Cigarette, alcohol taxes up 81.5%

MANILA, Philippines - Collection of taxes from makers of cigarettes and alcoholic drinks surged 81.5 percent in the 11 months of the year, due largely to the  sin tax reform law which took effect in January.

In a briefing yesterday, Revenue Commissioner Kim Henares said combined excise tax payments by alcohol and cigarette manufacturers amounted to P91.6 billion in the first nine months of the year, already exceeding the government’s full year target of P85.56 billion. The amount represents an increase of P41.2  billion from  P50.4 billion in the same period last year.

“This goes to show that we were right all along..that the sin tax law will generate ample revenues for the government,” Henares said.

The government expects to generate PP36.34 billion in additional revenues in the first year of implementation of the law which imposes higher taxes on sin products.

Of the P91.6 billion, the bigger share of P61.6 billion was accounted for by excise tax payments by cigarette producers or more than double the P29.1 billion recorded a year ago.

Collection of taxes from alcohol products reached P29.9 billion, 40.5 percent higher than the previous year.

The huge jump in collections came with an equally significant drop in the volume of cigarette and alcohol removals from manufacturing plants.

In the 11 months through November, volume of tobacco removals decreased 17 percent to P41.96 billion.  Similarly, volume of fermented liquor dropped 12 percent to P1.239 billion.

Volume of removals for distilled spirits, on the other hand, rose 26 percent despite the change in the tax structure.

Under the sin tax law, there will be a gradual shift to unitary taxation by 2017 to prevent  downshifting to low price brands and discourage consumption of sin products.  It has also removed a significant source to leakages in cigarette taxes.  The government reportedly lost P19.5 billion in sin tax revenues from 2006 to 2010 alone.

According to the Action for Economic Reforms (AER), the implementation of sin tax law was a success in terms of revenue collections.

AER said that while it is still premature to determine the public health impact of the sin tax law, the mesure has significantly boosted tax collections, which would translate to higher funding for health programs.

From only P53 billion this year, the budget of the Department of Health will significantly increase to  P84 billion for 2014. Health Undersecretary Teodoro Herbosa said next year’s allocation represents a 58-percent increase from the 2013 budget, which is the largest increase ever.

“The incremental revenues from the law shall be used to fund the PhilHelath premium subsidy of the poor and near-poor, fund the upgrading and modernization of government hospitals and health facilities, expand our public health programs such as immunizationto reach our Millennium Development Goals, hire the needed health workers, and fund health promotion as well as implementation research to support universal health care,” Herbosa said.

The AER pointed out that the local tobacco industry is thriving, debunking the doomsday predictions of the sin tax law’s critics.

“While there have been no major reports on the impact of the sin tax law on tobacco workers, there is no question that the immense benefits reaped by the law will far outweigh any inconveniences felt by any one sector,” the AER said.