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Case Study #2

The Philippine government projects earning PHP155 billion in additional tax revenues from 2013-2016 if Congress approves new excise taxes on tobacco, liquor, and distilled spirits. Revenues are projected to start at PHP31.35 billion in 2013, growing to PHP42.68 billion by 2015 before declining slightly to PHP41.51 billion in 2016. The majority of revenues will come from tobacco taxes, with cigarettes expected to generate PHP26.87 billion in 2013, growing to PHP36.27 billion by 2015. The Department of Finance expects the new tax system will improve tax collection efficiency and help the Philippines attain investment grade credit ratings.

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Sharah Del T. Tude
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260 views2 pages

Case Study #2

The Philippine government projects earning PHP155 billion in additional tax revenues from 2013-2016 if Congress approves new excise taxes on tobacco, liquor, and distilled spirits. Revenues are projected to start at PHP31.35 billion in 2013, growing to PHP42.68 billion by 2015 before declining slightly to PHP41.51 billion in 2016. The majority of revenues will come from tobacco taxes, with cigarettes expected to generate PHP26.87 billion in 2013, growing to PHP36.27 billion by 2015. The Department of Finance expects the new tax system will improve tax collection efficiency and help the Philippines attain investment grade credit ratings.

Uploaded by

Sharah Del T. Tude
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PRINCIPLES OF MICROECONOMICS SHARAH DEL T.

TUDE, CPA, LFA

CASE STUDY

Php155 Billion Projected from “Sin Taxes”

“The national government expects to earn Php154.73 billion in additional revenues from 2013 to 2016 if
Congress approved a new sin tax system this year,” the Department of Finance (DOF) said.

Data from the finance department showed that once Congress approved a new excise tax system on “sin
products” this year, the government could easily earn Php31.35 in additional revenue next year.

Of the amount, the DOF expects Php26.87 billion revenue from cigarettes, another Php3.03 billion from
fermented liquor, and the remaining Php1.45 billion from distilled spirits.

By 2014, state revenues from sin products would increase to Php39.02 billion. Of the amount, Php34.72
billion will be contributed by tobacco companies, Php2.52 billion from fermented liquor, and Php1.78
billion from distilled spirits.

Government income from excise tax is expected to further rise come 2015 as it is expected to generate
an additional P42.68 billion revenues.

The DOF estimated that smokers will pay Php36.27 billion in excise tax, while revenue from fermented
liquor will grow to Php3.79 billion and Php2.62 billion would come from distilled spirits.

Meanwhile, the DOF projected that state revenues from sin product to decline in 2016 to Php 41.51
billion.

Of the amount, the government sees Php35.38 billion in taxes from cigarettes, Php 3.03 billion from
distilled spirits, and Php 3.1 billion from fermented liquor.

With the new excise tax system, the government expects its efficiency in collecting taxes would likewise
improve, putting the country in better position to its goal of attaining investment grade.

Tax effort, used to gauge efficiency of tax collection, is computed as a percent of the country’s gross
domestic product.

To manifest efficiency in tax collection, a government should be able to increase the amount of taxes it
collects every time income levels grow.

Data from the finance department showed that the country’s tax effort has been in a declining trend
from 14.1 percent in 1998, adding on worries of the three international credit rating firms and investors.

In an effort to further improve the government tax efficiency, the finance department is pushing for the
restructured excise tac regime and rationalization of fiscal incentives.

London-based Fitch ratings earlier said that the Philippines low revenue base is the country’s key
weakness in the sovereign credit profile, suggesting the need for a structural reform rather than just
administrative measures.

Fitch cited the proposed reforms to the so-called “sin taxes” on alcohol and tobacco products as a
measure that would enhance the government’s revenue sources.
PRINCIPLES OF MICROECONOMICS SHARAH DEL T. TUDE, CPA, LFA

QUESTIONS:

1. Is the proposed sin tax progressive or regressive? Who will be burdened most? Why? Explain.
2. Will there be substitution between brands? Why?

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