Drink (tax) responsibly

Yellow Pad

The recently passed Tax Reform for Acceleration and Inclusion (TRAIN) law raised excise taxes imposed on products such as sugar-sweetened beverages, cigarettes, and coal. These products are deemed to have harmful effects on health and/or the environment. This objective of taxation — influencing behavior for the better — has received growing emphasis, aside from the usual objective of taxation which is revenue generation. But let’s not forget something that TRAIN might have left behind: alcohol taxes.

Because of the extremely lenient regulations it faces, the alcohol industry is able to market itself as espousing positive social values such as camaraderie and friendship. But alcohol regulation in any country is not to be taken lightly. What often goes unnoticed is that the impact of intoxication and addiction goes beyond health as it entails huge social costs in many homes, and even on roads and communities. These include drunk driving, domestic and/or sexual violence, and a higher propensity by individuals who drink to engage in other crimes.

Excessive consumption of alcohol is among the factors that puts one at much higher risk of developing various types of cancer (e.g liver, gastrointestinal track, colon) and cardiovascular disease. These are among the leading causes of preventable deaths in the country.

After the passage of the Sin Tax Reform Act of 2012, the prevalence of alcohol drinkers declined from 48% in 2013 to 44.8% in 2015, and the total volume of consumption declined from 1.86 billion liters in 2013 to 1.83 billion liters in 2015. This was a welcome development.

But the battle for alcohol harm reduction through tax reform is far from over. First, consumption may soon increase again given Filipinos’ rising incomes and the expectation that consumers will shift from now relatively more costly soft drinks to alcohol. Second, the numerous social costs are not yet reflected in the current prices of alcohol.

Filipinos’ incomes are increasing — this makes alcohol more affordable, even among the poor. GDP per capita is projected to increase by 5% to 5.5%, while alcohol taxes would only be raised by 4%. A considerable income tax cut was also provided under TRAIN. Moreover, the prices of alcohol substitutes — which include soft drinks and other sweetened beverages — have increased, potentially shifting drinkers to this even more unhealthy product.

The social impact of alcohol is stark. Studies have shown that alcohol use results in higher prevalence of violence against women and children, including sexual violence such as rape and molestation. Such social harm is felt by the most vulnerable and reverberates across future generations.

Alcohol’s effects on drivers has been established — bad motor coordination, impaired judgment, distorted vision, and slowed reflexes. LTFRB data show that road accidents attributable to human error have been increasing, a large subset of which includes drunk driving. Drunk drivers pose seven to 13 times more risk to those around them than sober drivers.

Even more worrying is the fact that alcohol consumption among young people is on the rise. Notably, this segment is more sensitive to price changes, and therefore to higher taxes. Thus, excise taxes can be increased further to discourage consumption. We can curb habits before they are formed.

Advertisements for alcohol typically end with the phrase “Drink responsibly.” In the same vein, we must also tax these products responsibly. Data and experience both show the urgency of introducing higher taxes on alcohol. Ironically, the alcohol industry has, so far, managed to avoid the key reforms that TRAIN introduced.

 

Madeiline Joy Aloria is a research associate of Action for Economic Reforms (AER).

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