May 27, 2024

The Insider News

Direct from the source

Salceda wants uniform rules on taxing denatured alcohol

HOUSE Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) led the House tax panel today in approving House Bill No. 10328 which imposes uniform tax rules on denatured alcohol regardless of source. 

Under the current law, only domestic denatured alcohol by distillers is exempt from excise tax. The provision, Salceda says, “is a holdover from the pre-2012 excise tax regime, where ingredients, rather than finished alcoholic products, were taxed.”

“When we enacted the 2012 Sin Tax Law, we imposed taxes on removals of final alcohol products. But we only exempted domestic denatured alcohol from taxation, not imported ones – and the domestic supply is simply not enough. You have to remember that we have some of the world’s biggest alcohol companies,” Salceda said.

The domestic alcohol industry, Salceda says, “is one of the country’s most global industries, with the world’s largest gin and brandy makers being Filipino companies. They create jobs. They pay taxes. So, we shouldn’t impose archaic, logicless rules on them.”

“Once denatured, alcohol becomes an undrinkable substance and shall no longer be taxed as potable alcohol under Section 141 of the NIRC. However, Sections 134 and 168 of the Tax Code limit the denaturing of alcohol only to domestic alcohol produced by local distilleries and only in the premises of such local distilleries. This is no longer the case now as importation of alcohol as ingredient is done regularly.”

“Alcohol companies have to denature alcohol because they often have to strengthen or rectify alcoholic products. It’s basically waste that can still be passed on to the pharmaceutical industry,”

“This situation creates a great disadvantage for industry taxpayers. As a result of this disadvantage, they are constrained from denaturing imported alcohol. To rectify this discriminatory practice, the said sections must be adjusted, consistent with the new taxation policy on denatured alcohol.”

Salceda also noted that even civil society resource persons “did not oppose the measure, as it is simply a tax administration measure that makes our rules uniform, consistent with the way global trade works.”