Uniform specific tax to hike revenues, improve health

MANILA, Philippines - The government can reduce by 26 percent or 3.82 million premature deaths largely caused by smoking if a uniform specific tax of P30 per pack is slapped on cigarettes, a study co-authored by a health and economics professor said.

According to the 2012 study co-authored by economics professor Frank Chaloupka of the University of Illinois in Chicago and experts from the University of the Philippine and the Department of Health, a uniform specific tax on cigarettes will achieve the objectives of increased revenue and better health.

“Levying a uniform specific excise tax of P30 per pack would reduce consumption by 46 percent and raise P53.3 billion in new revenues,” the study said.

The measure would also decrease the number of new smokers and discourage poorer citizens from smoking.

“In addition, a uniform specific excise tax of P30 would prevent an estimated 4.6 million of the youth from picking up the habit and avert almost 2.3 million premature deaths. Smoking prevalence in lower income households would also decrease dramatically and funds normally spent on tobacco products would be otherwise spent on other necessities,” the study said.

Citing the results of the study, Action for Economic Reforms (AER) economist Jo-Ann Latuja said Senator Ralph Recto’s fears that a high tax rate would mean lost revenues for the government are unfounded.

Recto is chairman of the Senate Ways and Means Committee, which is currently conducting hearings on pending bills seeking to restructure the country’s excise tax regime. The House of Representatives approved its version in July.

“It is clear from the study that an additional P53.3 billion will be generated from a unitary tax of P30,” Latuja said.

The study also recommended annual adjustments to inflation so that they retain their real value over time.

The Finance department and the Department of Health are both pushing for the restructuring of sin taxes into a unitary tax rate from a multi-tier system for cigarettes. Incremental revenues to be raised from a unitary tax rate are estimated at P31.35 billion in the first year of implementation.