Gov't urged to lower tobacco excise tax rate

The government should lower the tobacco excise tax rate and strengthen the enforcement of laws against illicit trade to address declining tobacco tax revenue, according to a think tank.

- CATHERINE TALAVERA

During the Senate public hearing on illicit trade, Minimal Government Thinkers president Bienvenido Oplas Jr. called for the rollback of the tax rate to P50 per pack.

In 2024, the excise tax for a pack of 20 sticks of cigarettes stood at P63, higher than the P60 per pack in the previous year.

Using the Laffer Curve analysis, Oplas said the optimal tax rate is P50 per pack, noting that the government was able to collect P176 billion in tax revenues when this was the rate in 2021.

"From peak revenues of P176 billion in 2021 when the tax rate was P50 per pack, it declined to P160 billion in 2022 when the tax rate was P55 per pack, and further down to P135 billion in 2023 when it was P60 per pack," Oplas explained.

"While collections from alcohol and sweetened beverage products continue to rise or flatline, collections from tobacco and cigarettes continue to decline," he said.

Dondanon Galera, head revenue executive assistant at the Bureau of Internal Revenue, said total tobacco excise tax collection in 2024 stood at P134 billion, about P51 billion short of the BIR's P185 billion target and relatively flat from the P134.91 billion collected in 2023.

Galera said the change in consumption patterns of smokers, including the shift to vape, and the prevalence of illicit trade in the country curtailed the BIR's capacity to hit its collection target.

He admitted that sellers of illicit cigarettes and vape products became "more brazen" last year, noting that they are even selling on online platforms.