STATEMENT ON THE PROPOSAL TO INCLUDE HIGHER TOBACCO TAX IN TRAIN PACKAGE 1
The Senate listened to the proposals of the health sector and NGOs to increase the cigarette tax rates. Their proposal is based on preliminary data and analysis with respect to the effects of the proposal particularly on revenues. It has been claimed that increasing the tax rate to P60 per pack will raise P68 billion in revenues. This is has to be looked at and studied carefully.
Since the enactment of the Sin Tax Law of 2012 or Republic Act 10351, collection from excise tax on cigarettes went up every year. From P32.9 billion cigarette tax collection in 2012, it more than doubled to P70.4 billion in 2013. In 2014, it reached P75.5 billion and in 2015, P100 billion. However, in 2016, collections from cigarettes dropped to P94.5 billion—the first time collections went down despite higher excise tax rates.
While withdrawals of tobacco have declined, the government has yet to provide a sound explanation why there has been a decline in the revenue collection from cigarettes in 2016. The answer that was given was due to possible tax evasion problems through the proliferation of fake stamps and smuggled imported products.
The sin tax collections fund our Philhealth premiums that enabled the government in recent years to cover more beneficiaries. We don’t want to see a decline in the funding that will reduce the benefits for Philhealth beneficiaries. While the Senate committee is open to reviewing and amending the sin tax law, it shall consider proposals as soon as the appropriate government agencies have submitted additional and substantial studies and analysis.
The DOF said they are still studying the ideal price point to take into account the public health impact and the price elasticities of cigarettes. It is important to note that the sin tax law already provides for an automatic indexation of tax rates, meaning they go up every year as it is. The DOF has also expressed confidence that the government can collect additional P24 billion per year from the acquisition of Japan Tobacco International Inc. (JTI) of Mighty Corp.
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