Sin Tax Law Essay
Sin Tax Law
“It has been a long battle for the sin tax reform measure proposed as early as 1997. For almost 16 years, the bill was debated on, scrutinized and sometimes set aside… but we have proven that nothing is impossible for a country that rows in one direction,” Mr. Aquino said.
Davao Rep. Isidro T. Ungab (3rd district), the House of Representatives ways and means committee chairman, called Republic Act 10351’s approval “a victory against lobby groups.”
“We got what we wanted — the removal of the annexes, the removal of the price classification freeze, indexation to inflation, unitary rates in five years and leveling of the playing field.”
Prior to the reform, taxes on tobacco and alcohol products continued to be pegged to 1996 prices.
Internal Revenue Commissioner Kim S. Jacinto-Henares said the law’s passage would be instrumental in securing an upgrade from credit agencies. The Philippines currently stands one notch below investment grade.
Higher taxes on tobacco and alcohol products will be imposed next year, she said, with the tax bureau to issue guidelines within the month.
“We will be coming up with a revenue regulation and it will be published before the end of the year,” Ms. Henares said.
The measure is expected to generate P33.96 billion in fresh revenues during the first year of implementation. The bulk, or P23.4 billion, will come from tobacco products.
British American Tobacco country manager James Lafferty congratulated the government for pushing an important reform through.
“We now have a system that benefits the entire nation by raising government revenues, addressing health needs, and leveling the playing field fueling greater investment in Philippines,” he said in a text message.
Tobacco farmers, however, claimed it marked a”death knell” for their livelihood.
“They did not listen to any of our appeals. Our only weapon left is through the ballot,” said Saturnino Distor, president of the Philtobacco Growers Association, referring to next year’s midterm elections.
“Sin taxes” are taxes imposed on products or services that are viewed as unnecessary, detrimental to health or morally harmful. The two most common examples of products that face sin taxes are tobacco and alcohol. Sin taxes have several potential advantages and disadvantages. Discouraging Harmful Behavior
* One of the main purported benefits of sin taxes is that they tend to reduce harmful behaviors. For instance, tobacco use is associated with various health problems such as cancer and heart disease. Imposing high taxes on cigarettes reduces the amount of tobacco consumers can afford, which may in turn reduce the overall negative health impacts of smoking. Other activities with known negative health effects that are taxed include drinking alcohol and using tanning beds. Increasing Tax Revenue
* Another benefit of sin taxes is that they can provide additional tax revenue to the government bodies that impose them. According to the New York Times, 22 states increased their tobacco taxes between January 2009 and April 2010 to bring in more tax revenue. Certain states like California are considering legalizing marijuana as a way to bring in more sin tax revenue. According to Reuters, “the U.S. federal government collected $20.6 billion in taxes on alcohol, tobacco, firearms and ammunition in fiscal year 2009.” *
* Sin taxes can potentially result in reduced economic activity which could reduce the amount of tax revenue they generate. If a gas station has to charge $1 more per pack of cigarettes, they will sell fewer cigarettes and make less profit overall as a result. This can hurt businesses that rely on the sale of products like alcohol and tobacco. If a consumer pays $100 a month due to sin taxes, that is $100 less that he can spend on other goods and services. Effectiveness
* While discouraging harmful behavior is often cited as one of the aims of sin taxes, it is dubious whether sin taxes are actually effective at discouraging harmful behavior. According to the New York Times, “economists doubt that sin taxes greatly affect the behavior of most Americans.” Products such as tobacco and soda are often viewed as basic necessities so consumers continue to buy them, despite incremental increases in cost due to taxes.
What We Think: The Sin Tax Bill
ADVANTAGE(S) + of Increase in Sin Taxes:
The increase in taxes of cigarettes and alcohol will serve as a deterrent for young people. Increase in government revenues would also be possible through this bill that could result to additional funding for other government projects i.e. healthcare, basic services delivery, source of calamity fund, etc. Our government will also now have the ability to meet our International Commitment pursuant to General Agreements on Tariff and Trade (G.A.T.T.) Agreements signed in 1994 and the World Health Organization (W.H.O) Framework Convention on Tobacco Control. The government could also help assist tobacco farmers (including financing of credit guarantee and crop insurance programs) in shifting to alternative crops other than tobacco and other livelihood programs. It can also be utilized in adjustment measures program for prevention of job losses and assistance to displaced workers.
DISADVANTAGE(S) – of Increase in Sin Taxes
Any margin of tax increase can and will probably be passed on to consumers/end-users given the regressive form of taxation; However, this is not an assurance that the young people will be deterred by the steep price of cigarettes and alcohol. This bill opens more doors for corrupt activities particularly those involved in the implementation phase. While we seek to honor our International Commitments, sometimes, the effect is not sure to be achieved, as it merely provides a level playing field among the signatories to International Agreements like the G.A.T.T.
WHY ARE CERTAIN PEOPLE/GROUPS PUSHING FOR THE INCREASE IN SIN TAXES?
Generally, it boils down to the supposed positive gains we hope to obtain, as enumerated in the + factors. Taxation are sometimes used in tandem with the “Police Power” of the State, it involves regulation of certain industry for the protection of health and safety of the citizenry against the pernicious effects of cigarettes and alcohol. Also, Curbing addiction by means of increasing taxes is one measure normally resorted by the Government.
WHY ARE CERTAIN PEOPLE/GROUPS OPPOSED TO THE FURTHER INCREASE IN SIN TAXES?
The industry is already highly taxed/regulated. Those who are generally opposed to the further increase in tax rate belongs to the manufacturers and people who are patronizing the use of cigarettes and alcohol.The noble intentions of the State, for higher taxes to serve as deterrent, are generally not met in all cases. Also, the market will be vulnerable to abuse when it comes to implementation.
WHAT IS THE STAND OF THE TOBACCO MANUFACTURING COMPANIES IN SO FAR AS INCREASE IN SIN TAXES ARE CONCERNED AND WHAT ARE THEY DOING ABOUT IT?
Generally, they are opposed to any further increase, as this might dampen their sales to the general public. It will result to their decrease in market share. They resort to tapping the services of lobby groups whose principal functions is to convince lawmakers to craft legislation that would be more favorable to them, as against the government. They will not hesitate to infuse lobby funds into the pockets of some legislators so they could obtain some form of leverage in their favor
WHAT CAN THE GENERAL PUBLIC EXPECT FROM THE INTENDED REFORMS IN THE SIN TAX BILL?
Given the very positive set goals, the public can expect so much from the supposed advantages. However, the problem is on the implementation aspect i.e. road user’s tax worth billions were collected and goals set then were also very noble yet, when it comes to implementation, the government seemed to reneged on its end of the bargain. Additional source of funding for the National Health Care Program of the Government should also be expected.
Credit financing will also be available to those who will be displaced and be able to shift to other diversified crop productions. Fund availability is also possible to upgrade health-care facilities and public health programs to include research and development to achieve millennium development goals
THE UNIVERSITY of the Philippines Economics Towards Consciousness together with other UP school organizations hold a Sin Tax Consciouness Parade at the Diliman campus to inform fellow students about the advantages of passing the law. While the highly controversial Reproductive Health Bill has succeeded the consciousness of all sectors of the society, another bill is yet causing a stir among Filipinos, the youth included — the Sin Tax bill. The proposed bill aims to increase the excise tax on tobacco and alcohol products that are being sold in the country.
This means an additional of as much as R30 tax on a pack of cigarettes, and R300 per proof liter for liquor. The Philippines is one of the countries in the world that sells the cheapest cigarettes and liquor. Some groups have said that the reform bill will benefit the country one way or another. For one, the increased tax will greatly increase government revenues, and the pricier “sin products” may lower the number of its users. But the University of the Philippines
Economics Towards Consciousness (UP ETC) would like to see the issue beyond just raising revenues and lowering the number of consumers. It’s all about how the tax revenues may benefit ordinary Filipinos. Last Wednesday, the student organization held a Sin Tax Consciousness Parade on UP Diliman grounds to voice out their support for the passing of the Sin Tax Bill. UP ETC, along with students from different organizations such as UP Alyansa, UP Green League and Alpha Phi Beta fraternity, marched around the academic oval of UP Diliman to inform students on the bill currently pending in the Senate. The House will resume hearings on the Bill on Sept. 20.
“We believe there are two issues that the passage of the Sin Tax Bill will answer. Una ang issue ng kalusugan. Alam naman natin na seven out of 10 ng matinding pagkamatay ng mga Pilipino ay dahil sa tobacco-related diseases. More than 200 Filipinos die daily from these diseases. On the economic side, for the past several years matagal nang hindi tinataaas ang tax sa mga produktong ito at ang dami sanang revenue ng government na makukuha na puwede gamitin sa iba’t-ibang sectors,” explained UP ETC president and senior BS Business Economics student Arjay Mercado.
SAVING LIVES AND MONEY
According to reports furnished, the money the government spends on tobacco-related healthcare issues is more than the revenue it gets from the taxes collected from tobacco and alcohol products. This means that the government is spending more to cure diseases — chronic pulmonary diseases, heart disease, cancer, liver diseases etc. — that are caused by the consumption of tobacco and alcohol. “Makakatulong ito lalung-lalo na sa mahihirap. Kapag titignan natin ang monthly expenditures nila, mas mataas pa ang binibigay nila sa tobacco compared sa edukasyon ng mga anak nila,” said Mercado, 19. Mercado said that it is just right to increase the excise tax to these products since they are not basic commodities.
Indeed, if a stick of cigarette costs R5, a smoker who consumes one pack (20 pieces) per day would spend R3,000 a month. For Filipino families who struggle to make ends meet, R3,000 is a lot of money. In the proposed Bill, the part of the revenues collected will go to government health care programs and alternative livelihood projects for farmers in the tobacco and alcohol industries. “What’s unique about this Bill is that 15 percent of the revenues collected will be given to alternative livelihood for farmers. A certain percentage will go to the universal healthcare, which will cater to all not only to tobacco-related diseases, basically healthcare needs ng mga kababayan natin,” Mercado added.
YOUTH CALLED TO ACTION
This youth-initiated action only shows that young people care about this issue, Mercado reiterated. He said that UP ETC has in fact sent its position paper to the Senate regarding the Sin Tax Bill. “Issue din ito ng youth in a sense that we do care about what happens to the Filipino families, to the workers,” he added. In an earlier report, the National Youth Commission (NYC) stated that there is an increase in the number of young smokers in the country. Two of five Filipinos aged 13 to 15 years old consumed tobacco last year. The increase in cigarette prices may thus curb the number of young smokers. “Progressive policy making ‘to, dapat aware ang mga estudyante sa mga polisiya na pinapasa ng gobyerno para hindi sila nagtatanong, sa halip bilang UP student sila ang nageeducate sa mahihirap at sa nakakausap nila about Sin Tax bill.
Kailangan may sariling appreciation from the community and maganda nga ang mga students ang nag spearhead ng education sin tax,” shares UP Alyansa chairperson Ace Ligsay. UP ETC further plans to push the passing of the bill. They will help in the nationwide signature campaign of raising one million signatures in support of the sin tax bill. They also plan to do forums and information campaign on the said bill. “Isa sa mga objectives namin is to raise people’s awareness about issues. We do this para maintindihan ng mga tao ‘yung tinatalakay natin. Hindi lang to influence them but to be informed, kung sasama sila dito, alam nila ‘yung issue, alam ‘yung pinaglalaban. We’d like them to sign the manifesto because we need to collect at least a million signatures. At least may contribution ang youth sector,” Mercado said.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 19 December 2016
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