MANILA, Philippines – A new sin tax measure would allow the government to add at least five million recipients or beneficiaries of state health insurance coverage, Budget Secretary Florencio Abad said.
“We can have five million in additional beneficiaries of health insurance coverage,” Abad said.
He said that an additional P60 billion – which is the estimated annual yield from a new sin tax measure – would provide the government more fiscal space.
This would then allow the government to fund more social services and infrastructure projects.
The government expects to earn P60 billion a year from a new sin tax measure seeking to restructure excise taxes on alcohol and tobacco products.
The funds to be raised from the Department of Finance-backed measure would significantly help plug the government’s budget deficit which is estimated to hit roughly P300 billion this year or 3.2 percent of gross domestic product (GDP).
From the current multi-rate specific structure of the excise tax on tobacco and alcohol products, a Finance-backed version of a new sin tax measure aims to create a simpler structure by adopting a unitary rate.
“With a unitary rate, problems attendant to the current structure, such as unfair tax treatment between and among tobacco and alcohol products will be addressed. A unitary rate will lend the tax structure more revenue-productive since it will avoid the shifting of demand to the least-taxed brand of tobacco and alcohol products,” the draft bill said.
Furthermore, the measure proposes a three-year transition period in unifying the excise tax rates on cigarettes and distilled spirits. However, the tax structure for fermented liquor will be immediately unified on the first year of the reform.
More importantly, the measure proposes an automatic adjustment of the tax rates using the tobacco and alcohol indexes established by the National Statistics Office (NSO).
“The adjustment will allow the specific tax rates to track inflation, thus, maintaining the buoyancy of the revenues from this source,” the draft bill noted.
Without a new measure by 2013, the DOF estimates that the government will lose P2 billion to P2.4 billion in additional revenues.
The P2 billion to P2.4 billion represents the additional revenues generated from sin taxes under Republic Act 9334 or the indexation of excise tax on tobacco and alcohol products.
The law, signed in 2004 by then president Gloria Macapagal-Arroyo, called for an eight percent increase in the excise tax rates on tobacco and alcohol products every two years starting in 2007.
The last adjustment takes effect this year, according to the law.
At present, 90 percent of the Philippine tobacco market is controlled by PMFTC, the merged entity of Philip Morris and Lucio Tan-owned Fortune Tobacco Corp.
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By: Iris C. Gonzales
Source: The Philippine Star, Oct. 3, 2011
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