The Distilled Spirits Association of the Philippines said it supports the government’s proposal for higher taxes on alcohol products as long as it promotes a level playing field among industry players.
DSAP president Olivia Limpe-Aw said association members were concerned that current proposals aimed to impose too much tax burden on distilled spirits and a lighter levy on wine products.
“As we told the Department of Finance, if you want to increase our taxes, we’re okay with that as long as you level the field,” Limpe-Aw said at a recent Senate ways and means committee meeting chaired by Senator Pia Cayetano.
Limpe-Aw said the DOF’s plan to exempt wines from the ad valorem tax was unfair to other alcohol makers. Under the proposal, the government plans to collect two kinds of taxes from every proof liter of distilled spirits”•first, a P40 specific tax and second, a 22-percent ad valorem tax based on net retail price per proof.
The DOF proposed to impose a single specific tax of P40 per liter of wine, which would be exempted from ad valorem tax.
“We’re currently applying a progressive tax structure for distilled spirits. There’s no reason it can’t be done across categories in the alcohol sector/industry. We just need to look for the right balance,” said Limpe-Aw, who is also the president and chief executive of Destileria Limtuaco, Inc., the country’s oldest distillery.
She said that if adopted, the DOF proposal would unfairly penalize low-income consumers who could not afford to buy expensive wines costing up to P600,000 per bottle that pay only P40 excise tax per liter or equivalent to P30 per 750-ml bottle.
“Let’s compare: Ginebra San Miguel Gin will be sold at P94 a bottle under this proposed tax, so the tax is P32.66 or a tax burden of 34.74 percent. The most expensive wine”•P600,000″•the tax is only
P30/bottle, or a tax burden of 0.005 percent,” she said.
She admitted that not all distilled spirits catered to the mass market as there were also brands that catered to affluent consumers and sold for more than P20,000 per bottle. She said high-end
distilled spirit brands paid higher excise tax.
“Let’s use P20,000/750 ml bottle as our base price to compare taxes: the tax per bottle for this distilled spirit is P2,996.91. That’s still more than 100-times compared to the P30 tax on a P20,000/bottle wine,” Limpe-Aw said.
Based on industry data, 91.3 percent of Filipino drinkers who consume distilled spirits mainly come from the D and E segments. Limpe-Aw said competition among industry players was tight in this price-sensitive business.
She said alcohol was currently the lowest priority on household spending and continued to decrease every year. From 1.2 percent based on the 2009 Family Income and Expenditure Survey, it’s down to 0.592 percent in 2015.
“Assuming our minimum wage is P15,000 a month, the budget now for alcohol is P89 based on that 0.592 percent household income allocation. That’s too small, P89 is just a bottle of gin or brandy every month,” Limpe-Aw said.
She said alcohol manufacturers needed to find ways to lower their costs and maintain the affordability of their brands.
“If you notice, our manufacturers depend on the budget of our market. Even distilled spirits hold a significant market share, we can’t dictate a higher price because of our consumers’ weak purchasing power,” Limpe-Aw said.
