicit trade growing to
almost 40% of the market.
o NEW YORK – excise duty hikes above underlying
inflation level led to a sharp drop in legal
volumes, decline in government revenues, decreased
smoking incidence and illicit trade reaching almost
40% of the market.
o ROMANIA – continuous massive excise
increases, increased government revenue, constant
smoking incidence, illicit trade is more than ⅓ of total
consumption.
O/S Recto

48. COUNTRY CASE STUDIES ON ILLICIT TRADE
o SINGAPORE – 135% increase in 2005 over
2000, declining government revenues despite tax
increase, smoking incidence was virtually
unchanged from 2001, illicit trade grew.
o SWEDEN – reduction in excise rates used to
counter extreme levels of illicit trade (late 1990s);
massive increase led to increased illicit trade (2007
and 2008) and reduction in total cigarette
consumption.
o UNITED KINGDOM – ‘duty escalator’ tobacco
taxation led to down-shifting by
consumers, increased illicit trade, government
revenue loss but with no impact on smoking
O/S Recto

49. 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

50. Are we willing to
OUTSOURCE even the
MANUFACTURE OF SIN to
distant lands?
O/S Recto

51. 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

52. O/S Recto

53. Newly-introduced products shall be
initially classified using the suggested
NRP as declared in the sworn
statement submitted to the BIR.
O/S Recto

54. We believe that the variety
of products sold should
beget a variation of taxes.
O/S Recto

55. We adopted a
CONSERVATIVE FRAMEWORK
that we believe hedges
CLOSER TO REALITY.
O/S Recto

56. Reasonable
Realistic and
Responsible rendering of our
power to tax the industry of
alcohol and cigarettes.
O/S Recto

57. INCREMENTAL REVENUE (HB 5727 ORIGINAL)
Original Revenue Estimates
Year Cigarettes Distilled Spirits Fermented Total
Liquor
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
Source: DOF O/S Recto

58. INCREMENTAL REVENUE (HB 5727 ORIGINAL)
Revised Revenue Estimates (in Billion Php)
Distilled Fermented
Elasticity Cigarettes Total
Spirits Liquor
-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
Assumptions:
Average Industry Growth: 1.97% Cigarettes, 2.62% Fermented Liquor, 3.69% Distilled Spirits
(1997-2011)
Source: DOF O/S Recto

59. O/S Recto

60. Cut-offs increased by 8%
O/S Recto

61. O/S Recto

62. Cut-offs increased by 8%
O/S Recto

63. INCREMENTAL REVENUE (SENATE COMM. REPORT)
(in Billion Php)
Distilled Fermented
Year Cigarettes Total
Spirits Liquor
2013 1.38
Source: DOF O/S Recto

64. O/S Recto

65. INCREMENTAL REVENUE (SENATE COMM. REPORT)
(in Billion Php)
Distilled Fermented
Year Cigarettes Total
Spirits Liquor
2013 1.38 3.81
Source: DOF O/S Recto

66. O/S Recto

67. O/S Recto

68. 4 tiers 3 tiers 2 tiers
O/S Recto

69. O/S Recto

70. NET RETAIL PRICE CUTOFFS
CIGARETTES
LOW MEDIUM HIGH
< P15 P15-P18 > P18
O/S Recto

71. O/S Recto

72. INCREMENTAL REVENUE (SENATE COMM. REPORT)
(in Billion Php)
Distilled Fermented
Year Cigarettes Total
Spirits Liquor
2013 1.38 3.81 9.79
Source: DOF O/S Recto

73. INCREMENTAL REVENUE (SENATE COMM. REPORT)
(in Billion Php)
Distilled Fermented
Year Cigarettes Total
Spirits Liquor
2013 1.38 3.81 9.79 14.98
Source: DOF O/S Recto

74. HB 5727 (AMENDED)
Range Attachment
Cigarettes -5.6 B 5.8 B
Alcohol 5.2 B
TOTAL -0.4 B 11 B
Attachment
Year: 2013
Elasticity: -0.584 O/S Recto

75. Cut-offs increased by 8%
O/S Recto

76. Our proposal is not just to
earmark the incremental revenues
but a portion of the
ENTIRE EXCISE TAX COLLECTIONS
from alcohol and tobacco.
O/S Recto

77. This measure:
+ P15 B incremental revenues on 2013
= P65 B
O/S Recto

78. O/S Recto

79. O/S Recto

80. RA 7171
1B to provinces producing
burley and native tobacco
40% of total sin tax proceeds =
50%
P26 B to PhilHealth
P33 public health sector
EARMARKING
10% of total sin tax proceeds =
P65 B P6.5 B to DOH
•3.25 B to 16 regional hospitals = 200 M
•3.25 B to 618 district hospitals operated
by LGUs = 5.25 M
100 M for public information and
education campaign program
100 M for displaced workers
O/S Recto

81. Extinction of vices cannot
be affected through
taxation.
O/S Recto

82. This bill is not the
magic pill that will
restore the fiscal health
of the government
either.
O/S Recto

83. Other industries must
do their share,
not through a round of
new taxes, but by
SHUTTING DOWN THE
LOOPHOLES
through which their
companies breathe.
O/S Recto

84. Two of the
HARDEST THINGS
a Senate can do is to
VOTE FOR WAR and
VOTE FOR NEW TAXES.
O/S Recto

85. Lalo na sa isang batas
na papataw ng buwis
hindi sa mga
dambuhalang kumpanya
pero sa ordinaryong
mamamayan.
O/S Recto

86. O/S Recto