Rocketing revenue proof sin tax working, says DOF
MANILA, Philippines—Finance officials reported a big surge in tax collections for cigarette and alcoholic beverages in the first three quarters this year, indicating the success of the sin tax law which took effect at the start of the year.
The Department of Finance (DOF) said in a statement the Bureau of Internal Revenue collected P63.6 billion in excise taxes on cigarettes and alcohol from January to September, representing a nearly 64-percent increase from the P38.8 billion collected in the same period last year.
Significant drop
Excise tax collections for cigarettes alone reached P40.2 billion in the first three quarters, up nearly 84 percent from the P21.9 billion in the same period last year.
Excise tax collections for alcoholic beverages amounted to P23.4 billion in the same period, up by 38 percent from the P16.9 billion in the same period last year.
The DOF noted that “this increase in collections came with an equally significant drop in the volume of cigarettes and alcohol removals from manufacturing plants.”
Withdrawn from plants
The DOF, however, maintained that the sin tax law was effective given that it was meeting revenue targets and causing a drop in the volume of cigarettes and alcohol being withdrawn from plants.
The DOF said cigarette volumes dropped year on year by 27.5 percent while that of fermented liquor fell by 11.6 percent from January to September.
The volume of distilled spirits, however, rose by 23 percent over the same period.
“[The decline in the volume of cigarettes and fermented liquor is] a clear manifestation of the relatively inelastic demand for these products,” said the DOF, which had argued in Congress last year that the sin tax reform bill, if enacted into law, would hit the twin objectives of raising government revenues and reducing smoking.
Proliferation of cheap brands
The DOF statement contradicted claims by some industry players that the consumption of cigarettes had not significantly dropped despite the higher tax rates.
Some cigarette companies, which strongly opposed the sin tax reform when it was being deliberated in Congress, had said the consumption of cigarettes remained high because of the proliferation of cheap brands.
They claimed that the amended Sin Tax Law had led to the smuggling of cheap cigaretts to the disadvantage of tax-abiding industry players.
Due to these complaints, a resolution seeking an inquiry into allegations of tax avoidance by unscrupulous cigarette entities has been filed in the House of Representatives by Rep. Paolo Everardo Javier of Antique.
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