Not considering inflation in sin tax to cost P4.7-B

Rappler.com
If the pending legislation on the amendment of excise law on cigarette and alcohol product would not consider the rising cost of prices and services, the government stands to lose additional P4.7 billion in revenues, says finance official Gil Beltran

MANILA, Philippines – If the pending legislation on the amendment of excise law on cigarette and alcohol product would not consider the rising cost of prices and services, the government stands to lose additional P4.7 billion in revenues, a finance official said.

“The revenue loss without sin tax this year would be the cost of indexation to inflation which for would be roughly P4.7 billion,” according to Finance Undersecretary Gil Beltran on Wednesday, June 6.

“The revenue loss could be higher if inflation is higher. [It] could be P5 billion next year if inflation will be higher,” he added, referring to estimates of the Finance Department, which has been backing House Bill 5727 that is being deliberated by lawmakers in the House of Representative

The amendments to the sin tax law is currently being rushed as Congress is scheduled to go on recess by end of week.

Indexation to inflation was one of the features of House Bill 5727, which had been watered down to raise P33 billion and not the original P60 billion.



Proponents of the amendments to the sin tax law are pushing for the indexation to inflation to reflect the true cost of the cigarettes and alcohol products that is used as basis for computing the sin tax.

The current law pegged the sin products to 1996 prices, resulting in lower sin tax collections for the government and more affordable cigarettes and alcohol products here in the Philippines and elsewhere.

Imagine a pack of cigarettes costs P4.50 in 1995 and is taxed P2.72. In today’s dollars, the same cigarettes could cost P5.50, but not indexing to inflation means the government would continue to get only P2.72.

The inflation aspect is one of the key amendments to the sin tax law. The other is the amendment to the current 4-tier system that favors local brands over foreign ones. – Rappler.com

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