Higher Sin Tax: Bigger Revenues, Less Consumption

All told, the total cumulative revenues to be generated from the sin tax reform will amount to more than PHP530 billion pesos in six years (2012-16). For the first year alone, the revenues to be collected will reach PHP 60.63 billion pesos, half of the amount to be contributed by the tobacco taxes.

Furthermore, health objectives will be satisfied. We can expect a reduction of approximately two percentage points in smoking prevalence, and we can generate substantial funds to finance the government’s program for universal health coverage.

The ghost conquistador and the specter of smuggling

Recently, the Philippine Daily Inquirer’s editorial titled Taxing vices (27 August 2011) made this conclusion: “So whether it is to raise taxes or curb vices, this is one piece of legislation that merits serious consideration by Congress. And the time to enact it is now during the current session, when our lawmakers are still not too preoccupied with ensuring their reelection.”

A week earlier (19 August 2011), Inquirer columnist Raul Pangalangan explained through his essay the essential features of the sin tax reform, namely the indexation of the specific tax to inflation, the adoption of a simplified unitary tax, and the removal of the discriminatory price freeze classification for certain tobacco products, where tax rates are pegged at 1996 prices. The Inquirer editorial cited above also discussed these attributes. Professor Pangalangan extends his work to tackle the “legal sophistication of the tobacco industry.”

The Pangalangan piece was an effective one, if we go by Mao’s statement that to be attacked by the enemy is a good thing. Someone rejoined, through a letter to the editor, which the Inquirer published.

No New Taxes Yet (Part 2)

The biggest resistance to sin taxes comes from the tobacco industry. The title of a paper co-authored by K. Alechnowicz and S. Chapman (2004), which came out in the international peer-reviewed journal Tobacco Control, says it all: The Philippine tobacco industry: “the strongest tobacco lobby in Asia.”

The Alechnowicz and Chapman paper documented “revelations from internal tobacco industry documents about the conduct of the industry in the Philippines since the 1960s.” Political corruption was among the areas explored.

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