Philippines aims for sin tax hike

Gavin Lipsith

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The country's department of finance hopes to increase the tax on liquor and tobacco at duty-free stores despite low revenues from the tax last year

The Philippines' department of finance is seeking to increase the excise tax that has been imposed on liquor and tobacco products including – since January 2005 - those sold in duty-free stores. The decision follows disappointing revenues from the tax last year, when the government collected Ps2.96bn ($56.76bn) compared with a forecast of Ps15bn ($287.63bn).

Finance secretary Margarito Teves told reporters that the department hopes to convince the government to increase sin taxes in the second half of the year, but that it needs to show a better record of tax collection. "To achieve higher collection is our focus for 2006," she said. "Maybe if we achieve our targets we can convince congress to hike the rate on 'sin' products."

Meanwhile the National Tax Research Center has recommended regular inspections of establishments selling liquor and tobacco to improve tax collection. It also recommended inspecting shops such as duty-free stores selling imported products, aiming to combat counterfeit and smuggling.

The sin tax has had a devastating effect on retailers including Duty Free Philippines and Philippine Airlines since its introduction. DFNI Asia understands that tobacco prices at Manila airport are now at the same level as Hong Kong International airport's, having risen from below those of Singapore Changi's stores.