Health advocates to reject sin tax hike below P60

by Macon Ramos-Araneta, Manila Standard, Jan 31, 2019

Health advocates will reject “anything” below the P60 increase in the sin tax on cigarettes based on the proposal by Senator Manny Pacquiao, citing the Department of Finance preliminary model.

The DOF model states that any rate below P73.30 will not produce significant impact on the demand for tobacco products.

However, PhilHealth Independent director Dr. Anthony Leachon considered as “a sweet spot” the P70.00 rate proposed by Senator Win Gatchalian.

During the second hearing of the Senate ways and means committee chaired by Sen. Sonny Angara, Gatchalian asked how much the government collects to treat tobacco-related diseases.

Leachon said this question highlighted the low sin tax collections compared to the costs that the country incurs.

He cited a study of Fajutrao and Dans in 2017, which placed the economic burden from four tobacco-related diseases at P210 B. He noted that this is much higher than the P124-billion yearly collections from sin taxes.

Pacquiao said taxing tobacco—a highly addictive substance—will protect the youth and help raise revenues for health.

“We want the youth to stop smoking. We are also thinking of the [tobacco]farmers. We are likewise thinking how to generate revenues for the government and avoid deaths among Filipinos [due to smoking],” Pacquiao said.

Leachon said the Philippines is the seventh lowest in terms of tax burden for tobacco products which makes cigarette prices cheaper than our neighbors.

Advocates of raising tobacco tax expressed alarm on the reported 17,000 new cases of lung cancer in 2018 which translates to 1,400 lung cases a month or 50 lung cases per day.

Health Secretary Francisco Duque III and Finance Undersecretary Karl Chua joined the health advocates in appealing to Angara to pass a tobacco tax rate that will balance both the health and revenue objectives of the reform.

As Angara wrapped up the hearing, no rate for the increase was reached because of time constraints. He is slated to continue the hearing on February 4.

But the senator has already committed to an increase between the House watered-down version of P37.50 hike and Senator JV Ejercito’s recommendation of P90 increase on a pack of cigarette.

Meanwhile, health advocates scored Senator Richard Gordon for redirecting the real issue in the last tobacco hearing to the issues of Dengvaxia and DOH budget utilization.

“This caused a major delay that prevented the Ways and Means from delivering a committee report during the same day,” said health advocates.

Sen. Nancy Binay, meanwhile, raised several questions regarding cigarette smuggling warning that an increased tobacco tax would result to this illegal activity.

She said the government would lost huge amount of supposed revenues from cigarettes once they are smuggled into the country.

Officials from the Federation of Free Farmers and Retail associations also brought up the usual arguments on illicit trade of cigarettes.

They also argued that increasing tobacco tax would put them in a disadvantaged position and may kill the tobacco industry. They added that their retail sales were already greatly affected by the tax rates imposed by TRAIN.

Nonetheless, the representatives from local government units conceded that raising sin taxes will provide additional earmarked revenues that will also benefit their stakeholders.