Hikes in sin-product tax explained

Faster rate of price increases of sin products, namely tobacco and alcoholic beverages, among others, continues to push domestic inflation higher to 4.3 percent last March from the revised 3.8 percent in February 2018.

This, as excise taxes of sin products rose further this year.

“However, the government is precisely discouraging the consumption of these products through higher prices, among others,” the Department of Finance (DoF) said in its Economic Bulletin on inflation. Tax of cigarettes is at four percent starting this year.

“Appropriate adjustments in prices of sin products, tobacco specifically, will continue to fuel inflationary momentum in the near term,” the bulletin said.

Also, sugar-sweetened beverages have been slapped with excise tax since the start of the year.

Both measures are targeted to discourage the public, especially the poor, from consuming alcoholic products and cigarettes as well as sugar-sweetened beverages like softdrinks to address rising cases of diabetics and reduce the number of people afflicted with diseases caused by sin products and sugar-laden drinks.

Aside from higher sin taxes, additional factor for the uptick in the rate of price increases as of the first quarter of 2018 is the impact of the first package of Tax Reform for Acceleration and Inclusion law, which hiked excise taxes on fuel and introduced excise tax on sugary beverages.

Elevated food prices in the third month this year was also caused by the limited supply of rice and fish due to rough seas and vegetable, due to weather-related disturbances.

The inflation rate last March is higher than DOF’s 4.1 percent forecast for the month and exceeded the government’s two to four percent target for the year. In the first three months this year, inflation averaged at 3.9 percent, still within the government’s target.