Gov’t expected to earn more from ‘sin taxes’

Government ‘sin tax’ collections from the tobacco industry may rise nearly twofold this year from tobacco sales alone as rates increase and the market expands in terms of number of players.

Even with the number of smokers in the country declining, PMFTC Inc., the joint venture between Philip Morris International and Lucio Tan’s Fortune Tobacco Corp., said sin tax revenues from cigarettes should easily exceed this year’s official target.

The implementation of higher excise taxes on cigarette and alcohol products was approved by Congress in late 2012.

“We note the forecast of the [Department of Finance] stating it will likely collect P72 billion in tobacco excise in 2014,” PMFTC president Paul Riley yesterday said in a statement.

The DOF figure is above the Bureau of Internal Revenue’s (BIR) goal of P65 billion.

“Based on the yearly increase in tax rates and current trends, PMFTC itself will likely contribute around P70 billion in excise tax payments for 2014,” Riley said.

PMFTC, manufacturer and distributor of Marlboro cigarettes, among others, corners 71 percent of the Philippine tobacco industry, Riley said.

PMFTC’s market share is down from last year’s nearly 80 percent.

Given the firm’s current market share, and assuming smaller tobacco makers pay the proper taxes, Riley said the DOF should expect to collect “well over P90 billion”—considerably more than the original target.

In 2013, total sin tax collections reached P51.2 billion. Of the total, higher taxes accounted for P44 billion.

Last month, the US and Japanese chambers of commerce in the Philippines, acting on behalf of its tobacco-making members, urged tax authorities to closely monitor operations of local cigarette makers.

In letters sent to Finance Secretary Cesar Purisima, both chambers said they suspected local firms of tax evasion, citing the proliferation of “illicit” cigarettes for sale.

A recent Oxford Economics study showed that the government lost nearly P15 billion in foregone revenue from excise taxes last year due to the illicit cigarette trade. The study was commissioned by Philip Morris, an American firm.

The complaints of larger players come amid the recent rise of local players, which started selling cheaper tobacco shortly after new legislation forced the industry members to raise prices.