Philippines: Excise Tax on Cigarettes down 41 Percent in January-February

Source from:  Business Mirror (ph)  04/17/2013

Collections from the excise tax on cigarettes dropped by 41 percent in the first two months of the year despite higher "sin" taxes on tobacco and alcohol products, based on data from the Bureau of Internal Revenue (BIR).

The BIR data showed that excise-tax collections on cigarettes amounted to P2.6 billion in January and February, which was P1.8 billion lower as against the P4.4 billion collected during the same period last year.

In January excise tax collected from cigarettes fell 47.6 percent to P1.1 billion from P2.1 billion during the same period last year, and by 34.8 percent to P1.5 billion in February from P2.3 billion during the same period last year.

Internal Revenue Commissioner Kim S. Jacinto-Henares said the decline in excise-tax collections was due to the front-loading or early withdrawal of stock from warehouses as practiced by manufacturers to avoid payment of higher excise taxes.

Henares added that volume plunged 70 percent, while excise-tax collections only went down by 50 percent as the higher excise tax compensated for the lower volume.

The BIR is required to collect P1.253 trillion this year or 16 percent higher than last year's target of P1.066 trillion. In 2012 it collected P1.058 trillion, which was P8 billion lower than the target.

The BIR targets excise-tax collections to increase by 44 percent with the implementation of Republic Act 10351, or the Sin-Tax Reform Act of 2012, which provides for higher rates on tobacco and alcoholic products. Signed by President Aquino late last year, the tax reform act took effect on January 1 this year.

The BIR is looking at possibly collecting P102.4 billion in excise tax on cigarettes and liquor this year from P71.2 billion targeted in 2012, which will result in a higher share in THE BIR's total collection goal to 8.2 percent this year from 6.6 percent last year.

In terms of revenues, the bureau said the new sin-tax bill would allow a collection of P33.96 billion in incremental revenues from tobacco and alcohol this year and P184.31 billion over the next four years.

Though lower than the Department of Finance's P60-billion target, government officials still believe that collections from the sin tax will be enough to cover funding requirements set by the Department of Health under the government's universal health-care program. Enditem