8 July 2021
Economic think tank Action for Economic Reforms (AER) slammed Ilocos Sur Mayor Chavit Singson for criticizing the recent tobacco-tax increases.
In a radio interview, Singson claimed that Senator Manny Pacquiao should not have pushed for higher tobacco taxes, as high tax rates would “kill the tobacco industry.” “Anything na sobra, masama. Dapat marunong siya magbalanse,” Singson was said to have stated over the program. [Anything extreme is bad. He must know how to balance.]
“We agree with Singson that too much of anything is bad. There are too many Filipino lives lost yearly due to smoking—this is why we need to raise tobacco taxes,” AER economist Arjay Mercado said.
Annually, about 100,000 Filipinos die of tobacco-related diseases, and the economic cost of smoking is estimated to be P210 billion (Dans and Fajutrao, 2015). The economic impact of lost productivity, early death, and disability caused by smoking also impedes our national development. Thus, Mercado claimed that tobacco should be taxed at a high rate to drive up cigarette prices and prevent new smokers, especially the young and the poor, from starting the addictive habit.
Smoking prevalence among adults in the Philippines dropped from 25 percent in 2013 to 19.9 percent in 2019, showing the effectiveness of the series of disruptive tax rate increases.
Mercado addressed Singson’s claim of high tobacco taxes “killing the tobacco industry” by citing the Tobacco Tax Law of 2019, which mandates that 5 percent of incremental revenues from tobacco tax are allocated towards programs empowering the livelihood of tobacco farmers and workers. “If Singson is concerned over the livelihood of tobacco industry workers, it is the local governments of tobacco-growing provinces, like Ilocos Sur, which Singson governs, that are responsible for properly allocating these funds so that farmers are fully supported and can reap the benefits of higher taxes,” Mercado said.
Aside from providing support to tobacco farmers, tobacco tax revenues are also allocated towards funding for universal health care and other health expenditures, which proved to be crucial during this pandemic, according to Mercado. The 2019 Sin Tax Law Annual Report shows that 55 percent of the DOH budget came from sin tax revenues alone.
“As the funding gap for universal health care remains and we expect at least 1,000,000 new smokers by 2022 due to increasing incomes, tobacco taxes need to be raised even further,” Mercado said.