In its efforts to restructure the excise taxes on tobacco and alcohol products, the Finance department is looking at models from other countries who are now enjoying substantial revenue increases on account of the same.
According to surveys by the US-based Tobacco Free Center, higher taxes on cigarettes lead to reduced consumption, especially among the poor and the young, while increasing revenue intake.
“Experience of other countries show that increased taxes on tobacco leads to higher government revenues while reducing tobacco consumption,” said Finance Undersecretary Jeremias Paul, Jr.
In South Africa, every 10% increase in excise tax on cigarettes has been associated with an approximate 6% increase in cigarette excise revenues, even as tobacco use declined. From 1994 to 2001, excise revenues more than doubled as a result of tax increase.
In Thailand, tax increases between 1994 and 2007 raised cigarette excise taxes from 60% to 80% of wholesale price, increasing tax revenue from THB20,002 million in 1994 to THB41,528 million in 2007, even as consumption decreased.
According to surveys by the US Centers for Disease Control and Prevention, a federal tax hike on cigarettes has in fact boosted revenues from $80 billion in 2008 to $98 billion in 2011, even though tobacco purchase fell 11%.
“We cannot maintain the status quo of marginal increase in tobacco taxes. Tax increase have to be significant to deter our youth from starting to smoke,” the finance official said.
Based on a research study by Dr. Antonio Dans of the UP College of Medicine, tobacco-related diseases cost the government P188.8 billion annually, as compared to P26 billion collected from tobacco excise taxes.
“We say this is a health issue just as much as a revenue issue because it is through reforming the tax regime that we can make the poor and the young less vulnerable,” he added.
The Senate’s Ways and Means Committee is set to hold its last public hearing on the proposed sin tax measure on September 20.