May-i Fabros is the coordinator of the Young Women Collective of WomanHealth Philippines and Jo-Ann Latuja is a fellow of Action for Economic Reforms.
A former health secretary once said, “This country must decide whether the health of families and communities is really more important than the profits of big business.”
All this talk of revenue, profit, and livelihood makes it very easy to forget health. It’s not about the money. It was never fundamentally about generating the highest amount that can be gained. It was primarily about curtailing behavior that is killing thousands of lives.
Anyone who has been following the ongoing debates on sin taxes at the Lower House should have observed that those pushing for the passage of House Bill (HB) 5727 are mostly health advocates and professionals, victims of tobacco-related diseases, and youth champions. This is tantamount to saying that the main motivation for the said bill is to protect the Filipinos’ health, especially the most vulnerable sectors such as the young and the poor.
But how is excise taxation one of the solutions to a health pandemic? Why are health advocates meddling with a tax policy?
Going back to basics
A price increase, all other things held constant, reduces the consumption for that product. Decades of research show that in the case of addictive products such as cigarettes and alcohol, a price increase will also reduce smoking. Hence, it is necessary to raise the price of cigarettes and alcohol high enough to significantly reduce smoking and drinking, and this can be done through excise taxation.
All over the world, excise taxation has, time and again, been proven to be effective in controlling negative behavior. Yearly tobacco tax increases in Thailand, for example, have reduced the smoking prevalence rate from 30% in 1991 to 20% in 2007. The same is true for the US, where about 78% price increase in cigarettes translated to approximately 22% decrease in the number of cigarette packs sold between 1995 and 2005.
Excise tax is also a powerful intervention in curbing tobacco and alcohol consumption especially in targeting specific sectors that will be most responsive to it. The young and the poor, due to their less disposable incomes, are more price-sensitive than the old and the rich, respectively. So higher prices will be most effective in reducing smoking and drinking, as well as preventing initiation of smoking and drinking among the young and the poor.
Which is why, the Framework Convention on Tobacco Control (FCTC), the first international treaty on health and one of the most rapidly and widely embraced treaties in United Nations history, ratified by the Philippines in 2005, recognizes that price and tax measures are the single most effective way to reduce use of tobacco products. Article 6 of the said treaty states that Parties to the FCTC should implement tax policies “… so as to contribute to the health objectives aimed at reducing tobacco consumption…” It further recommends that excise tax should be at least 70% of the retail price of cigarettes to significantly reduce the incidence of deaths and diseases caused by tobacco use.
Waging the War for Health and Governance
Despite the fact that about four out of five deaths in the country can be attributed to tobacco and alcohol use, the regulation of these deadly products is a war in itself. Though the Constitution mandates the state to enact measures that will protect, uphold and fulfill the right of all Filipinos to the highest standard of health, health advocates constantly need to battle it out with tobacco and alcohol companies, sometimes even with government, to stand firm on their obligation to the Filipino people.
Sin tax reform has been ongoing for almost two decades. It should have been an easy win from the very beginning, but some government officials, employees, and legislators in sheep’s clothing disregard the health and social costs by focusing the policy discussions only on revenue and industry profit loss.
In 2003, the World Health Assembly adopted the FCTC. But instead of instituting a tax policy grounded on the health treaty, intense lobbying by tobacco and alcohol companies pulled a fast one in 2004 with the swift passage of the highly contested Republic Act (RA) 9334 which retained the already problematic features of RA 8424 of 1997.
Article 5.3 of the FCTC as espoused in the Department of Health and Civil Service Commission Joint Memorandum Circular No. 2010-01 prohibits government officials and employees from any unnecessary interaction that “creates any perception of a real or potential partnership or cooperation with the tobacco industry.” Yet, the companies through their legislative champions either derail the process or fast-track the approval of a diluted bill, which was the case in RA 9334.
The battle at the Committee on Ways and Means at the Lower House has been won with the approval of HB 5727 with amendments. Indeed it is far from being the ideal health measure, but the war is not yet over.
No more compromises
The current flawed structure has resulted in an excise tax that is only 40% of the retail price of cigarettes, on the average; falling way behind FCTC’s recommended 70%. If the amended HB 5727 is implemented in 2013, the price of the ten most-sold cigarette variants (composing close to 80% of the total cigarette market) will increase by 52% to 81%. Excise tax burden will go up to 65% of the retail price in the first year and reach the recommended rate come 2014.
Those who oppose the tax reform bill may say, why the abrupt increase in prices? The answer is simple. It has already been 16 years since the tobacco and alcohol industries were protected and enjoyed hefty amounts of revenues due to very low taxes in exchange for millions of lives and billions of resources lost due to tobacco- and alcohol-related deaths and diseases. As Party to the FCTC, the country is also committed to reducing the current smoking prevalence rate (28.3%) to 25% by 2014.
Further compromises on the amended HB 5727 will already render the bill ineffective in fulfilling its primary objective of safeguarding the Filipinos’ health. The tobacco tax rates recommended by the bill are just enough, if not slightly insufficient, to reach the realistic, health target of reducing smoking prevalence to 25% by 2014.
Expect health advocates to continue pushing for the most effective features to achieve a true sin tax measure. Like the bida (protagonists) of long-running telenovelas who survive massive attacks by the kontrabida (antagonists), health advocates will remain standing strong and proud, battle scars and all.
Therefore, we urge our legislators to vote for health, for the swift passage of the amended HB 5727 and say NO to further compromises. This time, may the higher value of health and life prevail over the profits of big business.