Home Top News Finance department says no plan to further raise sin tax rates

Finance department says no plan to further raise sin tax rates

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Policemen seize fake cigarettes in this file photo. — PHILIPPINE STAR/ MIGUEL DE GUZMAN

THE DEPARTMENT of Finance (DoF) is not planning to raise taxes on “sin” products but is closely looking into the mounting tax losses due to illegal importation of cigarettes.

“We will not impose any hike except for the existing [rates,]” Finance Undersecretary and Chief Economist Domini S. Velasquez said at a forum hosted by the Economic Journalists Association of the Philippines and San Miguel Corp. at the weekend.

The government imposes so-called “sin” taxes or excise taxes on certain goods such as alcoholic beverages and tobacco products in order to discourage consumption.

Ms. Velasquez said the DoF is not keen on increasing tax rates that may stoke inflation. Instead, she said the department is “really zeroing in on how to improve administrative efficiency.”

Signed into law in January 2020, Republic Act No. 11467 increased the excise tax on electronic cigarettes and alcoholic products to fund the Universal Health Care (UHC) law.

For instance, the ad valorem tax was increased to 22% of the net retail price of distilled spirits. The specific tax was raised to P42 per proof liter in 2020, to P47 per proof liter in 2021, to P52 in 2022, to P59 in 2023, and to P66 in 2024.

Under the law, the tax rate for tobacco products would be increased by 5% yearly starting Jan. 1, 2024.

“Higher sin taxes could lead to some increase in inflation but the weight in the inflation/CPI (consumer price index) basket is relatively smaller,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Facebook Messenger chat.

Excise tax collection contributes around 12% to the Bureau of Internal Revenue’s overall collection. Aside from alcohol and tobacco, excise taxes are imposed on petroleum and minerals, among others.

Data from the DoF showed the sin tax collection reached P65.3 billion in 2022, 23% higher than the previous year.

DoF’s Ms. Velasquez said the department is looking into the rampant smuggling of cigarettes into the country, which has resulted in millions in revenue losses for the government.

“One of the things being looked at is possibly illicit cigarette trade. This could possibly be one of the gaps in terms of tax collections,” Ms. Velasquez said in a Viber message.

Mr. Ricafort said the government should ensure “greater enforcement of the law also versus smuggling and other illegal activities that also reduce the government’s tax revenue collections.”

He said the government should strengthen measures against tax evasion, run after tax cheats, and encourage tax payment compliance.

Earlier this month, the BIR seized 227,351 packs of illicit cigarettes during a raid of warehouses in Brooke’s Point, Palawan. The BIR estimated the illegal importers of these cigarettes were responsible for P150.7 million in tax liabilities. — B.M.D.Cruz

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