Tobacco tax hikes to raise revenues, promote health

TOBACCO TAXATION reforms should be pursued given the government’s aims of raising revenues and fostering public health, a law school and a nonprofit organization said.

“Taxing Health Risks: A Policy Paper on Tobacco Excise Tax and Health Promotion” by the University of the Philippines (UP) College of Law and HealthJustice, is scheduled to be presented tomorrow in the school’s Diliman campus.

“Studies have established a direct link between low prices of tobacco products and the high prevalence of smoking and incidence of tobacco-related disease,” the paper’s authors state in an executive summary provided to reporters yesterday.



“Corollary to this, a higher tobacco price, often due to [an] increase in excise taxes, has been proven to reduce tobacco consumption,” they added.

While policymakers’ objectives would ultimately determine changes to tobacco taxation, the authors said taxation reforms could generate additional revenues of P18-26 billion in the first year of implementation alone and cut smoking prevalence to 23-25% by 2014.

They recommended the following approach:

  • First, removal of a price classification freeze and the trimming of the tax structure to three tiers from four.
  • This should be followed by a further reduction in the number of tax tiers to two, which would have the effect of making cigarettes less affordable to the youth. The tax on medium- and high-priced brands should be raised to P16 from P12 while that for premium brands must go to P29.40 from P28.30.
  • The tax structure should finally shift to a single level and a uniform specific tax of P30 must be implemented for all brands “to compensate for inflation and increases in income and hence, further reduce cigarette consumption.”
  • Taxes should then be regularly increased “by at least a rate that is greater than inflation” over the long term, again to counter higher incomes and the effect of “being desensitized to prices.”

Pointing to the need to specifically channel tax proceeds towards health promotion initiatives, the paper’s authors — the UP College of Law’s Marvic M.V.F. Leonen and Deborah K. Sy, and HealthJustice’s Irene Patricia N. Reyes and Jo-Ann J. Latuja — said tobacco tax funds earmarked for tobacco farming promotion currently exceed the share set aside for health purposes.

They also noted that financing tobacco farming goes against a World Health Organization convention calling for the promotion of alternative livelihoods for tobacco farmers.

Tobacco industry officials were not immediately available for comment.

Finance Undersecretary Gil S. Beltran, in a phone interview, said any proposal regarding excise taxes “should be presented to Congress to be deliberated.”

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