Govt to step up drive vs illicit tobacco trade
Credit to Author: EIREENE JAIREE GOMEZ| Date: Wed, 10 Jul 2019 16:17:36 +0000
Following the recent approval by Congress of a new law imposing substantial excise tax increases on tobacco products, the Department of Finance (DoF) has directed the bureaus of Internal Revenue (BIR) and of Customs (BoC) to step up their joint campaign against the illicit cigarette trade in the country.
“The proliferation (of illicit cigarettes and fake tax stamps), that’s going to bloom some more next year,” Dominguez said. “Keep a tight watch over that,” DOF Secretary Carlos Dominguez 3rd told BIR and BOC officials during a recent DOF Executive Committee (Execom) meeting.
Dominguez directed Customs Commissioner Rey Leonardo Guerrero to intensify the BOC’s drive against cigarette smuggling, which is expected to increase once the new law imposing higher “sin” taxes on tobacco products is implemented starting next year.
The tobacco “sin” tax reform bill is now up for President Duterte’s signature.
The bill provides for a unitary P45-excise tax increase per pack on tobacco products by 2020, followed by a series of P5-adjustments until the rate reaches P60 in 2023, and a five percent annual increase thereafter.
The unitary excise tax rate on tobacco products was earlier increased under the Tax Reform for Acceleration and Inclusion (Train) Act from P30 per pack of cigarettes to P32.50 beginning Jan. 1, 2018 and to P35.00 beginning July 1, 2018.
Starting 2020, heated tobacco and vapor products will also be taxed by P10 to P50, depending on the liquid volume under the tobacco tax reform bill.
“Incidentally, we are the only administration that actually cleaned up the cigarette industry and raised tobacco excise taxes twice. This has never happened in any past administration,” Dominguez said at the recent Pre-State of the Nation Address (Pre-SONA) forum of the Economic Development and
Infrastructure Cabinet Clusters at the Philippine International Convention Center (PICC) in Pasay City.
He stressed that the DOF made history in 2017 by collecting from a cigarette manufacturer (Mighty Corp.) more than P30 billion for non-payment of excise taxes and for use of counterfeit tax stamps—the biggest sum on record raised by the government from a tax settlement with a single corporate taxpayer.
Increasing taxes on tobacco products, Dominguez said, is only one aspect of “sin” tax reform, as higher taxes on alcohol products still have to be tackled and approved by the incoming 18th Congress.
The DOF has proposed a tax of at least P40 per liter on alcoholic drinks.
Higher excise taxes on “sin” products will provide the government the means to curb vices and undesirable behavior, while at the same time generate hefty revenues needed to fully fund the Universal Health Care (UHC) program, which will require as high as P1.44 trillion combined from 2020 to 2024.
Dominguez said that from 2020 to 2024, all current sources of government funding can cover UHC at around P200 billion annually, while the cost of the program will start at P257 billion in 2020 and grow at an average of around P11 billion to P12 billion per year, amounting to a five-year total of around P1.44 trillion by 2024.
Without substantially adjusting the current “sin” tax rates, the cumulative funding gap by 2024 will reach P426 billion, Dominguez said.
For 2020, the government can cover the cost of the UHC program from its current funding sources from the national budget, the Philippine Amusement and Gaming Corp. (Pagcor) and the Philippine Charity Sweepstakes Office (PCSO) in the amount of P195 billion.
Without “sin” tax reform, UHC will be left with a funding shortfall of around P62 billion.
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