Sees strong recovery in 2021
The Department of Finance (DOF) expects lower sin tax collections this year to drop owing to movement restrictions and liquor bans during the strict community quarantine, but expressed optimism of strong recovery in 2021.
Based on the DOF estimates, excise tax revenues from cigarettes and alcoholic beverages would hit only P201.54 billion in 2020, lower by 10 percent compared with P224.63 billion last year.
Sin taxes, which have been a reliable source of government revenues, weakened this year following the ban on sale and purchase of alcoholic drinks. In addition, domestic cigarette production was also reduced during the enhanced community quarantine (ECQ).
Total sin tax collections from alcohol are expected to drop by 19 percent to P62.04 billion from P76.9 billion last year, while tobacco taxes are projected to decrease by 5.5 percent to P139.5 billion from P147.6 billion.
In April, the DOF reported that cigarette removals from manufacturing plants plunged by 99.2 percent, while production volumes of fermented liquors and distilled spirits slid by 99.9 percent and 95.7 percent, respectively.
Aside from the ban and movement restrictions, the DOF also noted that consumer demand for non-essential goods like cigarettes and alcohol has weakened amid the lockdown.
The DOF though expressed optimistic that sin tax collections will recover next year as local economy regains its strength following a fallout due to COVID-19 pandemic.
In 2021, tobacco and alcohol taxes are forecasted to reach P317.55 billion, higher by 57 percent compared with this year’s target.
Total tax haul from alcohol is seen to grow by 83 percent to P113.7. billion, while revenues from tobacco may increase by 46 percent to 203.8 billion.
Earlier, the inter-agency Development Budget Coordination Committee slashed its collection target for the Bureau of Internal Revenue (BIR) and Bureau of Customs amid sluggish economy.
For 2020, the government’s two main tax agencies are tasked to collect P2.192 trillion, lower than their actual revenue haul last year of P2.8 trillion.
The BIR’s goal was reduced by 3 percent to P1.686 trillion from an earlier P1.744 trillion, while Customs’ target is now at P506.15 billion, lower by 6 percent compared with the previous estimate of P542 billion.
At end-July, total tax collections of the BIR declined by 10 percent year-on-year to P1.115 trillion, while Customs raised only P303 billion, also lower by 15 percent compared with the previous year.