New sin tax seen to improve Pinoys' health, Phl finances

MANILA, Philippines -  Finance Secretary Cesar Purisima said that passing the original Finance-backed version of the sin tax measure would go a long way in improving the country’s health and fiscal situation as he reiterated his pitch for the passage of a new excise tax bill on alcohol and cigarettes.

“Passing the DOF version of the sin tax bill will go a long way in improving our people’s health and our fiscal health,” Purisima told The STAR.

The DOF version would translate to roughly P60 billion in incremental revenues in the first year of implementation. In June, the House of Representatives has approved a compromise version, with incremental revenues seen at P31.35 billion in the first year of implementation.

Health Secretary Enrique Ona, for his part, is backing Senate Bill 3249 of Senator Miriam Defensor-Santiago, saying that this measure is superior from the other bills.

“The department believes that SB 3249 best supports the twin goals of deterring our countrymen especially the youth and the poor from smoking and drinking alcohol, thus protecting them from the lifetime consequences of smoking and alcohol abuse and financing a universal health care program to accessibility to quality health care,” he said.

Ona said that instead of indexing the tax rate to inflation, SB 3249 “adopts the nominal gross domestic product for index, thereby keeping the tax rates real and ensuring that tobacco and alcohol products will not become more affordable as income increases over time.”

The Health chief expressed concerns that the Senate version would be weakened, as what happened in House Bill 5727 which was passed by the House of Representatives only after the incremental revenues to be collected for tobacco and alcohol products were lowered from P60 billion to P32 billion for 2013.

The Senate ways and means committee is set to hold its last public hearing on the proposed sin tax measure on Sept. 20.

The Department of Finance cited the experience of other countries in restructuring their respective sin tax environments, which are now enjoying substantial revenue increases.

Finance Undersecretary Jeremias Paul Jr. cited surveys conducted by the US-based Tobacco Free Center, which showed that higher taxes on cigarettes have translated to reduced consumption, especially among the poor and the young, while increasing revenue intake.

“Experience of other countries show that increased taxes on tobacco leads to higher government revenues while reducing tobacco consumption,” he said.

In South Africa, every 10-percent increase in excise tax on cigarettes has been associated with an approximate 6 percent increase in cigarette excise revenues, even as tobacco use declined, the Finance department also said.

Furthermore, from 1994 to 2001, excise revenues more than doubled as a result of tax increase.