Gov’t still has room to hike sin taxes — experts

SIN TAX REFORMS have helped generate much-needed revenues to support healthcare programs and curb consumption, but the government still has room to hike taxes on sin products, the Institute for Leadership, Empowerment, and Democracy (iLEAD) said.

“Our findings suggest that there is room for further tax increases on alcohol, tobacco, e-cigarettes, vape, and heated tobacco products, both in terms of reducing the health burden and generating additional revenue,” iLEAD consultant Kenneth Isaiah I. Abante said at a forum on Monday.

“These should be accompanied by stronger tax administration and illicit trade enforcement,” he added.

Republic Act No. 10351 or the Sin Tax Reform Act in 2012 increased excise taxes on tobacco, alcohol, and e-cigarette products. This was to reduce consumption and help finance the government’s priority health programs.

“Sin tax reforms simplified the tax structure and increased rates for tobacco products that made them artificially more affordable to the young and poor,” iLEAD consultant Lyonel Tanganco said.

He cited data that showed that cigarette prices in the country almost quadrupled from 2012 to 2022.

“More Filipinos have attempted to quit smoking because of high prices. We see current smoking among the youth fell significantly,” he added.

However, the absolute prices of tobacco products are still relatively low. “Cigarettes remain affordable. At P100 per pack, it’s P5 per stick. Single stick sales continue to make cigarettes affordable to the population,” he added.

Meanwhile, data also showed that taxes on alcohol failed to raise prices to a level that would discourage consumption.

“Alcohol prices have risen by around 70% from 2012 to 2022 but nowhere near the price increase in cigarettes,” Mr. Tanganco said, noting that alcohol prevalence and binge drinking still remained high.

On the revenue side, sin taxes boosted collections but were not as robust as initially projected.

Total sin tax collections went beyond what was promised, but collections were below what was promised for the first few years for alcohol and below for all years for cigarettes, vape and heated tobacco products,” Mr. Tanganco said.

“Nevertheless, sin tax revenues have tripled as a percent of gross domestic product (GDP). The health budget has tripled over the past decade,” he added.

Latest data from the Department of Finance (DoF) showed that collections from sin taxes amounted to P65.3 billion in 2022, up by 23% from the year earlier.

“Sin taxes are a very important source of revenue for health. As of 2023, sin tax revenues now support nearly 80% of the national health insurance program,” Mr. Abante said.

Sin tax revenues also cover 100% of the medical assistance to indigents program, almost half of universal healthcare program budget, and a quarter of the health facilities enhancement program.

Mr. Abante said these tax reforms helped fund the expansion of health insurance, but the majority of households still lack adequate coverage.

“Quality of care may have improved in some areas but more study is needed to attribute this to sin taxes,” he added.

The think tank also said that there is no sufficient evidence that increases in tobacco tax leads to illicit trade.

“The case of the Philippines affirms that illicit trade cannot be used as an argument against tobacco tax reforms. The country achieved lower smoking prevalence through higher taxes and can achieve lower prevalence with better enforcement,” Mr. Abante added.

Albay Rep. and House Ways and Means Chair Jose Maria Clemente S. Salceda earlier said that the government could lose at least P60 billion in revenue this year due to illicit tobacco.

“Sin tax reforms fulfilled many of its promises. But again, we have a dream of universal healthcare. We still need greater benefits, so every Filipino has access to healthcare,” Mr. Abante said.

He also called for better accountability mechanisms to ensure efficient tax administration. Congress should also be able to exercise oversight and coordinate with government agencies to ramp up monitoring.

“We recommend that civil society lead multisectoral working groups on each of the issues above, who will be tasked to constantly update the evidence, fill in the gaps in research, and publish an annual consolidated report on sin tax reform performance,” he added. — Luisa Maria Jacinta C. Jocson