By Lawrence Agcaoili

The Finance Department sees added revenues arising from higher excise tax on sin products such as cigarettes and liquor to hit only P500 million this year due to the practice of manufacturers to advance their withdrawals to avoid paying higher rates.

Finance Undersecretary Gil Beltran told legislators the increase in the excise tax rate on cigarettes and alcohol products this year would only yield P500 million.

Beltran said it has been the practice of manufacturers to front-load the withdrawals of tobacco and alcohol products from their warehouses months before the increase in the excise tax rates.

The indexation of sin tax on alcohol and tobacco products signed into law by President Gloria Macapagal Arroyo in December of 2004 calls for an increase in the excise tax on sin products every two years until the rate reaches 20 percent by 2011.

The law increased the excise tax on cigarettes this year by 7 percent and that of alcohol products by 8 percent.

Antique Rep. Exequiel Javier, chairman of the Committee on ways and means of the House of Representatives, said the higher rates should result in P3 billion in incremental revenues for the national coffers.

In a report to Congress, the Finance Department said the Bureau of Internal Revenue likely collected P41.8 billion worth of excise taxes from tobacco and alcohol products withdrawn by manufacturers from their warehouses.

However, finance officials said the preliminary figure of P41.8 billion for last year would have been exceeded as manufacturers front-loaded the withdrawals from their warehouses in December to avoid paying higher excise taxes.

BIR officials has also blamed local manufacturers for front-loading their withdrawals from warehouses to take advantage of lower rates that resulted in a decline in the volume of removals of tobacco products.

Major cigarette producers include Fortune Tobacco of taipan Lucio Tan, Philip Morris Philippines Manufacturing Inc. and La Suerte Cigar & Cigarette Factory while alcohol producers include Ginebra San Miguel, Tanduay Distillers, Consolidated Distillers of the Far East Diageo Philippines and Distileria Bago.

Finance Secretary Margarito Teves has been pushing for the rationalization of the existing sin tax law to raise as much as P112 billion worth of extra revenues for the national coffers to bankroll infrastructure projects and social services.

The proposed bill filed Sen. Panfilo Lacson under Senate Bill No. 2980 would raise between P89 billion and P112 billion over the first three years and between P60 billion and P70 billion annually starting the fourth year.