August 22, 2019
THE economic cost of alcohol consumption could reach P256 billion by 2022, according to the Department of Finance (DoF).
Citing a 2009 study, Finance Undersecretary Karl Kendrick Chua said this cost was estimated to hit P190.8 billion this year, which could balloon to P211.2 billion by 2020, P232.7 billion by 2021 and P256.8 billion by 2022.
“[The economic cost] is basically those [resulting] from deaths [and] sickness, [because] if you are sick you cannot work, and if you are disabled you need someone to take care of you,” Chua explained in an interview late on Tuesday.
“And because of [these deaths, there is] grief, [which has a] social cost. [There is also] the social cost of having a drunk person beating someone, [or sexually abusing someone] and all,” he said.
This big economic cost could be reduced if the excise tax on alcohol products is increased, according to the Finance official.
For instance, he said next year’s estimated 30,000 deaths caused by alcohol consumption would be reduced by half because of higher tax rates.
“[Deaths] are the main driver of the economic cost. And then if you have [fewer] deaths, then it reduces the opportunity cost, because instead of you dying, you can still live and work. And [higher tax rates] also reduces binge-drinking….” Chua said.
“So I think we can reduce the cost by half, given the DoH (Department of Health)-DoF proposal,” he added.
Chua is referring to Package 2 Plus B of the government’s Comprehensive Tax Reform Program, which also proposes further increase in the excise taxes on electronic cigarettes and vapor products to provide additional funding for the Duterte administration’s Universal Health Care program.
Under this package, tax rates on alcohol products is aimed to increase to at least P40 per liter in the first year of implementation.
The tax take from the proposed alcohol excise tax hike was estimated to reach P33.3 billion next year, P41.8 billion by 2021, P49.9 billion by
2022, P57.7 billion by 2023, and P66.3 billion by 2024.
The House of Representatives’ version of the package — House Bill 1026, whose proposed rates were lower — was approved on third reading on Tuesday.
If passed, the current ad valorem tax imposed on distilled spirits would increase from the current 20 percent to 22 percent, while the specific tax would increase from P24.33 to P35 per proof liter starting next year.
A P5-increase in the specific tax would then be imposed every year thereafter until it reaches P45 per liter in 2022. From 2023 onward, the specific tax for distilled spirits will climb 7 percent each year.
Estimates provided by the Finance department showed that the House version would yield lower government revenues of P16.6 billion by 2020, P19.9 billion by 2021, P23 billion by 2022, P26.2 billion by 2023, and P29.7 billion by 2024.
The Senate version of the measure remains pending in its Ways and Means Committee.
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