State think tank backs higher taxes on alcohol, cigarettes

MANILA, Philippines — A state think tank is recommending further increases in the excise tax rates of both alcoholic and cigarette products to effectively reduce consumption and protect the health of the public.

According to the latest journal of the National Tax Research Center (NTRC), there is still an increasing volume of removals of fermented liquors and distilled spirits from factories, as well as a high prevalence of alcoholic drinkers in the country despite the rise in excise tax rates for alcoholic products.

“(This) is an indication that the present tax rates are still relatively low to effectively reduce consumption of these alcoholic beverages. Hence, imposing higher excise tax on alcohol products is supported,” the NTRC said.

The excise tax rates of alcoholic products has increased since 2013 since the implementation of Republic Act 10351 or the Sin Tax Reform Law.

As a result, the NTRC said excise tax collections on alcohol grew 20.62 percent on average annually from 2013 to 2017. From a collection of P32.99 billion in 2013, it reached P59.09 billion in 2017.

Despite this, the think tank said volume of removals of distilled spirits grew 9.52 percent annually from 2013 to 2017, while volume of wines and fermented liquors rose 9.79 percent and 3.43 percent, respectively.

On the other hand, the NTRC said the sin tax law was able to increase the government’s tax take from cigarettes while also effectively reducing cigarette consumption in the country.

The tax research center said excise tax collections on tobacco products from 2013 to 2017 jumped from P67.96 billion in 2013 to P90.89 billion last year.

Volume of removals from factories decreased from 4.87 billion packs in 2013 to 3.03 billion in 2017.

Despite this, the NTRC noted current tax rates is still below the recommendation of the World Health Organization (WHO).

“Although the increase in excise tax rates was successful in reducing volume of removals and tobacco consumption in the country without revenues suffering, the ratio of excise taxes to retail price is still way below the WHO recommendation of at least 70 percent of the retail prices,” the think tank said.

“Hence, further gradual increase in the tax rates is likewise recommended,” it added.

The Department of Finance (DOF) is proposing for further increases in the tax rates of sin products, such as alcohol and cigarette products under the Package 2 Plus of its Comprehensive Tax Reform Program (CTRP).

Aside from these, the package is also seeking for tax adjustments on mining and casino taxes.

 As for the sin tax component of the bill, the DOF had said it will 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.