DOF to review excise tax regime
The Department of Finance (DOF) will review the country’s excise tax regime following requests from the World Health Organization (WHO), a ranking Finance official said over the weekend.
Finance Undersecretary Gil Beltran said international health institutions such as the WHO have noted the country’s low excise tax rate on cigarettes compared to other countries in the region.
"This is why Finance Secretary Margarito Teves wants a review of the excise tax in the Philippines," Beltran told reporters.
Excise tax is a tax applicable to certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption and to products imported into the Philippines.
A specific tax is an excise tax imposed on certain goods based on weight or volume capacity or any other physical unit of measurement. It applies to alcohol and alcohol products, tobacco and tobacco products and petroleum products.
Ad valorem tax, meanwhile, is imposed on certain goods based on selling price or other specified value of the goods. It applies to mineral products, automobiles and non-essential goods.
Data culled by the DOF showed that Singapore has an excise tax rate on cigarettes of $192.56 per 1,000 sticks while Malaysia has an excise tax rate of $23.29 per 1,000 sticks. Similarly, Brunei has an excise tax rate of $39.3 per 1,000 sticks.
On the other hand, the Philippines has an excise tax rate ranging from $2.42 to $2.98 per 1,000 sticks.
This, Beltran said, shows that the excise tax rate in the Philippines is really low compared to the rate slapped by its peers in the Asian region.
Because of the low tax rate, Beltran said the government is losing P34 billion in foregone revenues from cigarette products.
Amending the country’s excise tax laws, however, would require an act of Congress.
But no less than the House of Representative’s think-tank earlier recommended amendments to the country’s tax laws to help improve excise tax collection in the Philippines.
The Congressional Planning and Budget Department (CPBD) has said that the government’s excise tax collections have been inadequate due to certain provisions in the Tax Code, particularly the net retail prices of cigarettes.
"One clear reason for the stunted growth in excise taxes is the prescription in the Tax Code of the net retail price (NRP quote in 1997 prices) of cigarettes and fermented liquor on which tax rates will be computed," the CPBD said in a recent study.
The CPBD said that at present, many of the brands in the local market are currently selling at much higher prices and thus should be slapped with higher tax.
Before the Bureau of Internal Revenue (BIR) can slap higher taxes, Congress must first revise the net retail price schedules in the Tax Code, CPBD said.
According to the Tax Code, the net retail price of Philip Morris M 100s is P7.48 per pack although an informal survey showed that the prevailing retail price of the brand is P20 per pack.
The net retail price of Marlboro Reds, according to the Tax Code is P6.78 per pack although the survey showed that the brand’s retail price at present is P19 per pack.
The Winston Reds cigarette brand has a net retail price of P5.55 per pack in the Tax Code or lower than the prevailing retail price of P13.50 per pack. Hope Luxury cigarettes have a net retail price of P5.86 per pack, according to the Tax Code, also lower than the prevailing retail price of P13.50 per pack.
Camel, a low-priced cigarette has a net retail price of P4.71 per pack which is significantly lower than the prevailing price of P9.60 per pack.
Major cigarette producers in the Philippines include Fortune Tobacco of taipan Lucio Tan, Philip Morris Philippines Manufacturing Inc. as well as La Suerte Cigar & Cigarette Factory.
Despite government’s slow excise tax take, the Department of Finance sees excise tax collection from cigarette manufacturers rising by 3.62 percent to P27.78 billion this year.
The BIR has reported that excise taxes collected from tobacco products plunged by 19.6 percent to P11.05 billion from January to June this year compared with P13.75 billion collected in the same period last year.
Source: ABS CBN News
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