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Point of Law

Sin tax bill: Flagging some constitutional issues

/ 11:11 PM November 19, 2012

The proposed legislation seeking to impose higher excise taxes on liquor and tobacco products, more popularly known as the sin tax bill, is one of the most controversial pieces of legislation that ever crossed the halls of Congress.

One of the main issues is whether the sin tax law should apply a unitary rate on alcohol and cigarette products, regardless of their retail price.

Let us assume, for example, that the unitary rate is P10 and the cheapest cigarette or alcohol brand costs P1 while the premium brand costs P10.  Since the rate is unitary, both classes will be subjected to the P10 unitary rate.


In practical terms, the unitary rate means that the poor man (who will cater to the cheaper brand) will have to pay P11, 91 percent of which is excise tax, while the rich man (who will cater to the expensive brand) will pay P20, only 50 percent of which is excise tax.

In tax parlance, although the absolute value of tax collected is the same, there is a higher burden of taxation on the less fortunate members of society due to the higher percentage of tax relative to their ability to pay.

Some constitutional considerations

Definitely, the government has laudable objectives behind the proposed tax legislation, but given the vigorous opposition to the tax measure, the debate will not likely end up in Congress but in the halls of the Supreme Court.

On its face, the tax measure, in its current form, appears to have discriminatory effect against the poor who will bear the larger tax burden. It appears regressive in nature, and seeks to impose higher burden on those who are in the lower brackets of economic class and status.

As far as I can recall from my law school days, one of the principles of a sound tax system, based on Adam Smith’s Canons of Taxation, is “theoretical justice,” which means that the tax system “should be fair to the average taxpayer and based upon his ability to pay.” (Vitug & Acosta, Tax Law and Jurisprudence, 2006)

Our Constitution now embodies this basic principle of taxation when it expressly provides in Article VI, Section 28, par. (1) that: “[t]he rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.”

Is it equitable to require the underprivileged to pay the same amount of tax as the rich? Is the proposed tax measure really germane to its regulatory objective when the wealthy and their children can continue smoking even with the higher tax rate? Is this not really discriminating against those belonging to the lower-income bracket of the population? Is it not unfair, unjust or oppressive to pass a tax measure that will kill or, at the very least, substantially put at a disadvantage the local tobacco industry, which has been part of the national patrimony since time immemorial?


Is the proposed tax legislation consistent with our Constitution’s “Declaration of Principles and State Policies” to “promote comprehensive rural development” and “develop a self-reliant and independent national economy”? Will it violate the constitutional directive that “all sectors of the country shall be given optimum opportunity to develop”? Will it run against the constitutional objective to have an “expanding productivity as the key to raising the quality of life for all, especially the underprivileged”?

Indeed, in Central Bank Employees Association v. BSP (G.R. No. 148208, 15 December 2004), the Supreme Court said, “If the challenge to the statute is premised on the denial of a fundamental right, or perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict.”

Otherwise stated, statutes that discriminate or disadvantage those of lower economic class and status (like the poor) would be met with strict scrutiny by the courts.

And, when the strict scrutiny test is applied, the challenged measure “is presumed unconstitutional, and the burden is upon the government to prove [1] that the classification is necessary to achieve a compelling state interest, and [2] that it is the least restrictive means to protect such interest.” (Serrano v. Gallant Maritime Services Inc., G.R. No. 167614, 24 March 2009).

Or is the nature of the tax as an excise tax and the regulatory objective of the tax measure (i.e., protect and promote public health) as well as the safeguards that are being contemplated (e.g., 6 Billion Peso subsidy to the tobacco industry) sufficient to make it hurdle constitutional scrutiny?

Whatever it is, I fervently hope that our legislators will act with constitutional prudence and circumspection before finally passing the proposed tax measure into law, lest their gallant efforts to put it in place after all these years will be for naught.

(The author is the co-managing partner and head of the corporate and special projects department of ACCRALAW and a law professor at the Ateneo Law School. He may be contacted at

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