P32B in lost revenues from downshifting in cigarettes, beer

Posted at 08/20/12 3:10 PM

MANILA, Philippines - The government's foregone revenues as a result of "downshifting" in cigarette and beer amounted to P32 billion from 2006 to 2010, according to the Department of Finance (DoF).

Finance Secretary Cesar V. Purisima said the country's existing excise tax system is prone to "downshifting", or the misreporting of consumption from high-priced and high-taxed brands to lower priced and low-taxed brands, which result in weaker revenues.

"The Philippines is one of the countries with the cheapest cigarette cost and has one of the lowest excise tax rates in the world," he said.

Of the P32 billion, the government had P19.5 billion in foregone revenue from cigarettes, while the rest was from beer.

The revenues could have been spent on health care services for children, senior citizens and indigent families under the Philippine Health Insurance Corporation (PhilHealth).

Had it not been for "downshifting," Purisima said the government could have hired 203,125 new nurses, gave influenza and pneumonia vaccine to 11 million senior citizens, among others.

The government is pushing for the sin tax bill, which will increase taxes on cigarettes and alcohol. Aside from the revenues, the government is also hoping the measure will dissuade Filipinos from smoking.

Purisima noted the Philippines is the leading tobacco-consuming nation in Southeast Asia, with 28.3% of the male population are smokers and 17.5% of the female population are smokers.