Sin tax is for health, not just money

The Committee on Ways and Means of the House of Representatives has just approved HB 5727, which seeks to restructure the excise tax system on tobacco and alcohol products. Several public health advocates, however, do not believe this to be a cause for celebration because the amendments, which significantly departed from the original version of the bill, seem to have taken for granted the health targets and objectives of the bill.

“The distortion of the Abaya bill, the failure of the amendment to carry the unitary system of excise taxation for one, is objectionable from the standpoint of public health,” said Dr. Jaime Galvez-Tan, President of Health Futures Foundation Inc. and Former Secretary of the Department of Health.

The purpose for a unitary excise tax system is to disable smokers from increasing or even just maintaining their consumption when prices go up by easily shifting to a brand that is taxed lower than their usual brand.

“The existence of lower-priced brands in the market heavily contradicts with the health objective of making these products unavailable to the most vulnerable sectors, especially the youth and the poor. If the multi-tiered tax structure remains in place, prices will remain low and consumption will remain high,” explained Atty. Irene Reyes, Managing Director of HealthJustice Philippines.

In addition, a two-tier tax structure can be a source of tax administration problem because of the more than enough discretion that it gives to tax collectors. This, then, leads to misclassification and possible corruption, which causes inefficiency and less collection of taxes or lost revenue.

Another problematic aspect is the 8% increase every two years for ten years. In 2010, the average inflation rate was 3.8% while it was 4.8% in 2011. The increase approved, then, will be so marginal and it may even be lower than the average inflation rates. Also, the ten-year period for the indexation is too long and ties the hands of our government to impose a higher rate.

Moreover, the approved bill lacks the provision to have regular tax increases on top of the adjustments to inflation, to curb the consumption of these products. In the long term, people will be desensitized to the prices due to the increases in their income.

“Truly, the health targets and objectives appear to have only become incidental in this amended bill instead of being a real consideration in accordance with the Article 6 of the World Health Organization Framework Convention on Tobacco Control,” she added.

From the projected P60 billion revenue, this amended bill will only generate an additional P33 billion income for the government thus reducing the supposed supplementary budget for health.

“This amended bill will cost our nation more lives and will not contribute to the achievement of the short-term goal of reducing tobacco consumption by 10%. The Philippines will not be at par with the cigarette prices and smoking prevalence of our neighboring countries with the best tobacco control mechanisms,” claimed Atty. Reyes.

“More than the financial and economic perspectives, it must be stressed that these reforms are necessary to attain the country’s health objectives, such as reducing tobacco consumption, protecting the population from the burden of tobacco-related diseases, and providing for a fund for health promotion activities. The economic impetus of our government has overshadowed our health targets and objectives. We are losing the opportunity to protect and promote health,” alleged Dr. Tan.

“Our people are the core of our country’s national wealth, thus Filipinos’ health should always be a top priority. We have a long way to go from here but we must do everything to increase tobacco taxes and prices to reduce cigarette smoking. Public health should always be over and above profit,” said Dr. Esperanza Cabral, also a Former Secretary of the Department of Health and the Department of Social Work and Development.

Note:

The table below shows the Abaya Bill in its original form and changes, which were approved.