EXCISE tax collections from tobacco products and alcoholic drinks rose by 41.03 percent to P112.46 billion in the first half, from P79.55 billion a year ago, according to the latest data released by the Department of Finance (DOF).
Based on DOF data, collections from “sin” products breached the government’s target of P77.54 billion for the January-to-June period.
DOF Assistant Secretary Mark Dennis Y.C. Joven told reporters in an interview that the increase in excise tax collections was due to the hike in cigarette purchases and alcohol consumption in the first six months of the year.
Of the total excise tax collections in the first six months of the year, the lion’s share came from tobacco products at P78.95 billion, while collections from alcoholic beverages accounted for P33.51 billion.
Taxes from tobacco products during the period was 53.5 percent higher than the P51.43 billion collected in the first six months of 2017. The total excise taxes collected from alcoholic beverages was also 19.2 percent higher than the P28.11 billion recorded a year ago.
Joven said some firms “front-loaded” the manufacture of cigarettes during the period to avoid a higher excise tax rate. This would mean that some firms produced more cigarettes in the first half to dodge the second round of the excise tax hike for tobacco products under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Under the TRAIN, the cigarette excise tax rate was increased to P32.50 per pack, from P30 in the first half of the year. This was raised further to P35 per pack starting July.
As for the higher excise tax collections from alcoholic beverages, Joven said the reduction in personal- income tax under TRAIN may have allowed consumers to purchase alcoholic drinks from their spare cash.
“Tobacco was the most aggressive in terms of growth [in collections]. Analysis showed that there is some front-loading, that’s why there’s an increase in collections in the first half. For alcohol, collection is above target, which means there were extra funds arising from the implementation of TRAIN,” Joven said.
Perils of front-loading
Finance Secretary Carlos G. Dominguez III said companies that have front-loaded the production of tobacco products may incur additional costs.
“You cannot keep cigarettes for long. There’s also the inventory carrying cost. If stored for long, the quality of cigarettes deteriorates because of the humidity even if it is encased in plastic,” Dominguez said.
Sin products are certain goods deemed harmful to society. The excise taxes imposed on these products are collected by the Bureau of Internal Revenue and the Bureau of Customs.
The TRAIN was signed into law by President Duterte in December 2017 and took effect in January. The law slashed PIT rates while implementing offsetting measures, such as increasing excise tax rates on tobacco and fuel, among others.
Dominguez earlier said “substantial” PIT cuts under TRAIN—the first package under the Comprehensive Tax Reform Program—put an additional P12 billion in the pockets of taxpayers every month. Also, the free tuition in state universities and colleges allowed families to save P3.5 billion in school fees. The unconditional cash transfer gave beneficiaries a total of P2 billion a month.
There is no provision under the TRAIN on increasing excise tax rates for alcoholic beverages.
DOF data also showed that the total excise taxes collected by the government in the first half reached P152.72 billion, 71.42 percent higher than its 2017 collection of P89.09 billion.
Excise taxes from automobiles reached P2.92 billion; mineral taxes, P1.56 billion; petroleum, P18.03 billion, and sugar-sweetened beverages, P17.65 billion.