The govt conundrum over ‘sin tax’: Health or wealth?
Credit to Author: The Manila Times| Date: Wed, 27 Feb 2019 16:27:45 +0000
THE government has a goal to reduce the number of smokers in the country, saving both lives and the enormous costs of medical treatment for preventable, smoking-related ailments. It also now has a goal, thanks to the recently passed Universal Health Care (UHC) Law, of funding health care for tens of millions of Filipinos who do not have access to affordable care. Both of these are progressive, praiseworthy initiatives. They cannot both be satisfactorily achieved, however, with the single tool of the “sin tax” on tobacco products.
Under the current tax scheme, there is P35 per pack excise tax on cigarettes, which will be raised to P37.50 per pack in 2021 and P40 per pack in 2023. From 2024, the tax rate will be increased by 4 percent annually.
There are two competing proposals to replace the current tax regime. The Department of Finance (DoF) and the Department of Health (DoH) have called for an increase to P60 per pack, with annual increments of 9 percent beginning next year. The House of Representatives, on the other hand, has approved House Bill (HB) 8677, which would raise the current tax to P37.50 per pack in July, followed by an increase of P2.50 in each of the next three years, with annual increases of 5 percent thereafter.
The DoF and DoH believe that the imposition of the higher excise tax plan would reduce the number of tobacco users, and at the same time provide revenues to fund the UHC program. Funding for healthcare might be compromised under the House version, the DoF has said, because its projected revenue through 2022 would be P244 billion lower than the other, higher package.
There is an inherent contradiction in the government’s perspective, good intentions notwithstanding. If excise taxes are to be used to fund health programs, then logic dictates that the source of those tax revenues — a population of cigarette consumers — be maintained. If, on the other hand, the real goal is to ultimately end tobacco use and eliminate a serious, yet preventable, menace to public health, the revenue from sin tax would continuously diminish and ultimately reach zero, limiting its usefulness as a funding source.
Of course, the natural counter-argument to all that is that no matter how high excise taxes are, there will always be a certain part of the population that will use tobacco products, so long as they are available; therefore, a certain amount of revenue from the tax can be counted upon, and directed to appropriate uses. This is a cynical point of view, however, no matter how realistic; it consigns a certain part of the population to a risky, life-threatening habit, in effect sacrificing a part of the population for the greater good.
When two divergent objectives are pursued, the only certain outcome is that neither of them will be satisfactorily met. In the Philippines’ case, efforts to reduce or eliminate tobacco use will fall short of aspirations, while at the same time, funding for UHC will at best always be below what is considered ideal.
To fully achieve either goal, the government must make a stark choice: It can either commit fully to eliminating tobacco use and its attendant risks and costs by working to prohibit the manufacture, sale, and use of tobacco products in the country. Or it can forego that objective entirely, and maintain the tobacco excise tax at a level which guarantees a consistent revenue stream to apply to UHC, with the understanding that a significant portion of UHC funding will need to be applied to treating tobacco-related health issues.
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