Yellow Pad

 

In one of the rare moments of this year’s State of the Nation Address where President Rodrigo Duterte followed the speech written for him, he mentioned that one of his priority measures for the 18th Congress is raising the excise tax on alcoholic beverages.

The alcohol tax increase is a reform that did not get through the previous Congress. In the House of Representatives, House Bill 8618 was approved on third reading, but the tax rates passed were significantly lower than what the Department of Finance (DoF) proposed. In the Senate, a solitary hearing on the measure took place at the committee level, and that was it. The bill was never tackled in the plenary debates.

So how will I be affected by the alcohol tax? I personally do not drink, but after asking some of my friends that do, they all agree that drinking is a way for them to build relationships and create fun memories to look back on. Having said this, I would like to give two reasons why raising alcohol taxes is a good move.

First, I mention the Universal Health Care (UHC) Act, which was signed into law earlier this year. During the 17th Congress, the DoF stated that the first year of UHC still lacks around P63 billion in order to be fully implemented.

To bridge this gap, the previous Congress passed an increase in tobacco taxes, another landmark health reform recently signed into law. This measure is expected to generate around P15.7 billion in incremental revenue. In addition, should the alcohol tax rates proposed by the DoF be approved, they are projected to raise P33.6 billion in its first year of implementation.

The funds collected from the alcohol and tobacco taxes, together with the earmarking of 50% of the revenues from the tax on sugar-sweetened beverages, will go a long way towards addressing the funding shortfall for the first year of UHC, and for the succeeding years as well.

Second, increasing alcohol taxes will be effective in discouraging excessive consumption or binge drinking. According to the World Health Organization, alcohol is one of the leading causes of non-communicable disease, including cancers of the oral cavity, pharynx, larynx, and the liver, among others. Furthermore, the National Center for Health Marketing in the United States conducted a review of 14 different papers, all of which revealed that higher alcohol taxes led to a lower occurrence of motor vehicle crashes as well as of violence against women and children.

Raising the tax to regulate alcohol consumption is especially important for minors (those aged 18 and below), as drinking alcohol at an early age is said to significantly hamper brain development, and may lead to impaired memory and cognitive deficits that persist well beyond adolescence. It is therefore alarming that despite these health hazards, some alcohol companies have come up with marketing strategies that entice minors to try their products.

In recent years, we have seen the rise of alcopops. Alcopops are defined as pre-mixed alcoholic beverages with an alcohol content of less than 10% alcohol by volume. Simply put, an alcoholic drink mixed with flavors — think Smirnoff Mule, Tanduay Ice, or Bacardi Breezer.

Incorporating flavors into alcoholic beverages is an effective way of encouraging a younger demographic to start drinking. These flavors may take away the apprehensions of some when it comes to drinking, since they would help mask the alcohol’s strong taste.

Alcopops have also become popular because of their affordability. In convenience stores, a bottle of any of the brands mentioned only cost around P40. As a result, these are easily accessible to young drinkers.

Alcohol companies also use the packaging of their products to attract younger consumers. Recently, I came across a picture of what I had initially thought was a tetra pack of a new brand of fruit juice. However, upon closer inspection I found out that this was actually a tetra pack of a ready-to-drink cocktail, with an alcohol content of 7%.

When I realized this, my curiosity turned into concern. While the packaging comes with a small warning saying that the drink was only appropriate for those 18 years old and above, the design of the tetra pack places a much larger emphasis on the flavor of the cocktail.

The reality is, a young child walking inside a grocery store could now be enticed by a tetra pack of ready-to-drink cocktail, the same way that he/she would be enticed by a tetra pack of Zest·O orange juice.

In the future, we must consider coming up with restrictions on the packaging of these products so that adolescents and young children are not easily tempted by their design. As far as regulatory measures go however, raising the tax on alcohol is one that has been proven to be the most effective in discouraging consumption.

Data from the National Nutrition Survey show that the proportion of current drinkers among adolescents decreased from 21.7% in 2008 to 14.9% in 2015. The 2012 sin tax law played a part in this. Significantly increasing the tax again will further decrease the prevalence of drinkers, young and old.

As the 18th Congress begins its third week of work, the push for passing the alcohol tax is off to an encouraging start. House Majority Leader Martin Romualdez has stated that the House of Representatives will pass the priority tax bills — including the alcohol tax — by the end of the year. Romualdez himself, together with his wife Yedda, authored a bill proposing such. Meanwhile, Senator Manny Pacquiao has refiled the alcohol bill that he had authored in the previous Congress.

The first steps have been taken in order to pass this crucial reform. In a year where multiple health measures have already been signed into law, I do hope that the 18th Congress adds to the list of good health and tax legislation the increase on the excise tax on alcoholic beverages.

 

Carlos Jacinto is a tax policy researcher and media officer of Action for Economic Reforms.