Statement of Support for P-NOY Regarding the Increase of Excise Taxes on Sin Products

Action for Economic Reforms, et. al.

August 23, 2010

We welcome the statement of President Benigno Aquino III to back reforms on excise taxes on sin products, including tobacco and cigarettes. In his statement, President Aquino said that, “From asocietal concern, I say yes to the idea of an increase in sin taxes.There are trade-offs. As you know, these sin products have a health burden on the people, and this health burden has a peso value.”

Year after year, tobacco-related diseases claim the lives of millions. Inthe Philippines alone, approximately 90,000 die every year or about 10 Filipinos every hour die from smoking-related diseases. [1] We believe that increased excise taxes, particularly on tobacco products, will not only address the economic costs by curbing tobacco usage, but also increase revenues for the government.

Increasing taxes of tobacco products is the most effective means to reduce tobaccoconsumption. Studies consistently show that increase in tobacco prices would result in a significant reduction of tobacco use such that increases in price would reduce demand significantly in low and middle-income countries.[2] The poor is more responsive to price changes than the rich, thus, increasing tobacco taxes will significantly lower their tobacco consumption [3] and consequently improve their health.

The World Health Organization approximated in 1999 that about 200,000 Filipino men would develop smoking-related diseases in their productive years of age. In 2006, economic costs related to healthcare, loss inproductivity, resulting from tobacco-related diseased would cost Filipino taxpayers around US$ 2-6 Billion. [4] These added expenses are justification enough to increase taxes to reduce the economic burden.

This reform measure will significantly contribute to the commitment ofPresident Aquino to achieve health revenue objectives and address the problem of low tax revenues in general. For the past ten years, there has been a declining trend for the contribution of tobacco taxes on government revenue in the Philippines over all, yet the economic costs of tobacco usage have continuously been increasing.

The erosion of revenues from the specific tax on tobacco, because it is not indexed to inflation, has been a factor in the country’s low tax effort. Without new legislation that will reform the excise tax on sin products, we will expect a further fall in tax effort. The reform of the excise tax on sin products, including tobacco, is a necessary condition for the country to avert a fiscal crisis. This gives us even more reasons to increase taxes. The increased revenue from an increase in excise taxes can be used for a number of programs such as health promotion funding, promoting MDGs, and support for tobacco farmers to convert to other crops.

For all these reasons, we urge our legislators to heed the President’s call. Impose higher sin taxes now!

[1] Tobacco or Health: a Global Status Report, World Health Organization Geneva, Switzerland (1997)

[2] Chaloupka et al., Chapter 10, The Taxation of Tobacco Products, Tobacco Control for Developing Countries, p. 267

[3]Jha and Chaloupka, Curbing the Tobacco Epidemic: Governments and theEconomics of Tobacco Control, Global Trends in Tobacco Use, World Bank,p. 74 (1999)

[4] Philippines Tobacco Tax Report Card, June 2010, Southeast Asia Tobacco Control Alliance (SEATCA)

Signatories:

(in no specific order)

  • Marvic M.V.F. Leonen, A.B., LL.B., LL.M. Dean and Professor of Law, UP
  • Filomeno S. Sta. Ana III, Coordinator, Action for Economic Reforms (AER)
  • Jaime Galvez-Tan, MD, former Secretary of Health
  • HealthJustice
  • Eddie Dorotan, Executive Director, Galing Pook Foundation
  • Jessica Reyes Cantos, President, Action for Economic Reforms
  • Jenina Joy Chavez, Philippine Coordinator, Focus on the Global South
  • Maita Gomez, Coordinator, Bantay Kita
  • Nepomuceno Malaluan
  • Fides Lim
  • Aurora Pijuan
  • Alex Asuncion, Philippine Cancer Society
  • Philippine Cancer Society
  • Emer Rojas, President, New Vois Association of the Philippines (NVAP) & Philippine Laryngectomee Club Inc.(PLC)
  • Ulysses Dorotheo, MD, FPAO, Section Chief, Neuro-ophthalmology, Asian Hospital and Medical Center
  • Southeast Asia Tobacco Control Alliance (SEATCA)
  • Joy Flavier-Alampay, SEATCA
  • Ana Maria R. Nemenzo, National Coordinator, WomanHealth Philippines
  • Bienvenido Oplas, Jr., Minimal Government Thinkers, Inc.
  • National Pharmaceutical Foundation, Inc. (HEALTH Plus)
  • Cancer Warriors Foundation
  • Michael Alba, AER and former president of Philippine Economics Society
  • Tanja Lumba, AER
  • Tirso Nieva Paglicawan, Jr., President, Kapisanan ng mga Kawani ng Koreo sa Pilipinas (KKKP) [Philippine Postal Workers Union]
  • Dante Dean M. Barola, Secretary – General, KKKP
  • Manuel G. Rama, President, PhilPost Rank-and-File Employees Association (PRAFEA)
  • Mercedes Fabros, Alternative Budget Initiative-Health Cluster
  • Elenita Loida L. Afuang-Pedrosa, DMD, MPH – Executive Director, Alt*Health Foundation, Inc.
  • Francis Reiner Palanca, The Breathewell Initiative
  • Professor Ben Endriga, Department of Economics, UP Los Baños
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    We are on the cusp of fulfilling the great potential of our nation,” he said in a statement. Lacierda also warned that the “enemies of reform are locked and …

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    Beltran also said Finance department expected excise tax collection from tobacco products in 2010 to amount only to P25.8 billion.

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