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Philippines Sin Tax Revenues Benefit From Reform

Friday, 05 July 2013   (0 Comments)
Posted by: Author: Mary Swire
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Author: Mary Swire

The Bureau of Internal Revenue (BIR) has confirmed that the collection of excise taxes on alcohol and tobacco products in the Philippines improved significantly during the first four months of this year, following implementation of the progressive increases to their taxation from January 1, 2013.

The final version of the long-debated "sin tax" reforms affecting alcohol includes a tax of PHP20 per liter for distilled spirits and fortified wines, rising by 4 percent annually from 2016, plus an ad-valorem tax of 15 percent that will increase to 20 percent in 2015. On the other hand, the excise tax on tobacco is hiked from 29 percent to 63 percent by 2017, with, by 2017, a unitary rate of PHP30 per pack applying to machine-packed cigarettes.

Despite warnings that projected revenues from the tax hikes were over-optimistic, the Government projected that the reforms would bring in additional revenues of PHP33.9bn over the first year of imposition.

In fact, it has been disclosed that, in the period from January to April 2013, such sin tax collections totaled PHP21.75bn (USD504.2m), an increase of PHP4.3bn, or almost 25 percent, over the same period in 2012. BIR Commissioner Kim Henares confirmed, in a press interview with the Inquirer newspaper, that sin tax revenues were "doing well," and that the Government's projection of additional revenues was "proving itself to be correct."

However, some in the cigarette and alcohol industries are also warning that the Government's target could be missed if it is unable to reduce the increased smuggling and unreported production by unlicensed manufacturers that are occurring following the excise tax increases.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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