DOF unit nixes LGUs' bid to collect excise tax

MANILA, Philippines - The Department of Finance’s National Tax Research Center (NTRC) has rejected proposals seeking to allow local government units to slap excise tax on manufacturers of cigarettes, liquor, motor vehicles, and mineral products, saying this would result in higher prices.

According to the NTRC, allowing agencies to slap taxes on the said products could result in constant price hikes and multiple tax impositions.

The NTRC said the Bureau of Internal Revenue (BIR) already slaps excise tax on the different products such as petroleum, alcohol, tobacco, mineral, automobiles and non-essential goods as mandated under the National Internal Revenue Code (NIRC).

Furthermore, the tax center said that the products are also subject to the 12 percent value added tax (VAT) under Republic Act 9337 or the Expanded Value Added Tax of 1997.

“Imposing an excise tax at the local level may be too burdensome on the part of the manufacturers and producers and consequently on the consumers of said article as the tax is likely to be passed on via the price structure,” NTRC executive director Lina Isorena said in a position paper.

Isorena also raised questions on the capability of local collectors to impose and collect the excise tax on alcohol, tobacco, motor vehicles, non-essential goods, and mineral products.

She said such moves need close monitoring by the government.

“There is also a consideration of the capability of most local tax administrators to collect and administer the tax, since this imposition would require close monitoring,” she added.

A bill pending at the House of Representatives seeks to strengthen local government units by amending certain provisions of Republic Act 7160 or the Local Government Code of 1991. The bill wants LGUS to have more tax powers.

The BIR is tasked to collect P58.8 billion this year or P2.2 billion lower than the original target of P61 billion. The target has been revised by the tax agency due to the prolonged impact of the global economic slump.

The BIR’s excise tax collections reached P61.4 billion last year, or P5.87 billion, higher than the P55.5 billion collected in 2007.

The DOF has put on hold the imposition of higher excise tax on alcohol and tobacco products until 2012 on the following requests from major industry players.