1. 8/2/10
TOBACCO
TAX
STRUCTURE
IN
THE
PHILIPPINES
Gil
S.
Beltran
Undersecretary
Department
of
Finance
June
22,
2010
1
SUMMARY
OF
PRESENTATION
Overview
Weaknesses of Current System
Fiscal Situation
Conclusion
2
1
2. 8/2/10
Taxes
on
Tobacco
2009
(PB)
Excise
P24.2
VAT
(est)
1.1
Total
P25.3
3
Excise Tax Structure: Tobacco
Republic Act 9334
Brackets 2005 2007 2009 2011
Cigar: Per Cigar
Net retail price per cigar is P500.00 or less 10%
Net retail price is more than P500.00 P50.00 + 15% of the net retail price in excess of
P500.00
Cigarettes Packed by Hand 2.00 2.23 2.47 2.72
Cigarettes Packed by Machine, if net retail
price per pack of 20
a) Over P10.00 25.00 26.06 27.16 28.30
b) Over P6.50 but not over P10.00 10.35 10.88 11.43 12.00
c) P5.00 but not over P6.50 6.35 6.74 7.14 7.56
d) Below P5.00 2.00 2.23 2.47 2.72
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Health-Related
Earmarking Provisions
2.5.% of incremental revenues from
excise tax on tobacco and alcohol for
PHILHEALTH for universal coverage
2.5.% of incremental revenues from
excise tax on tobacco and alcohol for
DOH for disease prevention
P900M = 2005 to 2008 PHIC and
DOH estimated share each 5
WEAKNESSES OF THE
CURRENT MULTI-TIERED
SYSTEM
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4. 8/2/10
•
Creates
discre0on
for
the
taxing
authority
-‐
The
rules
for
classifying
products
based
on
net
retail
price,
i.e.
valida0on
and
revalida0on
rules,
leaves
too
much
room
for
discre0on
• Prone
to
downshi?ing
of
consump0on
/
repor0ng
from
high-‐priced
brands
to
low-‐priced
brands.
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5. 8/2/10
•
Tax
eroded
by
infla0on
• Congressional
protec0on
from
reclassifica0on
of
old
brands
Has
caused
inequity
in
the
tax
treatment
of
cigareEe
products
Has
constrained
government
revenues
due
to
inability
to
adjust
tax
rates
of
protected
brands
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6. 8/2/10
• The
effec0ve
tax
burden
rela0ve
to
retail
price
has
been
eroded
and
the
tax
becomes
more
ineffec0ve
as
a
tool
to
curb
consump0on.
Brand 2004
2004
Effective
2008
2008
Effective
Retail
Tax
Burden
Retail
Tax
Burden
(Tax/Price)
(Tax/
Price
Rate
Price
Rate
Price)
A
8.32
1.12
14%
18.00
2.23
12%
B
18.21
5.85
33%
39.50
6.79
18%
C
16.52
5.60
34%
30.75
6.74
22%
D
13.93
5.60
41%
17.65
6.74
39%
E
18.77
8.96
48%
31.00
10.88
35%
F
22.15
8.96
41%
30.00
10.88
37%
G
22.71
8.96
40%
30.00
10.88
37%
Notwithstanding
tax
increases,
effec0ve
burden
has
declined
from
60%
in
1986
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In Billion Pesos
Tax Collection as Percent of GDP 2007 2008
Philippines 14.0 14.1
Indonesia 12.4 16.0
Malaysia 14.8 18.0
Singapore 12.8 12.8
Thailand 18.0 14.4
China 18.3 18.3
South Korea 15.4 15.4
Hongkong 10.0 10.0
India 9.2 9.2
Vietnam 23.2 23.6
ASEAN 15.9 16.5
AVERAGE 14.8 15.2
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8. 8/2/10
Fiscal Situation: Cigarette Tax Incidence Lower
than Neighbors
COUNTRY
EXCISE
INCIDENCE
(%
of
RSP)
PHILIPPINES
38%
INDONESIA
40%
THAILAND
43%
SINGAPORE
65%
VIETNAM
45%
HONG
KONG
56%
AUSTRALIA
56%
UK
63%
AVERAGE
51%
15
Conclusions:
Tobacco
Tax
Needs
to
be
Reformed
to:
Raise
Additional
Revenues
Simplify
Structure
and
Enhance
Equity
Enhance
Sumptuary
Role
of
Tax
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