8/2/10	
  




        TOBACCO	
  TAX	
  	
  
      STRUCTURE	
  IN	
  THE	
  
         PHILIPPINES                       ...
8/2/10	
  




                 Taxes	
  on	
  Tobacco	
  
                                                      2009	
  (...
8/2/10	
  




       Health-Related
    Earmarking Provisions
  2.5.% of incremental revenues from
excise tax on tobacco...
8/2/10	
  




• 	
  Creates	
  discre0on	
  for	
  the	
  
  taxing	
  authority	
  
        -­‐	
  The	
  rules	
  for	
...
8/2/10	
  




      • 	
  	
  	
  	
  Tax	
  eroded	
  by	
  infla0on	
  




• Congressional	
  protec0on	
  from	
  
  r...
8/2/10	
  




 • The	
  effec0ve	
  tax	
  burden	
  
   rela0ve	
  to	
  retail	
  price	
  	
  has	
  
   been	
  eroded...
8/2/10	
  




In Billion Pesos




           Tax Collection as Percent of GDP   2007   2008
           Philippines      ...
8/2/10	
  




  Fiscal Situation: Cigarette Tax Incidence Lower
                  than Neighbors
           COUNTRY	
    ...
8/2/10	
  




Thank	
  you!	
  




                           9	
  
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Dof usec beltran on phil tobacco tax

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DOF Undersecretary Gil Belt

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Dof usec beltran on phil tobacco tax

  1. 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. 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 4   2  
  3. 3. 8/2/10   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 3  
  4. 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.   4  
  5. 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   5  
  6. 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     6  
  7. 7. 8/2/10   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 7  
  8. 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     16   8  
  9. 9. 8/2/10   Thank  you!   9  

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