Yellow Pad

The bill to substantially increase the tobacco tax has gained momentum. President Rodrigo Duterte and the Cabinet have certified as urgent Senate Bill 1599, sponsored by Senator Manny Pacquiao, which will increase the current rate of tobacco tax from P35 to P60. Senators JV Ejercito and Wyn Gatchalian have filed separate bills that have higher tobacco tax rates than the Pacquiao bill.
The clamor or support for this measure is driven by the goal to save the lives of Filipinos and reduce the economic burden brought about by tobacco-related diseases. According to a study conducted by Antonio Dans et al., spending for four smoking-related diseases alone, namely lung cancer, chronic obstructive pulmonary disease (COPD), coronary artery disease (CAD), and cardiovascular disease (CVD), amount to P210 billion annually. The costs are incurred from health care, productivity losses and premature death losses.
Further, Action for Economic Reforms (AER) projects half a million (0.56 million) new smokers next year if the current tobacco tax rate is not raised at the level proposed by Senator Pacquiao. This figure is equivalent to 1,540 new smokers as each day passes.
In terms of revenue, government can generate in 2019 the amounts of P41.2 billion (Pacquiao bill), P55.48 billion (Gatchalian bill), and P82.20 billion (Ejercito bill). In short, a huge tobacco tax increase will serve two primary purposes — discourage people from smoking and generate revenue to fund the Universal Health Care (UHC) law. Without the increase of taxes in tobacco and alcohol, we expect a funding gap of P128 billion for UHC.
The House of Representatives passed House Bill 8677 that features a measly increase of P2.50 per pack. (Barya, which is woefully deficient to save lives!) This will result in 0.41 million more Filipino smokers in 2019 alone or 1,131 new smokers daily.
But there is still hope. The Senate has a chance to nullify the House bill by passing a much higher tax rate. As mentioned earlier, the three Senate bills which will increase the current rate of tobacco tax per pack from the current P35 to P60 (Pacquiao bill), P70 (Gatchalian bill), or P90 (Ejercito bill). The figure here provides the data on how the Senate bills can have a big impact on health and revenues.
Health and Revenue Impact of Proposed Bills
At the minimum then, a Senate counterpart bill that will impose at least P60 per pack is necessary to meet the desired health and revenue goals. In fact, both the Departments of Health and Finance have raised the bar by declaring that P73 per pack is the optimal tax rate, or the “sweet spot.”
Senator Sonny Angara, the Chair of the Ways and Means Committee, has made a commitment that the Committee Report will endorse a rate that will sufficiently fund the UHC and will reduce smoking prevalence. We do hope that this corresponds to the rate endorsed by the Department of Finance, Department of Health, the medical professions, the economists and technocrats, and other civil society organizations.
The challenge is to have the bill passed after the midterm elections, given that the window of opportunity has become narrower.
Senator Angara is the key person to have the tobacco tax increase passed in the Senate. In truth, the Senate deliberation on the tobacco tax has been slow, leading to the fear that the bill is being killed.
Senator Angara is seeking reelection, and he is aware of the popularity of the tobacco tax. In this critical period, he will be put to test. He has professed himself to be a long-time health champion, even using #AlagangAngara as his campaign promise. True enough, Senator Angara has co-authored pro-health bills such as the National Integrated Cancer Control Act, Mental Health Act of 2017, and even the Universal Health Care Act, the success of which is contingent on the increased tax rates for tobacco and alcohol.
It is expected of him to support the increase in the sin taxes. To break his commitment will be a big blow to his reputation and credibility.
But by resisting the influence of industry and vested interests and asserting the high rates for sin taxes, the senator and his #AlagangAngara will be remembered not just as a campaign promise but as an enabler of Philippine comprehensive health reforms.
Rio Dayao is an advocate for youth empowerment and works currently as a researcher of Action for Economic Reforms.