THE proposed excise tax on plastic bags will be a “win-win” situation for the Philippines as it will not just reduce pollution, but the country will also stand to gain about P33 billion, according to the Department of Finance (DOF).
In a presentation to stakeholders, the DOF said its proposal to impose an excise tax on single-use plastics (SUPs) will generate P31.52 billion in estimated revenues from 2025 to 2028.
The DOF noted that all incremental revenues shall be earmarked for the solid waste management program in municipalities of the Department of Environment and Natural Resources (DENR).
“The proposed measure seeks to curb the high volume of mismanaged plastics in the country and serves as the Philippines’ contribution to the global movement of reducing pollution and adopting more sustainable practices while raising revenues to spur economic growth,” the DOF said.
Under the DOF’s proposal, a weight-based rate wherein P100 per kilo excise tax on SUP bags will be imposed with a 4 percent annual indexation starting the third year of implementation or in 2026.
The tax will apply to secondary-level plastics made of synthetic or semi-synthetic organic polymer, commonly known as “ice,” “labo,” or “sando” bags with or without handles, used as packaging for goods or products.
Negative externalities
THE DOF estimated that the use of plastic “labo” bags will decline by 24.7 percent while “sando” bags use will also decrease by 26.1 percent.
Prices per piece of “labo” bags will be increased to P0.82 from the current price per piece of P0.47, while “sando” bags will go up to P0.91 from P0.51 if the DOF’s proposed tax on SUPs will be implemented.
According to the DOF, the Philippines has one of the cheapest tax rates per bag at P0.40. The United Kingdom taxes P326 per bag, Ireland at P12, Virginia, USA, at P3; and, Denmark at P1.
“When a good has some negative externalities, meaning the consumption or use of a product causes some social cost, we try to regulate that through taxation. In the case of single-use plastic, the social cost is mismanaged waste, which is related to climate change,” Fiscal Policy and Monitoring Group (FPMG) Officer-in-Charge Undersecretary Karlo Fermin S. Adriano explained.
Adriano underscored in the presentation that the tax measure does not single out the plastic industry since the government has already been implementing this strategy on goods such as tobacco, alcohol and automobiles to curb consumption and mitigate social costs.
Risk of loss
THE Philippines is the third largest contributor of mismanaged plastic entering the ocean each year with 750,000 metric tons, according to the World Bank.
The world’s largest multilateral creditor identified that mixed waste collection, inadequate infrastructure, limited public funds and lack of recycling capacity are the challenges that lead to the difficulty in managing solid waste in the country.
The World Bank added that the country’s vulnerability to climate change puts the Philippines at risk of losing 13.6 percent of its economic output by 2040 if not addressed.
Through the DOF’s proposed excise tax on plastic bags, the country will contribute to the global movement of reducing plastic pollution and adopting more sustainable practices.
The DOF said it targets the passage of the tax measure by 2025. The writing of the guidelines for Extended Producer Responsibility (EPR) is ongoing to come up with a draft joint administrative order for the approval of the DOF and DENR secretaries.
“It is the government’s duty to raise awareness on the impact of non-recyclable plastics and the irreversible effects of climate change. I believe this is where strong policy intervention is needed,” Finance Secretary Ralph G. Recto said.
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