Philippines Eyes Tax Hikes to Offset Relief for Workers, Small Businesses

MANILA, Philippines — The Marcos administration is weighing a series of tax increases—including higher levies on sweetened drinks, tobacco and alcohol, single-use plastics and wealth—to make up for the revenue expected to be lost under President Marcos’ tax relief plan for workers and small businesses. The Department of Finance (DOF) plans to ask Congress to approve the measures, which are projected to raise P518.71 billion between 2027 and 2030, Finance Undersecretary Karlo Fermin Adriano said at a news conference on Monday. READ: Increase in taxes pushed to protect youth from vices The new revenues would more than compensate for the estimated P326.92 billion the government expects to forgo over the same period by expanding personal income tax exemptions and exempting small businesses from the minimum corporate income tax. This would leave the government with a net fiscal gain of nearly P192 billion. Finance Secretary Frederick Go earlier said that raising the annual personal income tax exemption threshold to P350,000 from P250,000 would reduce government revenue by about P60 billion a year. Meanwhile, exempting micro and small enterprises from the minimum corporate income tax would cost the government another P6 billion in annual revenue. To help fill that gap, the DOF seeks to raise the excise on sweetened beverages to P20 per liter for sugar-sweetened drinks and P40 per liter for beverages made with high-fructose corn syrup, Adriano said. The proposal would also remove tax exemptions for soy milk and 100-percent natural fruit and vegetable juices, while extending the levy to products such as ice cream and yogurt. The government would also seek a unified P72.90 excise on e-cigarettes beginning next year, impose levies on novel tobacco products such as oral nicotine pouches, and raise excise on distilled spirits. READ: Higher vape taxes, green levies to offset P50-B tax relief cost – R. Quimbo Beyond so-called sin taxes, the department is proposing a P150-per-kilogram excise on single-use plastics, indexed to rise 5 percent annually, a 75 percent excise on vehicles priced above P8 million, and an update to the Motor Vehicle User’s Charge, commonly known as the road tax. With just under two years left in Mr. Marcos’ term and the president’s approval ratings having weakened in recent opinion polls, Adriano said the finance department wants Congress to pass the measures “as soon as possible.” The urgency has also increased after debt watcher Moody’s Ratings warned that the proposed tax cuts could test the administration’s commitment to its deficit-reduction strategy, with this year’s budget deficit capped at P1.66 trillion. “You have relief that is really needed on one side, but you also have some revenue-generating measures that are not as controversial as others,” Adriano said. “So, when we chose the components of the [package], we recognize all of these circumstances that we need to factor in the process of legislation.” “Ultimately, it’s a package because the net revenue impact should not be negative,” he added. INQ