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DOF sees P19 billion revenue raise with sin tax reforms

Written by anyajulia on 10 July 2009

REVENUE increase of P19 billion in the first year of implementation alone puts the Department of Finance (DOF) into lobbying for both houses of Congress to pass a law to correct the weaknesses of the excise tax on alcohol and tobacco products law.

Otherwise known as Republic Act 9334, the excise tax law needs to be restructured to keep tax rates at par with Asian neighbors, sources at the finance department said.

The Philippines has the lowest excise tax rates among Asian countries and still loses more revenues with its implementation of lower corporate income tax, high personal exemptions and tax incentives, DOF said

DOF also points out that the law is prone to downshifting or misreporting of consumption from high-priced and high-taxed brands to low-priced and low-taxed brands resulting in lower revenues.

“The current excise tax structure also needs to classify brands which create discretion for the taxing authority. The law is likewise eroded by inflation due to lack of automatic tax rate adjustment, the government agency said.

Over these, the agency is proposing for the adoption of a unitary tax rate for each category of alcohol and tobacco products, which will also lapse in time.

Under the scheme, a unitary rate will be indexed using a relevant price index for tobacco and alcohol.

With the revenues from the excise tax, DOF proposes to allocate a portion of the excise tax revenues to a trust fund for the transitional guaranteed income of farmers who are shifting to other crops.

DOF says, the country needs to raise revenues now to strengthen its fiscal position amidst continuing pressure from the global recession.

With the threat of economic recession in the country, the DOF explains that the government has to have more revenues to pump-prime the economy. (PIA)

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