MANILA, Philippines — The government may slap taxes on alcopops – flavored beverages with relatively low alcoholic volume – and other vices in order to increase revenues and help in economic recovery.
In a webinar organized by the Philippine Institute for Development Studies (PIDS), Department of Finance chief economist Gil Beltran said the biggest source of increase in revenues right now is tax administration.
But he said the government may still improve its tax efforts through additional taxes on certain sectors. “We can do that for some sectors – like Secretary (Benjamin) Diokno already said, on the single-use plastics, which damage the environment – things like that can be done,” he said.
“Even for alcopops, for instance, the tax rate on vices is so low in our country. There’s still a chance to increase some of them,” Beltran noted.
Based on the fiscal consolidation proposed by the economic team of the previous administration, of which Diokno was also a part, the current administration is urged to introduce reforms on health taxes as part of the second tranche of the plan.
The reforms include levies on alcopops, cigarettes, e-cigarettes, non-nutritious foods and sugary drinks.
Under the proposal, alcopops will be taxed just the same as fermented liquors.
Excise taxes on cigarettes and e-cigarettes will be jacked up as well, while a unitary rate of P12 per liter on sugar-sweetened beverages will be placed, all in an effort to generate P91.4 billion in sin revenues every year.
However, Diokno and the current economic team has remained cold on additional tax burdens on consumers. So far, the Finance chief has only been vocal about his intent to tax single-use plastics and digital transactions.
Beltran, for his part, emphasized that the government cannot just impose additional taxes at this time because the economy is still recovering from the crisis brought by the pandemic.
Beltran said the government is focusing on further improvements in tax administration.
“We are studying all the sectors to see if they are complying with tax obligations. We have computerized the operations (of our revenue collection offices) to make it easier for people to pay their taxes online,” Beltran said.
As introducing new taxes is part and parcel of reducing the share of national debt to the country’s output, PIDS senior research fellow Margarita Debuque-Gonzales said it would be hard for the government to bring down the debt-to-GDP ratio to pre-pandemic level of about 40 percent.
“If you do want that, you have to raise your tax effort by an amount that I think we’ve never seen before, and I think that hasn’t been seen even in our last tax reform,” Debuque-Gonzales said.
“I think it is still important, though, that we have to have some way to raise revenues that is progressive, not regressive, which is what is fit for post-pandemic recovery, and that’s why we emphasized it to be medium and long term,” she said.
Debuque-Gonzales said that now is not really the right time to do so as the country is just slowly getting out of the pandemic.
“I think that is what everybody is saying, even Secretary Diokno, that we really should focus first on trying to squeeze the most out of our recent past reforms and trying to improve administrative tax administration,” she said.
For this year, the debt-to-GDP ratio is expected to decline to 61.8 percent and further go down to 61.3 percent in 2023. By 2024, the ratio is seen at 60.6 percent.
This will reach the internationally accepted threshold by 2025 at 59.3 percent. Further declines are seen by 2026 and 2027 at 57.7 percent.
Once the term of President Marcos ends in 2028, the debt-to-GDP ratio is targeted to be at 52.5 percent.