Government eyes P5 billion from proposed hike in 'sin' taxes

MANILA, Philippines - As much as P5 billion could be raised to help address the government’s ballooning budget deficit through a proposed tax increase of P3 per packet of cigarettes and 10 percent on all alcohol products. 

 Bohol Congressman Erico Aumentado announced the estimated P5-billion figure – based on current figures and an average of one packet of cigarettes for each of the country’s 17.3 million smokers – during a House ways and means committee discussion on two proposed bills yesterday.

Health Undersecretary Alexander Padilla said the current excise of P24 billion generated from alcohol and cigarettes was greatly outweighed by the amount of government money spent as a result of primarily smoking and alcohol-related illnesses.

“We spend an amount of almost 10 times that on healthcare,” he said.

The current top four killers in the Philippines were all cardiovascular diseases – of which smoking has been tagged as the primary risk factor, he said.

International studies have shown that increasing tax was the most effective way of controlling consumption of alcohol and tobacco, while generating government revenue and leaving tobacco companies economically viable, he said.

“It’s a win-win situation,” he added.

However, National Tobacco Administration spokeswoman Cristina Lopez said two million Filipino workers stand to lose their livelihood. The proposed additional P3 tax would apply to all cigarettes and hurt the cheaper brands most – those which contain Filipino tobacco, she said. 

“While we support the government’s effort to protect health, we (call) for their compassion for the two million Filipinos who would be affected,” she said. 

The administration does not encourage smoking but wants any tax hike delayed so there would be time for Filipino tobacco to enter the global market, she said. While many tobacco farmers had searched for other jobs, they had found none more lucrative.

“Foremost (must be) the livelihood of the tobacco farmers and their families,” Lopez said.

The committee also heard evidence from the Department of Finance that historical increases in Filipino alcohol and tobacco excise showed in an apparent decrease in consumption, which normalized after a few years.

“The demand for those products is relatively unelastic so that consumption does not reduce by the same magnitude as the increase in price,” director Stela Montejo said.

Meanwhile, Padilla said the Department of Health would look into concerns raised that Filipino cigarettes were being laced with wood chips and other ingredients because of failed tobacco crops.

The committee would direct a technical working group on the two bills and meet several more times.