MANILA, Philippines - Collection of excise taxes on cigarettes and alcoholic beverages grew by almost a third in the first half, largely driven by extra revenue generated by the sin tax reform law which took effect in January last year.
Data from the Bureau of Internal Revenue showed that from January to June, excise tax collections on sin tax products amounted to P46 billion, exceeding the government’s target by 31.6 percent or P11.04 billion.
The amount marked a year-on-year increase of 30 percent from the P35.46 billion collected in the same period a year ago.
Of the total, the bigger share of P28.18 billion was accounted for by excise tax payments by cigarette makers. The amount marked a 44.4 percent surge from P19.51 billion the previous year.
Excise tax collections for alcoholic beverages amounted to P17.8 billion, up 11.6 percent year on year.
Without the sin tax law, the government would have only collected P26.91 billion in excise taxes or an increase of just 2.25 percent from the 2013 levels.
The landmark measure effectively jacked up the tax rates on tobacco and liquor and mandated the gradual shift to a unitary tax rate over the medium term. The law is targeted to boost state revenues and reduce the incidence of smoking. The increase will be implemented annually across several products until 2017.
Internal Revenue Commissioner Kim Henares said the continued growth in excise tax collections only goes to show that the Sin Tax Reform law has been effective in increasing state coffers.
For this year, the government is eyeing a 22 percent growth in six tax collections to P104.8 billion. The bulk of which or P65.15 billion will come from cigarettes and P39.545 billion from alcoholic beverages.
Critics claim the government continues to lose substantial revenues due to illicit tobacco trade in the country.
Based on a study commissioned by leading tobacco firm Philip Morris, the Philippines lost an estimated P15.6 billion in revenues because of non-payment of correct taxes by domestic cigarette manufacturers while the consumption of domestic illegal tobacco nearly tripled from 6.1 billion in 2012 to 17.1 billion last year.
The report, done by Oxford Economic and International Tax and Investment Center, was designed to measure the consumption of illicit cigarettes – those sold in the domestic market but fail to comply with the right tax dues – in the Philippines and its impact on revenue losses for the government.
The report found that 19.1 billion illicit cigarettes were consumed in the country last year, almost three times the estimated 6.4 billion illegally traded cigarettes used in 2012.
Henares, however, shrugged off critics’ claims, pointing out the steady growth in revenues collected from sin tax products.