Sin tax collections suffer worst fall in 2011

MANILA, Philippines – The fall in the tax take from sin products, including cigarettes and alcohol products, had its loudest thud in 2011.

Sin tax collections in 2011 declined by roughly 20% to P25.4 billion from the year before, according to the Action for Economic Reforms (AER), citing data from the Department of Finance.

The government generated P31.5 billion in sin taxes in 2010. According to the Finance department, revenues from sin taxes fell by 13% in 2009, and 12% in 2007.

Finance Undersecretary Jeremias Paul said that the decline in revenues shows that the current excise tax scheme for tobacco is structurally flawed, and is in need of immediate changes.

“This is the worst fall yet in for our tobacco sin tax revenues. It’s a tell-tale sign that the system is structurally defective. That’s why we need the Abaya reform bill to fix this,” Paul said.

The House Bill 5757, authored by Cavite Rep. Joseph Emilio Abaya, has the backing of the Aquino administration, including reform groups and former finance chiefs. It aims to simplify current 4-tiered tax structure into a unitary one to raise about P60 billion additional revenues every year.

Already, the DOF has estimated that at least P 19.5 billion has been lost in revenues from 2006 to 2010 given the current sin tax system.

Unless that Abaya bill is passed, the government would continue to lose sin tax revenue collections, stressed AER senior economist Jo-Ann Latuja. – Rappler.com