The ultimate aim of higher 'sin' taxes

On the recent announcement by P-Noy’s government of its intention to restructure the current excise tax collection system on alcohol and tobacco products, it would be foolish to think that this is merely a measure intended to raise government revenues.

While P60 billion a year from the proposed bill restructuring exercise is not an amount to be scoffed at, we must not lose sight of the fact that any incremental revenues from this would be a big boost to the intended beneficiary: universal healthcare.

As a bonus, we should be happy that these additional taxes will greatly help advance the campaign to reduce the consumption of alcohol and tobacco, two “sin” products that have been singled out to be the cause of many debilitating illnesses among Filipinos today.

The restructuring of sin taxes is one of the 13 measures that President Aquino presented to congressional leaders as his administration’s priority pieces of legislation after his first year term. The bill that Malacañang will support aims to unify excise tax rates over three years.

Aside from allocating incremental revenue collections to the health care sector, the proposed law also directs the allocation of specified portions to the promotion of economically viable alternatives for tobacco farmers and workers.

Pending bills

Currently, there are a number of bills that are being deliberated in Congress that seek to amend the existing excise tax structure on alcohol and tobacco products. As of last count, there were five filed during the 15th Congress that would result in boosting the state treasury’s collections. The lowest contribution was estimated at about P540 million on the first year, and the highest at P58.5 billion in 2012.

As a background, here are some of the bills filed:

House Bill No. 2484, filed by Congressman Erico Aumentado, proposes that beginning 2012, an additional 10 percent of the existing 2011 excise tax be imposed. In addition, the bill proposes to earmark whatever additional revenue that can be collected to the information communication technology programs of the Department of Education.

Congressman Aumentado also filed HB No. 2485, which also recommends raising taxes on alcohol and tobacco. In this version, the bill stipulates that beginning 2012, an additional P3 per pack be imposed. And this time, any incremental earning will accrue directly to the National Health Insurance Program of the Philippine Health Insurance Corporation (PhilHealth).

A third bill, HB 2687 filed by Congresswoman Jocelyn Limkaichong, Congressmen George Arnaiz and Pryde Henry Teves intends to adopt a unitary tax rate for each category of alcohol and tobacco products. Cigarettes will be slapped P8 to P14 per pack on the first year, and P14 per pack on the second year.

For distilled spirits, the tax hike will be P30, P80 and P150 per proof liter for three consecutive years. For beer, it will be an immediate impost of P21.52 per liter.

Removing a 14-year-old protection

Congressman Hermilando Mandanas came up with HB 3059 which calls for the deletion of a current provision in the law that has protected certain brands (mostly Philip Morris-Fortune Tobacco brands listed in Annex D of RA 8424) from paying the correct amount of taxes. These “protected brands” have increased their selling prices during the past over fourteen years but still paid taxes based on their 1996 prices.

HB 3183 by Congressman Danilo Suarez proposes to impose a single ad valorem rate of 30 percent of net retail price of alcohol, and to slap an additional P10 per pack on cigarettes packed by hand, and P20 per pack on cigarettes packed by machine.

The last bills, HB 3465 and 3489, filed Congressman Neil Tupas and Congresswoman Dina Abad, seeks to increase the current P14 excise tax per pack of low-priced cigarette brands to P22 and the high-priced brands from P28.30 per pack to P30 in 2013.

On the third year, cigarette taxes will be raised to a uniform rate of P30 before being adjusted to the current value of cigarettes. By far, the Tupas-Abad proposal will give the government the biggest revenue increase.

Social equation

For sure, the debate will now center on how the various bills may be consolidated into one cohesive document so that it will contribute the best amount of revenue to the government treasury but will not kill the goose that lays the egg.

Authors of some of the above bills are cautioning against the Tupas-Abad bill because the provisions by far are the most radical. This bill’s detractors argue that the market may not be elastic enough, and this would lead to sharp reductions in consumption.

Consequently, with less people buying liquor and cigarettes, government tax collections on liquor and tobacco will be reduced. Why then should government even support the proposed law?

Paramount aim is healthy nation

There is only one way of answering this. If higher taxes will cause consumption to drop, then so be it. This will ultimately mean a reduction in health care expenditures spent on treating illnesses associated with “sin” products.

The higher cost of liquor and cigarettes will be a good deterrent for the youth to pick up these unhealthy habits. The ultimate aim is to have a healthier nation. As P-Noy declared when he announced his support for higher “sin” taxes, “There’s no question about our ultimate aim, to decrease the consumption of sin products.” So there.

PCCL Sweet 16 shaping up

The Sweet 16 Finals cast of the 2011 PCCL (Champions League) is slowly shaping up as the “mother leagues” all over the country are on the home-stretch of their competitions.

Already qualified are the UAAP Final Four (defending champion Ateneo Blue Eagles, Adamson U Soaring Falcons, FEU Tamaraws), and the current NCAA top three (San Sebastian Golden Stags, Letran Knights and defending champion, San Beda Red Lions).

The NCAA fourth placer (still being contested by at least four teams) and the top two of CESAFI (Cebu) are the other automatic qualifiers to the Sweet 16 Finals. The remaining six slots are for the four regional champions (North/Central Luzon, South Luzon-Bicol, Visayas Islands and Mindanao) and the top two teams from Metro-Manila qualifying games.

Visit www.CollegiateChampionsLeague.net and join for free ongoing surveys for the Sweet 16 Finalists.

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