According to James Sadowsky, author of The Economics of Sin Taxes, taxes imposed on products seen as vices such as alcoholic liquors and tobaccos are called sin tax. Aside from the commodities being objects of disapproval, even their consumers accept such taxes because they seem to hit two birds in one stone. First, they raise revenues and second, they made vices expensive. House Bill 5727 or also known as the Sin Tax Bill aims to reform the imposed tax on the sin products (Official Gazette, 2002). We support this bill for three reasons. First, the government can collect more revenues. Second, it promotes health by dissuading the consumption of the vices. And lastly, the poor sector benefits from it. Sin tax is a form of an excise tax. It is a tax levied on some commodities but not all commodities unlike sales tax.
This is how the government generates more revenues (Sadowsky). However, the opposition claims that this bill will backfire on its goals. Since the price of the price of the commodities will rise, the demand will decrease. Thus, there will be no revenues to generate which contrast one of the goals of the bill since industries such as tobacco will die. However, the products under sin tax are vices. Some people are already addicted to them. Even if the price of these products will rise, people will still buy though some price conscious such as the poor sector and students will cut their consumption (Fonbuena qtd. Monsod, 2012 ). Plus, even the demand for the sin products will decrease; the increased tax will make up for the loss demand. Thus, the industries will not die. The opposition also said that the rate of smuggling will worsen.
However, according to economist and former Economic Planning Secretary Solita Monsod, there is no connection between the rise of the levied tax and smuggling. Countries such as Japan and Singapore who levied tax the highest on sin products even have the lowest rate of smuggling. Moreover, aside from being a revenue bill, Philippine College of Physicians, New Vois Association of the Philippines (NVAP), and other health advocates claim that the bill is importantly a health bill. According to Emerson Rojas, New Vois President, should the sin tax bill be passed, more adult smokers would be encouraged to quit smoking, and also discourage the start of young smokers. Many people can be prevented from having diseases gained from these vices.
Moreover, a big portion of the revenue will go to public health while the smaller will go to affected tobacco workers (Reyes qtd. Drilon, 2012). According to Health Undersecretary Ted Herbosa, money collected from the industry will be used to enroll millions of poor families into socialized healthcare and for the improvement of the whole healthcare service delivery. Thus aside from improving public health, the poor sector will benefit more from the bill. However, the opposition claimed that there is inequality in the bill. The poor are the ones to burden the raised tax. But then according to Solita Monsod, the poor are the ones who are supposed to lessen their expense on these vices since they are the ones who can barely afford to pay medical needs if they acquire diseases from these vices.
Belo, Walden. The Sin tax Promoting the Nation’s Health. Inquirer. May 12, 2012. Web. Fonbuena, Carmela. 5 False Economic Claims on Sin Tax According to Solita Monsod. Rappler. October 18, 2012. Web. Investopedia. Sin Tax. Web.
Official Gazette. Sin Taxes. September 19, 2012. Web.
Reyes, Karl John. Sin Tax Passage to Affect Ph Trade, Finance and Social Services – Drilon. Interaksyon. September 28, 2012. Web. Tan, Kimberly. Liqour, Tobacco Companies reminded of Sin Products Social Impact. Gma News. August 23, 2012. Web The Wages of the sin Taxes. May 15, 2012. Web.
Sin Tax Bill: Both Revenue And Health Measure. Manila Bulletin. October 2012. Web.
A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue.
Sin taxes are typically added to liquor, cigarettes and other non-luxury items. State governments favor sin taxes because they generate an enormous amount of revenue and are usually easily accepted by the general public because they are indirect taxes that only affect those who use the products. When individual states run deficits, the sin tax is typically one of the first taxes recommended by lawmakers to help fill the budget gap. Source: http://www.investopedia.com/terms/s/sin_tax.asp#ixzz2HTDslR4A Why are we supporting it?
1. To promote health by discouraging vice.
2. To collect more revenue for healthcare.
According to the Department of Health (DOH), the Philippines has an estimated 17.3 million tobacco consumers, the most number of smokers in Southeast Asia. Filipinos on average consume 1, 073 cigarette sticks annually, while the smokers in the region consume less than a thousand sticks yearly. This high consumption rate is seen as a result, among others, of the very low cigarette prices in our country. Smoking is responsible for 71 percent of lung cancer deaths in the world. Consequently, lung cancer is the leading form of cancer in the Philippines.
DOH statistics reveal that 10 Filipinos die every hour because of smoking. According to the DOH, a 10 percent increase in tobacco taxes will reduce the number of smokers by two million by 2016. A significant decline in the number of smokers will likewise reduce the number of smoking-related deaths. Meanwhile, drinking alcohol, though effects are relatively less severe health-wise than smoking, has posed a number of costs on the individual and society.
The sin tax proposes the following reforms:
* Maintain the specific form of excise taxation (e.g., per piece, per pack, per proof liter) to discourage consumption, have more revenues that are predictable and easier to administer, and devoid of incentives for manufacturers and importers with under-invoice products; * A shift from a multi-tiered tax structure to a single tax structure: (1) For cigarettes, a two-rate structure of P14 and P30 per pack for the 1st two years, and a uniform rate of P30 per pack of cigarettes on the third year. (2) For fermented liquor, immediate implementation of unified rate of P25/liter. (3) For distilled spirits, a two-year transition period to a unified rate of P150 per proof liter on the third year. * Adopt an automatic annual adjustment of tax rates using relevant NSO-established tobacco and alcohol indexes after the third year. * A shift from a raw-material criterion to an alcohol-content criterion in taxing distilled spirits. * Revenues from sin taxes are to augment the funds of the Aquino administration’s universal health care program. * The continued sharing with tobacco farmers of the incremental revenues.
STATEMENTS FROM HIGH-RANKING OFFICIALS ABOUT SIN TAX BILL:
Sin Tax Bill: Both Revenue And Health Measure
Manila Bulletin – Wed, Oct 3, 2012
The Philippine College of Physicians, New Vois Association of the Philippines (NVAP), and other health advocates on Tuesday urged legislators to view Senate Bill 3249, otherwise known as the Sin Tax Bill, not only as a revenue bill, but more importantly as a health bill. , “It’s time to take action and pass the true sin tax bill, and not a token sin tax bill in favor of our tobacco manufacturers ” said former Health Secretary Esperanza Cabral. She is asking lawmakers to pass the bill in order to lower tobacco consumption in the country. New Vois President Emerson Rojas shared the harmful effects of tobacco. Rojas was a heavy smoker who eventually suffered from Stage 4 laryngal cancer.
He is now unable to talk, save for a device he is now using which is an electrolarynx. “The Philippines has the cheapest prices of cigarettes in the Western Pacific Region,” he lamented. Should the sin tax bill be passed, more adult smokers would be encouraged to quit smoking, and also discourage the start of young smokers. “Let us be on guard against the watering down of SB3249,” urged Rojas. On the other hand, Department of Health Consultant on Non-Communicative Diseases Dr. Tony Leachon and Framework Convention on Tobacco Control of the Philippines representative Dr. Maricar Limpin are pushing for the passage of the sin tax bill so that the government would have more money to build better hospitals and provide premium health care for the poor. “With the sin tax, there would be better revenue for health,” noted Leachon. DOH: Sin Tax is Pro-Poor
This thought is backed up by the DOH, which believes that the sin tax is not only anti-cancer, but pro-poor as well. “As the tobacco industry targets the poor in marketing their products, it will also be the poor who will benefit from the sin tax as money collected from the industry will be used to enroll millions of poor families into socialized healthcare and for the improvement of the whole healthcare service delivery,” said Health Undersecretary Ted Herbosa. According to the 2012 survey of the Philippine Institute for Development Studies, the prevalence of smoking in the country is higher among the poorest of the poor with 40 percent belonging to the lowest quintile while 36 percent come from the second lowest quintile. The figures are the opposite among the rich, where 25 percent of smokers are considered affluent.
“This means that of the 17.3 million adult smokers in the country, 76 percent of them are poor. This also reinforces previous studies that the poor spend more on cigarettes than on education and health,” said Herbosa. Citing results of the 2009 Family Income and Expenditure Survey, the health undersecretary said the country’s poorest spend as much as 67 percent of their income on food and that two-thirds of them do not see a doctor or do not seek a health facility when they get sick. Herbosa said as the poor are likely to be less informed of the harmful effects of smoking, they serve as a major market for the tobacco industry. They also suffer most from all diseases and economic burden attributed to smoking. According to Prof. Tony Dans of the University of the Philippines College of Medicine, half of the annual 300,000 deaths from non-communicable diseases in the country are attributed to smoking.
A total of P188 billion is also being lost every year from the top four killers of Filipinos (lung cancer, chronic obstructive pulmonary disease, heart attack, and stroke) which are all smoking-related. “We have to turn the tide and make the tobacco industry pay for the health and economic burdens that smoking brings. By taxing tobacco we will be able to enroll a total of 10.9 million poor families into the Philippine Health Insurance Corp. (PhilHealth) and increase catastrophic benefits from 10 percent to 30 percent of the total cost,” said Herbosa. The DOH also plans to use revenues from the sin tax to hire an additional 10,000 doctors, 50,000 nurses and midwives, and 100,000 community health teams to fill in gaps in health personnel. In addition, a total of 2,243 rural health units, 403 district hospitals, and 37 DOH-retained hospitals will also be enhanced as a result of sin tax revenues while about 700,000 rotavirus and pneumococcal vaccines will be purchased for poor infants.
“By taxing the tobacco industry we will not only improve our country’s healthcare service delivery but we will also prevent diseases and premature deaths because of smoking,” Herbosa explained. The DOH estimates that around 170,000 deaths would be prevented during the first year of implementation of the sin tax. Meanwhile, around two million smokers are expected to quit from consuming tobacco by 2016 as a result of a higher tobacco levy. “We will be able to save the lives of the poor and prevent our children from taking up smoking when we increase the tax for tobacco products. At the same time we will be able to improve our healthcare service delivery to cater to the poorest of our population,” Herbosa said. ….
POSSIBLE ARGUMENTS FROM THE OPPOSING SIDE:
Here are the top 5 false claims that the industry is supposedly spreading: 1. Tax increase will intensify smuggling
Presenting statistics in various Asian countries, Monsod showed that there’s no relation between increase in excise tax on cigarettes and illicit trade. Countries where cigarettes are most expensive — Japan, New Zealand, Singapore, and Australia — have the lowest incidence of illicit smuggling. “There’s no relationship,” said Monsod.
2. Sin tax is inequitable
Critics of the Sin Tax measure argue that it’s the poor that will bear the most proportion of the tax. Implenting a unitary sin tax, based on the original version of the legislative proposal, means the same tax will be imposed cheap and high-end cigarette brands. In the Philippines, the biggest proportion of smokers also come from the poor. Monsod said it’s not an issue. “We are not taxing a good. We are taxing a bad. The proportion of smokers is higher among the poor. Who buys the most? The poor. And they are the ones suffering [health-wise]. Do not use problem of inequity because precisely we want to stop the poor from smoking. They’re spending so much buying cigarettes. They cannot afford the cost of medication,” said Monsod. 3. Farmers, retailers to lose livelihood
Monsod questioned the statistics of the Philippine Tobacco Institute (PTI) a total of 840,146 people are employed in tobacco farming. With 32,325 hectares of farmland, that would mean there are 26 tobacco farmers and helpers per hectare. “Does that sound right to you? And yet, this was accepted without demur by our legislators. Nonsense. There are 52,000 farmers based on National Tobacco Administration data,” said Monsod. If the annual income per hectare is P80,000, it means that the annual income of a tobacco farmer is P3,269, Monsod data. “I am only using their data to show that their numbers are ridiculous…
How can anybody survive with P3,000 a year,” Monsod added. Another argument against the Sin Tax measure claims retailers will suffer from loss of sales from cigarettes. Monsod said retailers will likely keep their profits from cigarette sales because the demand for the product is elastic. And even if they lose sales from cigarettes, Monsod said it shouldn’t be a problem. “If people stop buying cigarettes, you think they’re not going to buy anything else? Cigarettes loss will be milk’s gain or rice’s gain,” she said. 4. Tobacco industry will die and gov’t will lose money
All studies show the contrary, Monsod said. Price increase, she said, will not decrease sales because demand for cigarettes is elastic. Price increase will not deter smokers, said Monsod, because smokers are already “addicted.” They will continue to buy cigarettes, she said. “If you have diabetes and insulin increased by 300%, you are still going to buy insulin,” she explained. 5. Negative net economic benefits
Based on Monsod’s presentation, the annual gross revenue from cigarette sales is P103 billion but its cost to health is P188 billion. Monsod said that is a net cost of P85 billion. ‘Even if the revenues were there, you will still say ‘Remove Tobacco,’ she added. It’s important that Congress passes a unitary sin tax, Monsod added. “A unitary tax is absolutely imperative. If it is not unitary, what you are essentially doing is, you are throwing the poor to the dogs. Let them die. You are allowing them to kill themselves cheaper,” Monsod said. Most, if not all, countries like the U.S. and Great Britain have adopted a unitary tax, she added. The House of Representatives in June passed on third and final reading a two-tier excise tax structure for tobacco products and 3-tier for alcohol. The diluted measure reduces projected revenues from P60 billion a year to P30 billion a year.
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