New sin tax to provide more funds for health workers

MANILA, Philippines - The Finance-backed sin tax measure would translate to more funds for the health sector and may even remove the need for the Philippine Health Insurance Corp. (Philhealth) to hike the mandatory contributions of members in the near future.

This was the message imparted by Finance Secretary Cesar Purisima and Health Secretary Enrique Ona during the fourth and last sin tax hearing conducted by the Senate ways and means committee.

“I think it’s very clear that the sin tax has a lot of health consequences and therefore the strategy of the government is on the right track to make sure that we have the resources to deal with these consequences and to cover the lowest two quintiles and at the same time to discourage the youth from getting into this,” Purisima told reporters after the hearing.

In a separate interview with The STAR, Ona said the move to raise the mandatory Philhealth contributions would depend on what sin tax measure Congress will approve.

“It will depend on what sin tax version will be approved,” said Ona when asked if Philhealth would proceed with its plan to raise the mandatory contributions if Congress approves a new excise tax bill on alcohol and cigarettes.

He said that if Congress approves the original Finance-backed version, which would translate to P60 billion in revenues, there may no longer be a need to raise Philhealth contributions in the future.

Philhealth is planning to increase the premium contributions of individually paying members to P2,400 from the existing P1,200 annually.

During the hearing, Senator Ralph Recto, chairman of the ways and means committee, asked Health officials where Philhealth contributions go.

He said that if there will be higher revenues from sin taxes, this should really reach the intended recipients.

“I hope that when we increase taxes on sin product, we will really spend it the way we promised we would. The magnitude that you’re asking for is P25 billion to P50 billion and on top of that you will still be raising Philhealth premiums?” Recto asked Ona.

Ona replied the Health department would be submitting all the projections including the proposed increase in premium.

Purisima for his part assured that government revenues would not necessarily go down even if the prices of alcohol and cigarettes go up because of higher sin taxes.

He cited a study presented to the committee by Dr. Antonio Dans of the UP College of Medicine yesterday. Dans said that tobacco consumption is very resistant to price increases.

“The fear that’s being shared with a lot of people that we might end up losing revenue is without basis based on the model that Dr. Dans showed.

Purisima also cited the experience of the United States when President Obama increased excise taxes in 2009.

“He tripled or quadrupled the excises taxes and they’ve reported they’ve decreased consumption and at the same time increased revenue,” he said.

The Finance department is asking the Senate to approve its counterpart version of a bill that seeks to raise taxes on alcohol and cigarettes and to shift to a unitary tax regime from the current multi-tiered system.

The House of Representatives already approved its version in June. Incremental revenues to be raised from a unitary tax rate are estimated at P31.35 billion in the first year of implementation.

According to the measure approved by the House of Representatives, at least 85 percent of the revenues from the new sin tax measure would go to health services, including health coverage for indigents and informal sectors under the National Health Insurance Program.

Roughly 15 percent would go to support tobacco farmers who may be adversely affected by the measure.