By Benjamin Cuaresma
MANILA — The Department of Finance (DOF) has proposed a sweeping package of tax increases on sugary beverages, electronic cigarettes, alcohol, plastic products, and luxury goods to offset an estimated P67 billion in revenue losses from the government’s planned income tax relief for millions of Filipino workers and small businesses.
The proposal, presented Tuesday before the House Committee on Ways and Means, forms part of the ProGRESS tax reform package endorsed by President Ferdinand Marcos Jr. It seeks to raise the annual tax-exempt income threshold from P250,000 to P350,000 while removing the 2-percent minimum corporate income tax for qualified micro and small enterprises.
The DOF estimates that the tax relief measures would benefit around 3.13 million individual taxpayers and 78,000 micro and small businesses beginning in 2027.
To recover the projected revenue shortfall, the finance department proposed increasing the excise tax on sweetened beverages using caloric sweeteners from P6 to P20 per liter, while drinks containing high-fructose corn syrup would see their tax rise from P12 to P40 per liter, both subject to a five-percent annual adjustment.
The package would also remove existing tax exemptions on 100-percent natural fruit and vegetable juices, as well as edible frozen products such as ice cream and frozen yogurt.
DOF Undersecretary Karlo Adriano said the proposed adjustments are intended not only to raise government revenues but also to discourage excessive sugar consumption and help address the country’s growing obesity problem.
Citing studies, Adriano said reducing the affordability of sweetened beverages is expected to lower consumption by about 27.2 percent, with carbonated soft drinks projected to decline by nearly 32 percent.
The proposal likewise seeks to equalize the taxation of electronic cigarettes, heated tobacco products, and conventional cigarettes, setting the excise tax at P72.93 per 2 milliliters beginning in 2027, with annual increases of five percent. Vapor devices would also be taxed P150 per unit.
Finance officials argued that emerging tobacco products pose health risks comparable to traditional cigarettes and should therefore be subject to similar tax rates.
Alcohol products are also targeted under the reform package. The excise tax on distilled spirits would more than double—from P74.16 to P157.21 per proof liter—followed by annual six-percent indexation.
To address environmental concerns, the DOF also proposed imposing a P150-per-kilogram excise tax on plastic sando bags, labo bags, and plastic sachets, with annual increases of five percent.
Luxury goods would likewise face higher taxes. The proposal seeks to increase the excise tax on automobiles valued at P8 million or more from 50 percent to 75 percent, while taxes on private aircraft, yachts, jewelry, and perfumes would increase from 20 percent to 25 percent. It also calls for adjusting the Motor Vehicle User’s Charge (MVUC) based on inflation.
The finance department estimates that the revenue-generating measures could raise approximately P112.44 billion in 2027, with about P88.1 billion expected to come from higher taxes on sweetened beverages, tobacco products, alcohol, and flexible plastics.
While lawmakers generally welcomed the tax relief proposal, several members of the House panel expressed concern over measures that could disproportionately affect ordinary Filipinos.
Committee Chairman Rep. Miro Quimbo questioned the proposed tax on plastic shopping bags commonly used in public markets, saying the measure could burden low-income consumers while generating relatively limited revenue. He suggested lawmakers instead focus on taxing plastic sachets, which contribute more significantly to environmental waste.
Quimbo also voiced reservations about increasing the MVUC, warning that higher vehicle registration charges could offset the benefits of the proposed income tax relief, particularly for middle-class vehicle owners.
DOF officials said they remain open to refining the proposals during congressional deliberations.
Batangas Rep. Ryan Recto also cautioned that steep increases in alcohol excise taxes could encourage smuggling, particularly if tax rates become excessive.
Adriano acknowledged the concern but maintained that stronger tax enforcement and anti-smuggling measures would accompany any increase in excise taxes, while emphasizing that higher prices are intended to discourage harmful consumption and reduce its social costs.
Meanwhile, Albay Rep. Cielo Krisel Lagman urged the DOF to reconsider the continued tax exemption granted to 3-in-1 coffee, noting its high sugar content and potential contribution to lifestyle-related diseases.
The finance department said it is open to reviewing the proposal as lawmakers continue deliberations on the ProGRESS tax reform package, which Malacañang hopes will provide meaningful tax relief while maintaining the government’s fiscal sustainability.
ia/xf
