The year 2011 did not bode well for the Philippines. Growth was sluggish as a result of underspending. The government now needs to pump prime the economy, which requires more revenue sources other than plugging the leaks. The policy recommendation is to adopt a higher yet uniform specific tax rate with indexation to inflation and removal of the price classification freeze. Despite possible objections and drawbacks, there are policy features that can address these issues. In summary, this policy paper aims to illustrate the necessity of reforming the sin tax system in the Philippines, for the economic survival and future growth of the country. Indeed, taxing sin is no sin at all.
The heavy burden of tobacco consumption and the high smoking prevalence in the Philippines should compel policy makers to put in place appropriate regulations, including legislation that will effectively curb the growth of tobacco use. Price and tax measures are undeniably effective in reducing tobacco consumption.
Increasing the tobacco price through taxation has become even more critical and urgent in light of the declining real prices of cigarettes, arising mainly from a problematic and infirm Philippine excise tax system. Said differently, reforming the excise tax policy, which includes a tax increase, is key to meeting the government’s health objectives such as reducing smoking prevalence—the Philippines having one of the highest in the world—and saving lives and resources.
As the 15th Philippine Congress resumes its regular session on Nov. 14, 2011, we look forward to seeing the Lower House immediately tackle the passage of a bill that will reform tobacco and alcohol taxes.
After all, no less than the President, with the concurrence of the House Speaker, has pronounced the bill on sin taxes — we prefer to call them health-oriented taxes — as a priority legislative measure.
In fact, the Legislative Executive Development Advisory Council (LEDAC) has endorsed a bill that contains the best features found in the bills filed by several House representatives, namely, Henedina Abad, George Arnaiz, Jocelyn Limkaichong, Pryde Henry Teves, and Niel Tupas, Jr.