Doing our home work

The government’s excise tax collection for the first quarter of the year fell 6.1 percent short of its target as tobacco companies frontloaded their stocks to avoid the scheduled increase in the tax rate effective this year.

Data from the Bureau of Internal Revenue (BIR) show that  excise tax collections amounted to  P14.2 billion in the first three months of the year, lower than the  P16.5 billion target for the period.

The revenue agency has missed every single excise tax collection target in the quarter, with alcohol excise tax collections amounting to P4.4 billion against a quarterly target of P5.1 billion.

Excise taxes on petroleum products amounted to only P2.8 billion during the period, also three percent short of the P3.3 billion target.

Revenues from sin taxes are expected to increase by 4.2 percent this year as the tax rate also increased for the third straight year since the structure was adjusted in 2005.

The Department of Finance (DOF) said the excise tax on so-called sin products such as cigarettes and alcohol would increase by eight percent this year as prescribed under Republic Act 9334.

The increase in excise taxes was already having an impact on the consumption of sin products with manufacturers reporting lower sales.

Excise taxes are considered sumptuary taxes which are duties imposed on products and services considered undesirable. Sumptuary taxation, however, was generally considered to be regressive since low-income groups tend to spend a large proportion of their resources on these goods than higher income households.

According to Finance Undersecretary Gil Beltran, manufacturers have also attempted to preempt the increase in excise tax rates this year by front-loading their production last December.

This meant that manufacturers have already removed huge inventories from their warehouses as early as last December and stockpiled them elsewhere since the tax was being charged ex-factory.

Beltran said the volume of withdrawals of cigarettes and alcohol products jumped 29 percent in October, November, and December last year.

”That’s why we are expecting a 46 percent drop in withdrawals in the first quarter this year because manufacturers want to avoid the increase as much as they could,” Beltran said.

“Once these inventories are exhausted, then we will get the normal amount of revenues. For the rest of the year, we think it would normalize,” he added.

DOF data showed that total excise tax collections from alcohol products and cigarettes are projected to reach P44.72 billion this year or P1.8 billion higher than last year’s P42.92 billion.

Internal Revenue Assistant Commissioner Corazon Pangcog said the BIR noted a shift in the consumption pattern to medium and low-end brands.

“We also noticed the shifting of the consumer preference with regards to excisable products like tobacco and alcohol,” Pangcog said.

According to Pangcog, alcohol drinkers shifted from medium to low-end but cheaper brands while smokers were forced to transfer to low-end brands from high-end or premium cigarettes.