Sin taxes light up again for revenue
THE Philippines’ Department of Finance will push for a further increase in alcohol and cigarette excise taxes not only to raise additional revenues but also as a health measure, even if elevated prices of “sin” products had already contributed to high inflation at the start of the year.
“It’s the right thing to do,” Finance Secretary Carlos Dominguez said. “Just because you’re going to get a bad reaction, that doesn’t mean you’re going to stop.”
The government earlier reported that inflation rose 4.5 per cent year on year in April, an over five-year high, mainly as prices of sin products such as cigarettes and alcoholic drinks jumped 20 per cent.
As such, the headline inflation rate based on 2012 prices averaged 4.1 per cent during the first four months, breaching the government’s target range of 2-4 per cent.
Under the Tax Reform of Acceleration and Inclusion (TRAIN) Act, the unitary excise tax slapped on cigarettes rose to 32.50 pesos per pack effective in January from 30 pesos a pack last year.
The TRAIN law also mandated a further hike in the cigarette excise tax rates to 35 pesos per pack from July 1 this year to December 31, 2019; 37.50 pesos a pack from January 2020 to December 2021; and 40 pesos from January 2022 to December 2023.
Also, the excise tax rates slapped on alcoholic drinks increase every year under the Sin Tax Reform Law of 2012.
The department was proposing a tax reform package “two plus,” which will also cover taxes on tobacco, alcohol as well as mining, coal and casinos. Package two plus will jack up taxes slapped on alcoholic drinks and rationalise the bills already filed in both houses of Congress covering the other products and services.
The first tax package or the TRAIN law was already enacted into law, while at least four more packages were aimed for Congress’ approval before yearend.
Signed by President Rodrigo Duterte in December, Republic Act No. 10963 or the TRAIN law since January 1 jacked up or slapped new excise taxes on cigarettes, sugary drinks, oil products and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of 250,000 pesos.
The TRAIN law, coupled with a weaker peso and rising global oil prices, had been mostly blamed for the faster inflation in the first few months of the year.