DoF finalizing new taxes on ‘sin’ products

By Melissa Luz T. Lopez, Senior Reporter
THE Department of Finance (DoF) is finalizing proposals for a fresh round of tax increases on alcoholic drinks and cigarettes, as authorities noticed that consumption remained high despite the latest round sin tax adjustments.
Finance Secretary Carlos G. Dominguez III said the agency is readying a new proposal to Congress that will raise the excise tax on alcohol and tobacco products.
“They will be submitting that in the next few weeks,” Mr. Dominguez told reporters, even as he declined to discuss the specifics of the draft law which the DoF is preparing.
“When you talk of ‘sin’ taxes, the idea there is to raise the tax. They will raise the price so that less people will consume it… That’s a fact of life — we are not basing so much revenue, but it’s an idea to discourage the consumption of these products.”
On Jan. 1, the excise tax on cigarettes has been raised to P32.50 per pack this year under the Tax Reform for Acceleration and Inclusion (TRAIN) law. The tax will rise to P35 per pack by July. Meanwhile, prices of alcoholic drinks also went up by four percent, as provided under the Sin Tax Reform Law of 2012.
Despite these rate increases, the Bureau of Internal Revenue (BIR) has pointed out that consumption of the so-called ‘sin’ products have not declined as ‘sin’ tax collections breached agency targets.
Finance Undersecretary Antonette C. Tionko then said that this strengthens the case to adjust the tax rates, saying “it has to go higher.”
According to agency data, tobacco excise revenue grew by a fifth to P38.86 billion during the first quarter, beating the P23.888 billion target for the period.
The BIR has also flagged that the higher levies on cigarettes triggered increased smuggling, especially ahead of further increases in the tax rate.
The DoF has scheduled the reform of tobacco and alcohol excise taxes for succeeding packages of the comprehensive tax reform program, which they want approved by Congress within 2018.
Finance officials previously signalled that they are keen on supporting the proposal of Senator Emmanuel D. Pacquiao to raise the tobacco excise tax to P60 a pack.