DOF pushes higher alcohol, cigarette taxes

The Department of Finance is supporting further increases in alcohol and cigarette excise taxes to lessen consumption of these “sin” products even as these have become inflationary.

Amid rising inflation, the DOF claimed that the Tax Reform for Acceleration and Inclusion (TRAIN) Act was “not to blame” as it contributed only 0.4 percentage point to the five-year high rate posted last month.

Finance Secretary Carlos G. Dominguez III told reporters recently that both chambers of Congress were expected to submit bills seeking higher excise tax rates on alcoholic drinks in several weeks’ time.

Even as the increases in cigarette and alcohol excise taxes under the TRAIN and the Sin Tax Reform laws were partly to blame for elevated inflation at the start of the year, Dominguez said that the government supported moves to further increase them.

“When you talk of sin taxes, the idea there is to raise the tax so they will raise the price so that less people will consume it—that’s really the purpose. Cigarettes are not a necessity, and neither is alcohol. We know to some extent they are detrimental to health, and by making them less affordable we hope people will consume less and therefore less health problems and be more productive in life,” Dominguez said.

“So the idea is really to raise the price, that’s a fact of life. We are not raising so much revenues. It’s not an idea to raise revenue but it’s an idea to discourage the consumption of these products,” he added.

The government earlier reported that headline inflation rose 4.5 percent year-on-year in April mainly on the back of a jump in prices of sin products such as cigarettes and alcoholic drinks.

Under the TRAIN Law, the unitary excise tax slapped on cigarettes rose to P32.50 a pack effective Jan. 1 from P30 a pack last year.

The TRAIN Law also mandated a further increase in the cigarette excise tax rates to P35 a pack from July 1, 2018, to Dec. 31, 2019; P37.50 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.

Last week, the Bureau of Internal Revenue reported that even as it had programmed to collect incremental revenues of only P686 million from cigarette excise taxes in the first quarter, the actual additional take was 2,082-percent higher at P14.9 billion.

Actual collections from tobacco excise taxes amounted P38.9 billion, exceeding the P23.9-billion target. —BEN O. DE VERA