Smoking prevalence to go down 17% with higher cigarette tax of P60

Simulations developed jointly by the Departments of Finance (DOF) and of Health (DOH) along with the World Health Organization (WHO) indicate that the proposal by Sen. Emmanuel Pacquiao to increase excise taxes on tobacco products to P60 per pack will bring down cigarette consumption by 16.8 percent and lead 3.2 million adults to quit smoking.

Pacquiao’s measure--Senate Bill (SB) No. 1599--is similar to the DOF-DOH proposal of increasing the excise tax on cigarettes, regardless of brand or price, to P60 per pack in the first year of implementation and an additional 9 percent per year thereafter.

Finance Undersecretary Karl Kendrick Chua said during a recent hearing of the Senate ways and means committee on the proposal that simulations show that the threshold in which the cigarette consumption would prove elastic is to tax it “above P73 per pack. This means that incremental revenue begins to fall if the excise tax rate is beyond P73 per pack.”

But Pacquiao’s proposal of P60 per pack would also be beneficial because it would prompt “the youth, the poor and other price-sensitive cigarette users to stop smoking,” Chua said.

Health Secretary Francisco Duque III told senators that evidence shows that the Sin Tax Reform Law of 2012, which raised taxes on alcohol and tobacco products, was effective in reducing smoking among Filipinos.

“The effects, however, have plateaued; making the Philippines the third highest among ASEAN countries in terms of smoking prevalence,” Duque said during the same hearing by the committee chaired by Sen. Sonny Angara.

Duque said results of a simulation exercise developed jointly by the DOH, DOF and WHO estimates that the P60 per pack proposed tax rate will “avert approximately 713,000 deaths, and will result to 3.2 million quitters in adults.”

“This rate will also bring down smoking prevalence to 16.8 percent and help reach our non-communicable disease target,” Duque added.

On top of cigarettes, the DOF and DOH are also asking lawmakers to increase the excise taxes on alcohol and impose a unitary tax system on fermented liquors, which make up the bulk of consumption.

The House of Representatives, however, approved last December excise tax rates for both tobacco and alcohol products that are much lower than the DOF-DOH proposal, which, Chua said, will not be enough to fund the Universal Health Care (UHC) funding gap of around P40 billion.

Chua and Duque, backed by several health advocacy groups, are urging the Senate to approve Pacquiao’s bill, which is estimated to raise incremental revenues of P30.1 billion from cigarette excise taxes to help fund the UHC program.

“The total difference (between the House-approved version and the DOF-DOH proposal) is P244 billion if computations are done up to 2o22, which might undermine the effective implementation of the UHC,” Chua said.

Duque and Chua said that with cigarette prices in the Philippines still the 7th lowest among Association of Southeast Asian Nations (ASEAN) member-countries and with disposable incomes rising, tobacco products still remain affordable even for the poor. Thus, underscoring the need to drastically raise the cigarette excise tax to P60 per pack, Chua added.

“We urge the Senate to support the measures that will achieve the objectives of UHC and ultimately a healthier population,” Chua said.

“The DOH and the DOF have worked towards developing a proposal that would achieve the twin objectives of protecting the public`s health, and at the same time raising sufficient revenues for the implementation of the Universal Health Care,” Duque said.

Pacquiao, in his opening statement during the hearing, said his main objective in filing SB 1599 “is to save lives,” as he cited studies showing the current number of Filipino smokers at around 13 million, which is expected to increase by 1.2 million by 2022.

“Most of the victims are from the youth and marginalized sectors, people who have no means of paying for the harmful effects of smoking,” Pacquiao said.

Pacquiao said adopting his bill would prevent an estimated 850,000 adults from smoking on the first year alone of its implementation.

Moreover, he said “the tobacco tax increase will help raise revenues. Magkakaroon ng funding ang universal health care. Napakalaking tulong po ito para sa pangangailangan sa budget ng ating gobyerno,” he said.