The Departments of Finance (DOF) and of Health (DOH) are making a final push for the outgoing Congress to further raise ‘sin’ taxes on tobacco and alcohol to close a cumulative funding gap estimated at around P426 billion over the next five years for the full and proper implementation of the Universal Health Care (UHC) program.
Finance Secretary Carlos Dominguez III said at a joint press briefing with Health Secretary Francisco Duque III that the approval by the 17th Congress of higher excise taxes on tobacco and alcohol products will provide the government with the means to curb vices and undesirable behavior, while at the same time generate the revenues necessary to fully fund the UHC, which will require as much as P1.44 trillion combined from 2020 to 2024.
President Duterte signed the UHC program into law last February to ensure a better, healthier life for Filipinos, which is in step with his agenda to build a healthier nation and improve living standards nationwide.
Duque said at the joint media briefing that the reforms provided under the UHC Law will ensure health insurance coverage and expand benefit packages particularly for outpatient consultation and outpatient medicines for all Filipinos.
But government funds are not enough to fulfill the financing requirements beginning 2020. Thus, the urgent need for the Congress to write a new “sin” tax reform law.
Dominguez said that from 2020 to 2024, all current sources of government funding can cover UHC at around P200 billion annually, while the cost of the program will continue to grow to as much as P1.44 trillion during the same period.
In 2020—the first year of UHC’s implementation—the program is estimated to cost P258 billion, which the government can cover from its current funding sources from the national budget, the Philippine Amusement and Gaming Corp. (PAGCOR) and the Philippine Charity Sweepstakes Office (PCSO) in the amount of P195 billion. Without “sin” tax reform, UHC will be left with a funding shortfall of around P62 billion, Dominguez said.
The new set of excise tax rates jointly proposed by the DOF and DOH backs the proposal of Sen. Emmanuel Pacquiao under Senate Bill (SB) No. 1599 to increase the current uniform excise tax rate on cigarettes and other tobacco products from P35.00 to P60 per pack in the first year of its implementation and an additional 9 percent per year thereafter.
Aside from tobacco products, the DOF and DOH are likewise asking the Congress to increase excise taxes on alcohol to at least P40 per liter and impose a unitary tax system on fermented liquors.
Without adjusting the current ‘sin’ taxes to at least the rates proposed by Pacquiao, Dominguez said the cumulative funding gap by 2024 will reach P426 billion.
“If we do not establish new sources of revenue, we will not have enough funds to properly, fully implement Universal Health Care and ensure a better quality of life for all Filipinos,” Dominguez said.
Without a new sin tax reform law and at current premiums, members of the Philippine Health Insurance Corp. (PhilHealth) will continue to be covered for only 18 primary care drugs and seven conditions while shouldering 90 percent of the cost of prescribed medicines.
But if the current Congress gets to pass the law before it adjourns in June, PhilHealth coverage will expand to cover 120 drugs and there will be no limit on primary care treatment.
The DOH has also proposed that medicine purchases will be limited to a fixed fee—the cost of the transaction alone. These are some of the specific benefits that Filipinos will receive under UHC if fully implemented.
“The DOF and DOH have presented the facts on this issue to the President and the Cabinet. We were given clear and urgent instructions: tax alcohol and tobacco at higher than current levels, and fund UHC beginning this year,” Dominguez said.
Dominguez recalled that President Duterte urged the Congress in his 3rd State-of-the-Nation Address (SONA) last year to approve both the UHC and ‘sin’ tax increases, and subsequently agreed to certify Pacquiao’s bill, with the Cabinet recommending the swift passage of this measure.
Dominguez thanked Senators Pacquiao, JV Ejercito and Sherwin Gatchalian for championing significant increases in ‘sin’ taxes, and Sen. Juan Edgardo Angara for moving this reform measure forward in the chamber as chairman of its ways and committee.
“We urge both Houses to give due priority to this reform. Approve the Senate version in the bicameral conference and ratify it immediately,” Dominguez said.
Duque noted that with only three session weeks remaining in the 17th Congress “there is still time to collectively take action.”
“We look forward to the support of our counterparts in the legislature, during this crunch time. This is the final round, tapusin na natin ang boksing,” Duque said.
The 17th Congress will resume session on May 20 up to June 7 before its sine die adjournment on June 8 to make way for the new set of lawmaker-members of the next Congress that will open on July 22.
Dominguez said that if the government fails to significantly raise excise taxes on tobacco and alcohol, the UHC program will begin with both a funding gap and the prospect of ballooning costs arising from alcohol and tobacco-related diseases.
“Sin taxes are not whimsical impositions by greedy governments. Such taxes are carefully calibrated according to the social costs incurred by consumption of certain products,” the Finance chief said.
Duque, for his part, reminded the public that sin taxes are “first and foremost a health measure” and need to be raised to the levels necessary to fulfill the Duterte administration’s twin goals of keeping all Filipinos healthy and providing the sick quality and affordable health care so that the Philippines will emerge as among the healthiest countries in Asia by 2040.
“This is not rocket science. When the prices of cigarettes and alcohol are higher, it is harder, especially for the youth to buy these very harmful products. We can only reduce consumption by making these ‘sin’ products less affordable to consumers,” Duque said.
Both Dominguez and Duque noted that the rise in incomes and slower increases in “sin” taxes over the past few years have made cigarettes and alcoholic drinks affordable to the average Filipino, which, in turn, has increased anew the number of smokers, especially among the youth, and made binge drinking more prevalent.
Raising tobacco taxes in in 2012 succeeded in reducing smoking prevalence from 29 percent during that year to 22.7 percent in 2015. However, smoking has gradually been on the rise, reaching 23 percent in 2018.
With the 2012 “sin” tax law failing to increase taxes on alcohol products, the prevalence of binge drinking among regular consumers continues to rise.
“The deterrent effects of the original excise taxes have been eroded,” Dominguez said.
He warned that if the government is unable to regularly update “sin” tax rates to correspond to the increasing purchasing power of consumers, “we run the risk of reversing previous gains.”
Duque, meanwhile, warned the public that the failure to increase “sin” tax rates now will put the lives of 250,000 Filipinos at risk every year.
He said revenues gathered from “sin” taxes provide the much-needed financing to help reform the health sector, deliver PhilHealth coverage to poor Filipinos, scale up the DOH’s non-communicable disease (NCD) prevention services, and extend aid to the country’s tobacco farmers.
With the UHC program, the blueprint for reforming the Philippine health system is now in place, Duque noted, but the government needs to “secure sufficient and sustained resources to ensure that the health system will be set up and transformed as envisioned in the next 10 years.”
Duque noted that increasing taxes on ‘sin’ products are what the Filipino people want, as shown by the results of a Pulse Asia survey conducted in March.
The results revealed that 75 percent, or 3 out of every 4 Filipinos, support the move to increase tobacco taxes and more than half of current smokers surveyed also backed higher tobacco taxes.
Dominguez and Duque said the UHC program was designed to be at par with the world’s best healthcare systems, but it would not be sustainable should the government fail to create the means to adequately fund it.
“Quality healthcare is not free—it costs huge sums of money.” Dominguez said. “This does not require a complex algorithm. It is simple arithmetic, and we have already done the calculations for you: tax cigarettes at 60 pesos per pack and alcohol at 40 pesos per liter, at least.”
Duque said that over the last eight months, the DOF and DOH have gathered the support and approval of their joint proposal on the ‘sin’ tax hikes from the President, the Cabinet, medical community, civil society and members of both chambers of the Congress.
He called on the Senate, where the proposal on “sin” tax increases is pending, to conclude the discussions on these measures so that a new tax reform law that would impose rates adequate enough to help fund the UHC program could be approved by the Congress.