Liquor concessionaire reacts to Philippines bill-UPDATE

Gavin Lipsith

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Colombo Management Holdings believes the passage of legislation imposing excise tax on duty-free liquor and tobacco will severely damage liquor sales at Duty Free Philippines from late January

Duty Free Philippines liquor concessionaire Colombo Management Holdings (CMH) has voiced its concerns over the country's new "sin tax" legislation, which includes a clause subjecting liquor and tobacco products sold at duty-free outlets to excise tax. The Philippines Senate formally passed the legislation on December 21, and it will come into effect by the end of January 2005. CMH president Robert Colombo told RavenFox.com the move would have predictably negative results for duty-free sales.

"Spirits in duty-free stores--a strange name for them given what has just happened--will now be subject to the same excise tax as those sold by local liquor merchants," said Colombo. "You can guess what that will do to [duty-free] sales."

As revealed on RavenFox.com on December 14, the bill was proposed to boost the country's tax revenues by about Ps15bn ($267m). Duty-free goods will nonetheless remain exempt from Customs duties and value-added tax.

Senate president Franklin Drilon, a supporter of the bill, said: "When you say duty-free, we understand it to be free of Customs duty. But if you look at the law, it is free of Customs duties, of taxes and of value-added tax. We will remove the exemption from taxes so that now [duty-free shops] will have to pay the excise tax."

According to the country's Bureau of Customs, 350m packs of cigarettes were imported through duty-free stores and free-trade zones in 2003. Senator Ralph Recto told local media he believed that the government would raise a "significant amount" of its expected revenue gains through the new taxes on duty-free sales. "I think we could generate a significant amount of revenue here, estimated at a minimum of Ps5bn ($89m)," said Recto.