Where to, sin taxes?

Despite all the grim warnings against raising taxes on tobacco and alcohol products, the Sin Tax Law since its passage in 2012 has brought substantial and increased revenues to government coffers, the bulk going to health care and the remaining to tobacco farmers’ welfare.

True, there may still be some illicit tobacco trade going on, and this subsequently somehow reduces total tax collections. Fortunately, our government revenue collection agencies and law enforcers recognize the problem, and are committed to solve this.

Even the warning that high taxes could dampen cigarette and liquor sales significantly, and thereby negate the expected government collections, has not happened. Demand has somehow been dampened, but the significant rise in taxes has more than compensated for dramatically improved collections.

After three years, collections are still rising by double digits. Compared to 2014, revenues from excise taxes collected on tobacco and alcohol products rose 25 percent to P142 billion in 2015 from P113 billion the previous year.

And surprisingly, the bulk of revenues came from cigarettes, up 32 percent to P100 billion, with fermented liquors contributing14 percent or about P28 billion, distilled spirits and compounded liquors accounting for P13.5 billion, and wines up P500 million.

Sin taxes work

The World Health Organization (WHO), which has taken a strong interest in introducing taxation of tobacco and alcohol products in the Philippines as a means towards raising health revenues since over a decade ago, recently released its own assessment of the Sin Tax Law’s effectiveness.

Within the first year, the WHO said, the government had collected more than P500 million. The amount was divided for health care (85 percent) and displaced tobacco farmers (15 percent), as stipulated in the law.

Health care

In 2014, the money was able to provide health care to an additional 14 million families or roughly 45 million Filipinos, according to the WHO. There was also an 82 percent increase in enrollment of the population in PhilHealth, which is higher than the 74 percent registered in 2009.

While victims of non-communicable diseases (NCDs) such as strokes and heart diseases had been the initial target beneficiaries, the law and its implementing rules and regulations do not specify this. The PhilHealth route was expected to do the work, especially since one out of four Filipinos is affected by NCDs.

Somewhere along the line, therein arose problems and issues. While the poor who are enrolled in PhilHealth now have the opportunity to access medication for NCDs, the option to avail of treatment is still low, at less than 50 percent of those affected.

Health advocates say the new system still needs time to sink in so that those who formerly shunned treatment because of fear of the cost would be convinced to enroll in PhilHealth and go to their health center.

Help for tobacco farmers

Allocation of the incremental 15 percent of the collected sin tax funds should go to tobacco farmers that are and will be affected by the law. The number has been estimated at about 54,000 families.

In 2014, the amount that should have been allocated for the tobacco farmers was at P15 billion; disbursement of this money continues to be plagued by ambiguities, although there are general conditions defined in the law and its IRR.

The money is supposed to fund alternative programs for tobacco farmers and workers, including a shift to the production of other agricultural products or commercial crops, financial support for those displaced, infrastructure projects like farm-to-market roads, and agro-industrial projects that will enable them to be involved in the management and subsequent ownership of projects like post-harvest and secondary processing facilities.

Misappropriations

Already, there are charges of “misappropriations,” especially among stakeholders in the health sector who feel the absence of clear directions on how the collected revenues should be used has opened the door for unwarranted purchases that are not related to diseases due to cigarette smoking or excessive liquor indulgence.

Criticism about excessive purchases of drugs from pharmaceutical companies by the Department of Health to treat heart problems have surfaced, and the money wasted since the medicines that reach the local health centers are not used.

More than that, radical medical practitioners say that NCDs need to be seen from a holistic point view, meaning that it needs to be fought at the source. Therefore, more of the funds should promote healthy lifestyles that will prevent NCDs.

In essence, they said, this is what the Sin Tax Law is all about: raising the prices of cigarettes and liquor to make it less affordable to those who are gullible enough to indulge on these health hazards.

With an average of 240 Filipinos dying every day from smoking-related diseases, the sin tax is regarded as an effective measure to prevent young people and those belonging to lower economic classes from taking up such deadly habits as smoking and excessive drinking.

Challenges

Definitely, entering its fourth year of implementation, the sin tax law and the disbursement of the billions of pesos collected from it and allocated to the health sector and tobacco farming community has to be fine-tuned to make it more relevant to the nation.

The universal health care system has room for much more improvements, and the principles of health care need to be made more relevant to the needs of the population.

Similarly, more transparency is urged in the disbursement of funds for tobacco farmers so the money does not end up in the pockets of local government politicians.

Let us not lose this battle in the post-implementation era where the hundreds of billions of pesos collected from sin taxes are misappropriated by devious corrupt people, or ironically, even by well-meaning individuals or groups that fall prey to misdirected objectives and hidden agenda.

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