Government keen on additional increase in sin taxes

MANILA, Philippines — The Department of Finance (DOF) will still push for a further increase in the excise taxes on sin products, particularly cigarettes, despite its possible impact on inflation, according to Finance Secretary Carlos Dominguez.

Dominguez said the DOF would continue to support the increase in excise taxes on tobacco and alcoholic products notwithstanding the backlash it may cause.

“Yes, because it’s the right thing to do. Just because you’re going to get a bad reaction, that doesn’t mean you’re going to stop,” Dominguez said when asked if the DOF would still push through with its plan to raise taxes on sin products.

The DOF earlier announced its intent to submit Package 2 plus of the Comprehensive Tax Reform Program (CTRP), which seeks further tax adjustments on alcohol, tobacco, mining, and casinos.

As for the sin tax component of the bill, Dominguez said the DOF would support the bill filed by Sen. Manny Pacquiao. Among the provisions of the bill is the imposition of a unitary excise tax rate of P60 per pack on cigarette products.

Currently, tobacco excise taxes cost P32.50 per pack, following the implementation of CTRP Package 1A or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Alcohol excise taxes have also increased due to the Sin Tax Reform Law, which was enacted in 2012.

Both sin taxes on tobacco and alcoholic products are considered primarily as health measures, as they discourage consumption of these products and help finance the universal healthcare program of the government.

However, sin taxes, particularly on tobacco, were identified by the DOF as one of the main drivers of inflation, which has averaged 4.1 percent in the first four months of the year, slightly above the two to four percent target range of the Bangko Sentral ng Pilipinas.

Finance Undersecretary Gil Beltran earlier said the increase in tobacco prices was in part due to the TRAIN Law, and mostly due to better enforcement by revenue-collecting agencies.

“Tobacco prices rose by 46 percent year-on-year in the first quarter mainly because of better tax collection,” Beltran said.

“Of the 46 percent price rise, TRAIN only accounts for two percentage points of the increase; sin tax for the four percentage points; and the rest (40 percentage points) is due to the industry’s response to more efficient sin tax collection,” he said.

The DOF earlier said adjustments in the prices of sin products, especially tobacco, would continue to fuel inflation in the near term.