THE DEPARTMENT of Finance (DoF) is proposing a package of new and higher taxes on sweetened beverages, e-cigarettes, flexible plastic products, luxury vehicles and private aircraft to offset revenue losses from proposed personal income tax relief measures.
At a briefing on Monday, DoF Undersecretary Karlo Fermin S. Adriano said these measures are part of the proposed Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability bill.
Mr. Adriano said the tax measures are expected to generate an average of P129.68 billion in additional revenues annually from 2027 to 2030.
These revenues are expected to offset the estimated P81.73-billion average annual revenue loss from raising the personal income tax-exempt threshold to P350,000 and removing the minimum corporate income tax for micro and small enterprises.
Overall, the tax package is projected to generate average net additional revenues of P47.94 billion annually from 2027 to 2030.
Under the package, the excise tax on beverages using caloric or noncaloric sweeteners would increase to P20 per liter from P6, while the levy on beverages using high-fructose corn syrup would rise to P40 per liter from P12.
Mr. Adriano said the increase is meant to address the continued rise in the consumption of sweetened beverages since 2022, even after the excise tax took effect in 2018.
“Why is it increasing over time? Because unlike other sin products that have annual indexation, where the excise tax rate is increased every year, sweetened beverages do not have that mechanism,” he said.
The proposed sweetened beverage tax rates would be indexed by 5% annually.
The DoF also wants to remove selected exemptions and expand the coverage to edible ices, including ice cream, sorbets, ice lollies and frozen yogurt. It estimated this would generate an average of P74.24 billion in additional revenues annually.
Also, the Finance department is proposing a unified P72.93 excise tax rate on e-cigarettes and heated tobacco products beginning in 2027.
The new rate would be applied per milliliter of salt nicotine, per two milliliters of freebase nicotine and per pack of 20 heated tobacco products.
Novel tobacco products would be taxed at P72.93 per two grams or two milliliters, while devices used for heated tobacco, vapor and novel tobacco products would be subject to a P150-per-unit levy. The rates would be indexed by 5% annually beginning in 2028.
“The problem that we’re trying to solve here is, one, the unequal taxation of e-cigarettes,” Mr. Adriano said, noting that traditional tobacco products are generally taxed more heavily.
He cited government data showing that e-cigarette use among adolescents aged 10 to 19 increased to 39.9% in 2023 from 7.5% in 2021. Among adults aged 20 to 59, the proportion rose to 9.9% in 2023 from 1.4% in 2021.
The changes to e-cigarette and novel tobacco taxes are expected to generate average additional revenues of P8.26 billion annually.
Mr. Adriano said the package would also update excise taxes on alcoholic products to address the uneven taxation of fermented and distilled spirits relative to their alcohol content.
The DoF is proposing to raise the specific excise tax on distilled spirits to P157.21 per proof liter and expand its coverage to premixed alcoholic beverages or alcopops. The rate would be indexed by 6% annually.
The alcohol tax reforms are projected to generate an additional P7.82 billion in average annual revenues.
The DoF is proposing a P150-per-kilogram excise tax on sando bags, labo bags and sachets, subject to 5% annual indexation.
Mr. Adriano said the measure is expected to reduce plastic consumption by 31.45% to 38.4%, depending on the type of plastic packaging, and generate average annual revenues of P13.05 billion.
WEALTH TAXES
The package also proposes an update on “wealth taxes,” particularly excise taxes on automobiles and nonessential goods, including private aircraft.
The DoF wants to impose a 75% tax rate on vehicles with a net manufacturer’s or importer’s price exceeding P8 million.
The existing rates would be retained for the lower tiers: 50% for vehicles priced above P4 million to P8 million, 20% for those priced above P1 million to P4 million, 10% for those priced above P600,000 to P1 million and 4% for those priced up to P600,000.
“It’s really a wealth tax. Those who can buy more than P8 million worth of cars will have to pay a 75% excise tax rate instead of 50%,” Mr. Adriano said.
The DoF is also proposing to raise the excise tax on nonessential goods by 5 percentage points to 25% of the wholesale price or dutiable value and expand its coverage to private aircraft.
The tax package also seeks to adjust motor vehicle user’s charge rates, which have not been updated for more than two decades.
“The proposal is to adjust it by cumulative inflation,” Mr. Adriano said, adding that this would bring the rates to about 2.1 times their current levels.
The automobile tax is projected to generate average annual revenues of P3.91 billion, while the adjustment to the motor vehicle user’s charge is expected to yield P22.39 billion annually.
In his State of the Nation Address last month, President Ferdinand R. Marcos, Jr. urged Congress pass several tax relief measures, including raising the annual personal income tax exemption threshold to P350,000 from the current P250,000, removing the minimum corporate income tax for small businesses, and granting a tax amnesty covering unpaid income, estate, donor’s and value-added taxes, including penalties. — Justine Irish D. Tabile
