Sin Tax Reform Bill : Health or Political Issue?

It is no doubt that tobacco maims the health of an individual, the debate continues whether sin tax reform should be enacted to law, it is now up to the concern and the political will of legislators, how they will deal with tobacco products and industries will greatly affect not only the economy but the health sector of the country as well.
Tobacco consumption is one of the leading causes of death in the Philippines. Each year, more than 20, 000 Filipinos die of cardiovascular and lung diseases. Though the society knows what risks and complications cigarettes may bring, many chose to stick with the routine, despite the existing countless campaigns and advocacies in effort to eradicate smoking, the number of smokers still failed to decline, in fact an increase has been reported.

In a pursuit to reduce the number of smokers, the government signed FCTC (Framework Convention on Tobacco Control) a measure of World Health Organization which aims to curb tobacco use, Article 6 recognizes that taxation on tobacco yield increased price of products hence a possible way to reduce consumption of tobacco products. In 2004, the government enacted Republic Act 9334, also known as the “Sin Tax Law of 2004”, sin tax is a tax levied on products which are considered harmful and not seen as neither necessities nor luxuries. Sin tax generates huge amount of revenue and is accepted by the general public because this is only indirect tax that only affect those who use the products.

In 2012, the House passes on House Bill No. 5727, a bill authored by legislator Cavite Rep. Joseph Emilio Abaya, a reform which seeks to restructure the excise tax on alcohol and tobacco products by removing price freeze classification and replacing the four-tier system (tax system where the excise tax for low-priced, mid-priced, high-priced and premium brands varies) with a binary system on which the uniform price rate for all brands is P30. Removal of price class freeze will make even lower tier products more expensive, it also seeks to remove the discriminatory factor in competition among brands.

According to the Action for Economic Reform (AER), the bill will generate P33 billion in new revenues annually. Part of the revenues from the sin tax will increase funds for better health care services; additional revenue will especially help cover the universal healthcare of the poor. The added income will also contribute towards alleviating the smoking-related disease burden that was estimated at P177.2 billion in 2011. Furthermore, with regards to argument of job losses, AER cleared that prices the farmers have been getting for their products have been dropping due to monopoly control of the industry, leading many of them to shift to more profitable crops. To ease transition, farmers will get funds equivalent to 15 percent of incremental tax revenues from tobacco taxes that will be devoted to alternative livelihood projects.

Tobacco Epidemic in the Philippines: Health Impact, Economic Burden and the Poor.

In the latest GATS estimates 30 percent adult smoking prevalence in the Philippines, this is equivalent to approximately 17. 3 million (aged 15 and above) Filipinos who currently use tobacco products. Meanwhile, the use of tobacco products among youth continually increases, the previous record of 27.3 percent increased to 28.2 percent, school children aged 13-15 years old are already smokers. It is said that children as young as five to seven years old are starting to smoke.

In Philippines, it is estimated that more than 20, 000 die every year due to tobacco-related diseases. Majority of these deaths come from chronic obstructive pulmonary diseases and cerebra-vascular diseases. Scientific evidence reveals that smokers suffer from high risks of death from numerous cancers, respiratory diseases and cardiovascular diseases, most common diseases attributed to smoking. Secondhand smoke causes risks to non-smokers; a report pointed out that breathing secondhand smoke even for short time could cause wide range of immediate and long term adverse health effects on respiratory and cardiovascular system.

Smoking-related diseases account for six to eight percent of all deaths. The government shoulders part of the costs for people who cannot afford medical expenses of tobacco-related diseases. The health care costs and the fraction borne by public sector are resources that could have been use to finance other public service or goods. On the other hand, the fraction of health care costs borne by the private sector follows opportunity costs and income losses caused by productivity losses due to sickness resulting from tobacco consumption. These all represent economic burden wherein the expenses for health care and the costs of productivity losses lead to approximately P216 to P461 billion losses in our economy.

Despite poverty, the poor still spend scarce resources on tobacco. In Philippines, a study shows that tobacco consumption as percentage of household expenditure is higher in poorest compared to richer households; the ratio of tobacco expenditure to total income is highest among the poor. Because majority of Filipinos do not earn enough to satisfy their family’s basic needs, money being spent on tobacco products means sacrificing shelter, education or health.


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Tax increases could save lives, prevent diseases and prevent the youth from taking up smoking. Research shows that increase in tobacco prices has resulted in reduction of tobacco use. It was estimated that a ten percent increase in price will reduce demand by about eight percent in low-middle-countries.

It also shows that increasing tobacco tax can be instrumental in preventing the youth from smoking. Youth will more sensitive in changes in cigarette prices relative to adults for several factors. First, it will be easier for the youth to quit for they have been smoking for a relatively short time as compared to addicted adults who have been smoking for years. Second, peer smoking is common on youth thus if one stops smoking because the vice has become unaffordable, others are likely to follow. Lastly, the youth have less disposable income than adults and will be more affected by price increases.

As for the poor, an increase in tobacco taxes will significantly lower tobacco consumption because they are more responsive to price changes. As they reduce consumption of these products, their income can be reallocated to spend for other basic commodities.

Conclusion

Sin tax is considered the single most effective means of reducing tobacco-related deaths and diseases. It also serves as a barrier for the youth to try smoking. The bill is a health measure which aims to curb tobacco use, although it incidentally raises revenue for the government. The tobacco industry and antis argued that the bill will ruin the tobacco industry. But there is no country in the world that encountered economic turmoil or even downfall of a tobacco industry, nor made poor worse off because of tobacco tax increase. There are still other factors to consider in order for the numbers of smokers to decline which includes media and fashion industry’s glorification of smoking and the smokers’ will. The sin tax is the best way to start, though many would argue that it is anti-poor, it is better for the poor to afford medicines than to afford vices.