The Department of Finance (DOF) is projecting an uptick in revenues from "sin" products next year, driven by increased collections from alcoholic beverages.

Data from the DOF showed that excise tax collections from tobacco and alcohol are estimated to reach P278.97 billion in 2025, an eight percent rise compared to this year's revised target of P258.89 billion.

Of the total sin tax revenues, more than half, or 53.4 percent, is expected to come from tobacco products, while the remainder will be generated from alcoholic beverages.

The excise tax on cigarettes is projected to yield P148.93 billion, five percent higher than the 2024 target of P141.73 billion.

On the other hand, alcohol excise tax collections are expected to increase by 11 percent, reaching P130.04 billion from P117.16 billion this year.

In 2024, the DOF adjusted its target for sin-product collections downward from the P308.87 billion initially set during last year's budget deliberations in Congress.

According to the DOF document, this reduction was primarily driven by the 23 percent decrease in excise tax collection from cigarettes, which was originally estimated at P185.32 billion for 2024.

Moreover, the government also anticipates lower-than-expected collections from alcohol, which were initially projected at P123.55 billion.

Despite the slowdown in revenue collection, Finance Undersecretary and Chief Economist Domini S. Velasquez had said the Marcos administration does not intend to increase excise tax rates on cigarettes and alcohol. 

Velasquez said that rather than raising taxes, the DOF focused on enhancing the efficiency of tax administration processes.

Republic Act No. 11467, enacted in January 2020, raised the excise tax on electronic cigarettes and alcoholic beverages to support the Universal Health Care (UHC) law. 

The legislation stipulates a yearly five percent increment in the tax rate for tobacco products starting from Jan. 1, 2024.

Velasquez added that the DOF was also actively addressing the issue of widespread cigarette smuggling, which has led to substantial revenue losses for the government. 

In 2022, the government’s sin tax revenues also deteriorated after levies collected from alcohol and tobacco products fell short of hitting the target.

The BIR collected P261.64 billion in excise tax from “sin products” in 2022, down two percent compared with P266.61 billion in 2021.

The full-year sin tax revenue was also below 16 percent against the P313.2 billion goal for 2022.

According to the BIR, the contraction was due to a weaker tax haul from cigarettes.

Tobacco manufacturers paid P160.42 billion in excise taxes in 2022, down nine percent from P176.48 billion in the previous year.

Moreover, cigarette excise tax collection failed to hit the P209.6 billion target for the year by 23 percent.