Philippine Reserves another peak high- $82.1 Billion USD; Smoke, liquor tax up +₱32

Gross int'l reserves hit record high

The Philippines' gross international reserves (GIR) reached a new high of $82.093 billion last month, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

The end-October level marked a "modest increase" from $82.028 billion posted in the first nine months, BSP Deputy Governor Juan de Zuñiga said in a statement.

The latest GIR, which serves as buffer in times of external shocks, is well above BSP's 2012 forecast of $77.5-$78 billion, breached as early as July. BSP has said revised forecasts will be revealed this month.

"The modest increase in the end-October 2012 GIR level was due mainly to inflows from the foreign exchange operations and investment income of the BSP," De Zuñiga said.

"These inflows were offset, however, by foreign exchange outflows for the payments by the national government of its maturing foreign exchange obligations, as well as revaluation losses on the BSP's gold holdings resulting from the decrease in the price of gold in the international market," he explained.

Reserves are now good to cover 11.9 months worth of imports of good and payments of services and income, De Zuñiga said. They are also equivalent to 11.7 times the country's short-term external debt based on original maturity and 6.6 times based on residual maturity.

Bill eyes P45B from 'sin' tax

A SENATE committee yesterday unveiled a substitute "sin" tax bill calling for higher tax rates on cigarettes than those proposed by the House, with the revenue take expected to be larger at ₱40-45 billion.

           "Our version adopts that of the Lower House with added features... and amendments," Senate ways and means Acting Chairman Senator Franklin M. Drilon said in his sponsorship speech yesterday.

The earlier version sponsored last month by Senator Ralph G. Recto -- who quit as ways and means chairman after receiving criticism for supposedly watering down the bill -- was expected to generate only ₱14 billion.

House Bill (HB) No. 5727 scrapped the unitary rate proposed by the Finance department and set two tiers for tobacco and three for alcohol products, with standard increases every two years after a transition period beginning 2015. HB 5727 is expected to generate ₱30 billion in incremental revenues.

The National Internal Revenue Code has a four-tier classification for cigarettes and three for fermented liquor and distilled spirits.

Mr. Drilon said the scheme will raise ₱40-45 billion in incremental revenues on the first year -- ₱26.87 billion from tobacco products, ₱7.17 billion from distilled spirits, and ₱12.5 billion from fermented liquor.

The new bill states that "on Jan. 1, 2016, all cigarettes will have a unitary tax rate of ₱32.00."

Before that, rates for cigarettes packed by hand will go up to ₱12.00 per pack on Jan. 1, 2013, ₱22.00 on Jan. 1, 2014, and ₱28.00 on Jan. 1, 2015, from the current ₱7.56.

The House version proposes only two tiers beginning January 2013, with an 8% increase every two years after the transition period, or from 2015 to 2025.

For cigarettes packed by machine, Mr. Recto proposed three tiers for the period March 2013 to 2019, with an 8% increment every two years. The tiers were supposed to be reduced to two by 2020 with an adjustment of 4% every two years thereafter.

"We also wish to introduce amendments to the excise tax provisions governing distilled spirits so that our laws would conform to our WTO (World Trade Organization) obligations. Under our version, we propose a mixed rate of P30 plus 30% of the net retail price (NRP)," Mr. Drilon said.

For distilled spirits, the House version proposed three tiers with specific rates while the substitute bill is a combination of specific and ad valorem rates. The Recto version maintained four tiers, with a two-step increase in rates based on proof per liter on March 1, 2013 and on Feb. 28, 2015.

"With respect to fermented liquor or beer, we shall be introducing a two-tier system with the products whose NRP do not exceed ₱22 taxed at ₱20. For those whose NRP exceed ₱22, the same shall be taxed at ₱25," Mr. Drilon said.

The House version proposed the same number of tiers but the NRP was set at ₱50.60 and below and ₱50.60 and above. Mr. Recto proposed two tiers during the transition period beginning March 2013, with an 8% increase every two years from 2015 to 2019 and 4% beginning March 1, 2020.

President Benigno S. C. Aquino III was amenable to lowering the take to P40 billion from the original Palace proposal of P60 billion.

"At ₱40 (billion), we're happy. At ₱60 (billion), we'll be happier. For ₱40 (billion) is already, I think, sufficient to meet the objectives both in terms of gaining more resources, managing the deficit but most importantly addressing the health issues," he said at the sidelines of the Asia-Europe meeting in Laos.

Philstar, BusinessWorld Online