Sin tax revenues down in March, but beat Q1 target

MANILA, Philippines - Graphic health warnings on cigarettes pulled down excise tax collections on "sin" products in March, but revenues remained up to beat its first quarter target, the Bureau of Internal Revenue (BIR) reported on Wednesday.

A total of P8.09 billion in sin taxes were raised that month, down 1.73 percent from P8.24 billion a year ago.

Nonetheless, collections from January to March were still up 22.78 percent to P26.62 billion, also beating the P24.73-billion goal.

"Our landmark sin tax reform continues to deliver positive health outcomes for the Filipino people," Finance Secretary Cesar Purisima said in a statement.

Jo-ann Diosana, senior economist at think tank Action for Economic Reforms, agreed. "There is no doubt the reform is bringing in more much-needed revenues," she said by phone.

Enacted in 2012, Republic Act (RA) 10351 prescribed for yearly specific adjustments in tobacco and alcohol excise tax rates.

The law, which was meant to deter smoking and excessive drinking, allocates around 80 percent of incremental revenues to universal health care program and 15 percent to tobacco farmer support. 

In March though, the drop in collections was led by a 16.12-percent decrease in tobacco revenues to P4.04 billion.

Those from distilled spirits and compounded liquors also decreased 9.11 percent to P970 million, data showed. Fermented liquors surged 31.02 percent to P3.09 billion.

For the first quarter, collections remained up 23.05 percent, 3.75 percent and 30.72 percent, respectively.

"Companies are still disposing off their stocks which do not have graphic health warnings so there were less withdrawals," BIR commissioner Kim Henares said in a separate phone interview.

Withdrawals pertain to stocks released from factories to the market. BIR data showed tobacco volumes went down by more than a quarter to 148.62 million packs in March.

RA 10643 took effect in March and required cigarette packs to contain photographs of health repercussions of smoking.

"The gauge is based on withdrawals, not consumption. So basically, you have those in the market, but possibly they are not being consumed that much," Henares said.

"Besides, logically, why would you even add heat to your body if it is already too hot these days?" she added.

Diosana, for her part, said she is satisfied with how the law is increasing state revenues.

"They are also being allocated to the right program. But in terms of actual use of revenues, we have to monitor the implementing agencies like the Department of Health," she said.