The Department of Finance will push for a further increase in alcohol and cigarette excise taxes not only to raise additional revenues but also as a health measure, even if elevated prices of “sin” products had already contributed to high inflation at the start of the year.
“It’s the right thing to do,” Finance Secretary Carlos G. Dominguez III told reporters recently, “just because you’re going to get a bad reaction, that doesn’t mean you’re going to stop.”
The government earlier reported that inflation rose 4.5 percent year-on-year in April, an over five-year high, mainly as prices of “sin” products such as cigarettes and alcoholic drinks jumped 20 percent.
As such, the headline inflation rate based on 2012 prices averaged 4.1 percent during the first four months, breaching the government’s target range of 2-4 percent.
Under the Tax Reform of Acceleration and Inclusion (TRAIN) Act, the unitary excise tax slapped on cigarettes rose to P32.50 per pack effective Jan. 1 from P30 a pack last year.
The TRAIN law also mandated a further hike in the cigarette excise tax rates to P35 per pack from July 1, 2018 to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020 to Dec. 31, 2021; and P40 from Jan. 1, 2022 to Dec. 31, 2023.
Also, the excise tax rates slapped on alcoholic drinks increase every year under the Sin Tax Reform Law of 2012.
The DOF was proposing a tax reform package “two plus,” which will also cover taxes on tobacco, alcohol as well as mining, coal and casinos.
Package two plus will jack up taxes slapped on alcoholic drinks and rationalize the bills already filed in both houses of Congress covering the other products and services.
The first tax package or the TRAIN law was already enacted into law, while at least four more packages were aimed for Congress’ approval before yearend.
Signed by President Rodrigo Duterte in December, Republic Act No. 10963 or the TRAIN law since Jan. 1 this year jacked up or slapped new excise taxes on cigarettes, sugary drinks, oil products and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.
The TRAIN law, coupled with a weaker peso and rising global oil prices, had been mostly blamed for the faster inflation in the first few months of the year.