DOF moves to plug excise tax leakages

BAGUIO CITY, Philippines — The Department of Finance (DOF) is moving to address the gap in excise tax collection, particularly of sin products, amid the still rampant illicit trade.

During the Economic Journalists Association of the Philippines-San Miguel Corp. Business Journalism Seminar here, Finance Undersecretary and chief economist Domini Velasquez said the government is zeroing in on the leakages in terms of excise taxes especially on tobacco and alcohol products.

“We have seen smaller collections from those as we notice a shift to e-cigarettes, for example. And they are being sold on online platforms,” Velasquez said.

Last year, excise taxes went down by 6.34 percent to P291.73 billion from the P311.47 billion generated in 2022. This was also 13 percent below the collection goal of P335.04 billion.

For 2024, excise tax collection is projected to hit P324.55 billion, up 11 percent.

Excise tax is a levy on the production, sale or consumption of a commodity. It contributes around 12 percent to the overall collection of the Bureau of Internal Revenue (BIR).

Excisable products include alcohol, tobacco, petroleum and minerals, among others.

Despite the need for additional revenues, the DOF remained firm in its stance of no new tax measures over the next few years.

“We are not keen on increasing anything that will increase inflation. Instead, we will zero in on how to improve administrative efficiency,” Velasquez said.

Tobacco excise tax slipped by 16 percent to P134.87 billion from P160.55 billion in 2022. It was also 20.6 percent below the target of P169.86 billion.

On the other hand, excise on alcohol inched up by 6.85 percent to P108.46 billion from P101.5 billion. However, it was 1.58 percent below the target of P110.2 billion.

Combined, the two sin products made up 83 percent of total excise tax collection last year.

For 2024, about 47 percent of the excise tax will come from tobacco products at P152.04 billion. This is expected to improve by 13 percent from last year.

This will be followed by alcohol products at P116.506 billion, up by 7.4 percent.