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DOF, DOH step up efforts to get lawmakers to hike sin taxes

By: - Reporter / @bendeveraINQ
/ 07:36 PM May 19, 2019
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Finance Secretary Carlos Dominguez III (File Photo by TOTO LOZANO / Presidential Photographers Division)

MANILA, Philippines — With just three more weeks before the 17th Congress officially comes to a close, the Departments of Health (DOH) and the Department of Finance (DOF) are pulling out all the stops to convince legislators to pass bills that will slap higher taxes on cigarettes and alcoholic drinks — or so-called sin products.

After reviving last week the 1990s anti-smoking mascot “Yosi Kadiri” and launching an ad with no less than the “Pambansang Kamao,” Sen. Manny Pacquiao, week, Health Secretary Francisco Duque III and Finance Secretary Carlos Dominguez III also reminded the House of Representatives and the Senate that it was President Rodrigo Duterte himself who gave the marching orders to hike excise taxes on tobacco and alcohol products.

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For Duque, “it’s time for another round” of increases after the Sin Tax Reform Law of 2012.

‘Warning sign’

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Dominguez noted that, while smoking prevalence declined to 22.7 percent in 2015 from 29 percent in 2012 thanks to higher excise taxes, the rate inched up to 23 percent in 2018 — “a warning sign,” according to the head of the Duterte administration’s economic team.

“With the rise in incomes and slower rise in tobacco taxes over the past few years, tobacco has again become affordable to the youth and the average Filipino. The deterrent effects of the original excise taxes have been eroded. If we do not regularly update the rates to address this reality, we run the risk of reversing previous gains,” Dominguez warned.

As for alcohol, the 2012 law was a failure, as Dominguez said it “did not raise excise taxes to the level that both fiscal and health authorities deemed ideal.”

“As a result, prevalence of binge drinking among regular consumers continues to rise. The deterrent effect of sin tax on alcohol products has not been achieved,” the DOF chief said.

Duque said members of the Cabinet and the President support the plan to further jack up sin taxes, while citing a recent Pulse Asia survey showing that three out of every four Filipinos supposedly agreed to raise cigarette taxes in particular.

Given the crunch time, the DOH chief urged: “Tapusin na natin ang boxing, ‘ika nga.”

[Let’s finish the boxing match, as they say.]

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‘Urgent instructions’ to raise taxes

Dominguez revealed that after a recent Cabinet meeting, the DOH and the DOF were “given clear and urgent instructions — tax alcohol and tobacco at higher rates than current levels and fund universal health care beginning this year.”

“The entire Cabinet has recommended swift passage of Senate Bill (SB) No. 1599 of Senator Pacquiao. The President also agreed to certify the senate bill as urgent. With three session weeks left after elections, we urge Congress to give due priority to this reform,” Dominguez said.

“Approve the Senate version in the bicameral conference and ratify it immediately. Quality health care is not free — it costs huge sums of money. It will not be sustainable if we do not create the means to fund it. This does not require a complex algorithm — it’s simple arithmetic: tax cigarettes at P60 per pack and alcohol at P40 per liter at least,” Dominguez added.

Asked if they were confident that Congress would heed their call, Duque replied: “It’s very difficult to second guess the minds of legislators. But we hope and pray they see the light of day and really support the President’s legacy for the Filipino people — not only to pass universal health care and implement this, but also address the funding gap. Well-meaning senators and representatives share this well-meaning sense of legacy with the President. It’s for our people.”

Congress should take cue from results of elections

For Dominguez, the recent midterm polls showed how President Duterte’s endorsement — or lack of it — make or break a national candidate’s chances to win elections, thus the need to follow the President’s marching orders.

“The House and the Senate are really the representatives of the people and they are elected directly by the citizens. And I think they know how to read what has happened recently — the national candidates that the President endorsed all won except for one,” Dominguez said.

“I think, as representatives of the people they should recognize that the will of the people is affirming the leadership and the programs of President Duterte,” he added. “I believe the House and the Senate will take that into consideration and come to the conclusion that the bill that he will designate as urgent will be passed.”

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the unitary cigarette excise tax had already risen to P35 per pack since July last year.

Also last year, the House of Representatives approved on third and final reading higher excise taxes on tobacco products — but only to P37.50 per pack starting July this year, before further increasing to P40 in July 2020, P42.50 in July 2021, P45 in July 2022, and by 4 percent annually starting July 2023.

In the Senate, there are three pending bills aimed at jacking up the excise tax on cigarettes to between P60 and P90 a pack this year, one of which was sponsored by Pacquiao.

In the case of alcoholic drinks, the House-approved levels are also below the original proposal of the DOF.

Dominguez said the revenues to be generated by the House bills would “hardly make a dent on the funding gap.”

Duque said the DOH and the state-run Philippine Health Insurance Corp. (PhilHealth), which administers the national health insurance program, need a total of P258 billion next year to implement the Universal Health Care Law recently approved by the President, and higher sin taxes were going to be its main source of funding.

Funding gap

Without sin tax reform, there will not only be a funding gap for universal health care but also a possibility of ballooning costs to be shouldered by the government for its citizens’ alcohol- and tobacco-related diseases, Dominguez warned.

“Our estimate showed that in 2020 — the first year of implementation of the universal health care —  government will raise about P195 billion for this program. Without sin tax reform, the program will be left with a funding gap of around P62 billion,” he said.

“From 2020 to 2024, all current sources of government funding can cover around P200 billion annually or a total of P1 trillion, while the cost of the universal health care program will continue to grow to as much as P1.44 trillion

Without sin tax reform, the cumulative funding gap by 2024 will stand at P426 billion or about one-third of the total cost,” he added.

Dominguez said funding for universal health care can only be sufficient if it will be Pacquiao’s SB 1599 that is passed into law.

“If SB 1599 is not passed, then we cannot fully implement the universal health care program. There will be gaps — either not enough people will be served, or all people will be served but not all the requirements,” Dominguez said.

No Plan B

Asked if he was optimistic that the Senate can convince the House to adjust rates to the level of the DOF and Pacquiao’s proposal, Dominguez reiterated: “They are representatives of the people, and I think they are very keen on seeing the results of the people’s will. And a few days ago the people spoke freely and very definitely that they support the President’s candidates, they affirmed his leadership, and they support his programs—and this [universal health care] is his program.”

Pressed further what the DOH and the DOF would do in case the 17th Congress lacked time to pass their proposal, Dominguez replied: “We don’t have a Plan B — this is the only plan. And it is ready to be passed.”

“Sin taxes are not whimsical impositions of greedy governments,” he said. “In other countries, tax on tobacco products account for 70-75 percent of retail prices. If we get the rates correct, taxing sin products works.”

Meanwhile, Dominguez told reporters that the government was urging tobacco industry stakeholders, especially the farmers, to instead plant other crops to sustain their livelihood.

Asked how the government intends to support the “dying” tobacco sector, he replied: “Dying? That’s what we want, we want to kill it.”

“if you’re not producing a [good] product, you should not do it. I mean you can plant corn, you can plant vegetables. Have you been to the tobacco area? I have, and it’s actually good land. The land can be used for many other things: corn, sorghum, fruit trees — those are better products,” he said.

(Editor: Alexander T. Magno)

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TAGS: 17th Congress, Carlos Dominguez III, DoF, DOH, Francisco Duque III, Rodrigo Duterte, sin taxes
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