4-month ‘sin’ tax take surges

The Bureau of Internal Revenue’s collection of excise tax from alcohol and cigarette manufacturers grew by over P4 billion in the first four months of the year, due mainly to the implementation of the controversial Sin Tax Reform law.

BIR Commissioner Kim Henares said the law, which took effect in January, is proving effective in beefing up state coffers.

Official government data showed that in January to April, combined excise tax payments by alcohol and cigarette manufacturers amounted to P21.75 billion. This represented a P4.28-billion, or nearly 25-percent, increase from P17.47 billion in the same period last year.

“Our collection of sin taxes is doing well. The assumption [on additional revenues to result from the law’s implementation] is proving itself to be correct,” Henares told the Inquirer.

Some cigarette industry players, however, said the government is at risk of missing its 2013 revenue target from the Sin Tax Reform law due to smuggling and tax evasion by illegitimate firms.

The government intends to generate P33.9 billion in additional revenues in the first year of implementation of the law slapping higher taxes on “sin” products.

Michael Tan, president of the Lucio Tan Group (LTG) Inc., which is the local partner of Philip Morris Fortune Tobacco Corp., said that the company’s volume of cigarette sales dropped by 40 percent year-on-year in the first quarter.

He suspects that the entry of smuggled cigarettes as well as sales by tax-evading cigarette makers forced the drop in sales of LTG Inc.

Tan said that so far this year, the government has already lost P3 billion in potential revenues and could lose P8 billion in total for 2013 due to smuggling and proliferation of illegitimate or tax-evading industry players.

But Henares disagreed, reiterating that the government was poised to meet the revenue target from the Sin Tax Reform law.

The Sin Tax Reform law did away with the old multitier tax structure—which was said to favor certain brands—and imposes the same tax rates on all industry players.

For cigarettes, the new tax rates effective this year are: P12 per pack for brands with a net retail price of P11.50 and below, and P25 per pack for brands with a net retail price of more than P11.50 per pack.