Philippines: World Bank cites success of PH ‘sin’ tax reform

9 October 2017:

The World Bank has cited the Philippines’ sin tax reform as among the “most successful” tobacco taxation that not only shored up revenues but also lessened smoking prevalence in the country.

“The tax reforms in the Philippines are one of the most successful recent examples of tobacco taxation as a win-win policy. The reforms included a five-year plan to merge the four-tier excise system for cigarettes into a uniform system by 2017. The fiscal impact of these reforms has been dramatic, with excise revenue from tobacco increasing by 114 percent in just the first year of implementation—an extra $1.5 billion in revenue,” the World Bank said in a recent report titled “Tobacco Tax Reform: At the Crossroads of Health and Development.”

The World Bank was referring to the implementation of Republic Act No. 10351 or the Sin Tax Reform Law, which came into force in 2012 during the administration of former President Benigno Aquino III.

“The experience generated by the government of the Philippines over 2012–2016 is one of the most compelling examples of ambitious national tobacco tax reform. The Philippines’ experience shows that such a bold reconfiguration of tobacco tax structures can be good for both fiscal and public health,” the World Bank said.

“Tobacco accounts for about 80 percent of the $3.9 billion in additional revenues generated by the Philippines’ tobacco and alcohol tax policy reform in its first three years of implementation. The additional fiscal space created by the reform increased the Department of Health budget threefold,” the World Bank noted.

As such, the number of families whose health insurance premiums were paid by the national government rose from 5.2 million primary members in 2012 to 15.3 million in 2015, the World Bank added.

As for smoking prevalence, the World Bank noted that the implementation of the sin tax reform law reduced the number of smokers to 25 percent of the population in 2015 from 30 percent in 2011.

“Results from surveys also reveal that the number of cigarettes smoked per day decreased from 10 to nine. Reduction in smoking was greatest among youth (18–24 years old), with prevalence dropping from 35 percent to 22 percent from 2012 to 2015. For the wealthiest, smoking prevalence fell from 25 percent to 14 percent, among the middle class it stayed the same at 26 percent, and among the poorest, prevalence fell from 38 percent to 27 percent,” the World Bank said.

SEATCA Publications: Tobacco Tax