7-month tobacco excise tax collections up 31% — DOF

MANILA, Philippines — The government recorded higher excise tax collection from cigarettes in the first seven months of the year, with two Big Tobacco firms paying hefty levies that the state could use to keep the country's healthcare system running amid the pandemic.

In a statement on Monday, the Department of Finance said the Bureau of Internal Revenue collected P83 billion in tobacco excise tax in January-July period, up 31% year-on-year.

Broken down, Philip Morris Fortune Tobacco Co. Inc. (PMFTC), which retained its 50.1% market share during the period, recorded the highest annual increase in seven-month excise tax payments to P42.04 billion, up 6.9%. Aside from its flagship Marlboro cigarettes, PMFTC produces and distributes Chesterfield, Fortune, and Hope brands.

PMFTC’s tax payments exceeded the amount settled by Japan Tobacco International (Philippines) Inc. (JTI), which paid P38.8 billion in excise taxes in the first seven month, up 73.1% on-year. JTI sells cigarette brands such as Camel, Winston and Mevius, and captured a 46.8% market share during the period.

The remaining P2.13 billion of the total excise tax collections from January to July was paid by other cigarette manufacturers, such as the Associated Anglo American Tobacco Corp. (AAATC) and Kenstand Philippines Inc. (KPI).

In terms of volume removals, which counts cigarettes that were released from tax-regulated warehouses to be sold to consumers, the DOF said a total of 777 million packs from JTI were slapped with excise levies in the first seven months, up 56% from a year ago.

Volume of removals of PMFTC, on the other hand, stood at 841 million packs from January to July, down 3.78% year-on-year. That translated to a decline of 33 million packs.

According to DOF, excise tax rates for both PMFTC and JTI increased by P5 per pack this year, in accordance to tax laws. In the case of JTI, the bigger volume of removals also contributed to its higher tax payments.

Excise taxes make up a crucial segment of government revenues, as collections from these products are among the sources of funds for a Universal Healthcare law that was enacted in 2019. The ambitious program was poised for a pilot run in 2020 until the coronavirus pandemic happened and drained the resources of Philippine Health Insurance Corp. (PhilHealth), the state health insurer tasked to implement the law.

Excise taxes on cigarettes and other tobacco products were increased thrice under the Duterte administration.

The first instance was under the Tax Reform for Acceleration and Inclusion (TRAIN) law in 2018. 

This was followed by Republic Act 11346 or the Tobacco Tax Law of 2019, which hiked cigarette taxes to a uniform rate of P45 per pack starting last year; and RA 11467, which imposed another round of tax hikes on e-cigarettes, along with alcohol products, also starting in 2020.