An excise tax policy proposal for beer and cigarettes

The past two decades have seen significant changes in excise tax policies for beer and cigarette products often with goals of higher revenues. While such taxes are considered major contributors to government collections, revenue generation must also be complemented with sumptuary goals as beer and cigarettes are often associated with negative externalities.The aim of this study is to come up with an excise tax policy that will maximize potential revenues for the government while giving considerations to the users of these vices. The paper begins with the discussion of the nature of sin taxes followed by a discussion of economic principles associated with them. The effects of policy changes to removals and collections including substitution and income effects will also be examined through the historical analysis of excise tax policies in the Philippines. After reviewing the excise tax system, the incidence approach will be applied in computing for the different tax burdens across deciles and regions. This, together with descriptive profiles of Filipino smokers and drinkers and the points mentioned above, will aid in the proposal of fiscal and public policies that concludes this research paper.