THE Aquino administration is likely to lose billions of pesos in revenues starting 2013 if Congress fails to pass a new sin-tax law, an official of the Department of Finance said.

Finance Undersecretary Gil Beltran told reporters that according to its estimates, the national government will lose around P2 billion and P2.4 billion a year from excise taxes of tobacco and alcohol products.

“We need to have a new [excise tax on alcohol and tobacco] bill before 2013,” Beltran said.

The existing excise tax on alcohol and tobacco, which is expiring this year, provides for an increase of 4 percent in tax rates for the so-called sin products every two years to factor in inflation. It was implemented since 2003 but the last tranche of the excise-tax increase has already been implemented this year.

“Theoretically, you will lose that [P2.4 billion] because there is no adjustment in the rate and no adjustment made for inflation,” Beltran said.

The hike on the rates of excise tax on sin products was being implemented in order to make up for increases in inflation rate in the country. The government is making around P60 billion in revenues from sin products.

The DOF has been pushing for a version of the sin-tax bill that is indexed to inflation, and provides a uniform tax rate across all alcohol and tobacco products.

The DOF’s proposal, however, is to have the tax rate linked to the inflation index for tobacco and liquor of the National Statistics Office instead of the consumer price index (CPI) just like in the current sin tax scheme.

“Nongovernment organizations want the sin tax rate indexed to the CPI to prevent possible manipulation of prices given the few players in the industry.  The existing law follows the CPI… they take the average over a five-year period which is 4 percent. So they adopted it,” Beltran said.

He said that having a single tax rate for alcohol and tobacco products instead of the tiered system under the current tax scheme would make the tax administration easier.

“The ideal is just one rate for alcohol and tobacco.  It would also eliminate the price distortions, which is in adherence to the rules of the World Trade Organization (WTO), if there is a uniform tax rate,” Beltran said.

The WTO has recently ruled in favor of the European Union and the United States, which filed complaints against the Philippines over the lower tax rates imposed on locally manufactured alcohol products, making imported liquors less competitive.

The House of Representatives, which by law will have to review every proposed tax measure, are still deliberating on various versions on excise tax for alcohol and tobacco.