Sin Tax in the Philippines Essay Example

could dissuade around 2 million young individuals from taking up smoking and motivate approximately 1 million adults to quit smoking, despite some smokers voicing strong dissatisfaction with the sharp increase. Critics argue these tobacco taxes are just a strategy for governments to increase their revenue at the cost of personal liberty - a typical example of an oppressive "sin tax," a term commonly used for additional fees imposed on common vices like alcohol use, gambling, and smoking.

The execution of the sin tax is a renowned approach. In order to support his luxurious lifestyle during the early 1500s, Pope Leo X applied this tactic by imposing taxation on legalised prostitutes. Additionally, Peter the Great capitalized on Russian pride two centuries later by introducing a beard tax for men. American statesman Alexander Hamilton suggested in the Federalist papers an excise tax on alcohol with aims to increase revenue and reduce its usage. This recommendation was enacted in 1791 and led to the Whiskey Rebellion where infuriated settlers from Pennsylvania initiated a revolt that had to be quelled by federal troops.

In the U.S., cigarette taxation has been a common practice since the Civil War era, although these taxes are typically lower than in other countries. The latest increase, supported by a President who's trying to give up smoking, emerges as states grappling with economic issues consider taxing items like pornography and marijuana to enhance their revenue streams. While tobacco tax generally garners public support, recent attempts to impose sin taxes have encountered obstacles. This might suggest that partaking in vices could offer some comfort during difficult times.

2. History of the Local

Area

Corazon C. Aquino, only a few months into her presidency of the Philippines, enacted Executive Order No. 22 on June 25, 1986. This legislation elevated tax duties on items including cigars, cigarettes, and all types of alcoholic beverages to conform with international tax standards where taxes constitute approximately half the retail price (Aquino 1986). For example, employing an exhaustive ad valorem approach where the tax was about 50% of the non-taxed wholesale selling cost (De Leon 1983; Matic 1973,2; Yoingco 1985,50) resulted in alcohol taxes rising from sixty-nine centavos (P0.69) to one peso per bottle. The revenues obtained from tobacco and alcohol were termed "sin taxes", reflecting that these commodities were viewed as "sin products". It's clear that Executive Order No.22 was predominantly economically motivated - this choice to impose stricter taxes was primarily influenced by economic considerations.

Upon assuming the role of President, Aquino was confronted with a country on the brink of economic disaster, needing immediate fiscal stimulation for its recovery. The necessary funds were raised by applying new taxes to tobacco and alcohol items. It was anticipated that by year-end 1986, the cigarette industry alone would contribute an additional P2.9 billion, and beer and liquor companies would generate an extra I750 million (Yoingco 1985, 50). Although not directly stated, it can be deduced that these laws also sought to change consumer behavior by escalating prices for such detrimental and non-essential "sin products".

Specifically, policymakers were of the opinion that by increasing the costs of tobacco and alcohol, they could steer people's expenditure away from detrimental habits such as smoking and drinking towards healthier and economically advantageous pursuits.

These encompass saving or investing in essential needs like food, healthcare, and children's education.

The tacit social objective of Executive Order No. 22 appears substantiated by the research evidence on how Filipino families spend their money. A comprehensive study conducted nationwide over nineteen years (1957-75) by the Fund for Assistance to Private Education (FAPE) reveals sizable spending on tobacco and alcoholic beverages, making it the third largest expense for these families. In stark contrast, expenditures for children's education consistently remained at the bottom – the seventh place – throughout the period of study (Dumlao and Arcelo 1979, 71-89).

It's not unexpected that the most notable expense categories were identified as food, clothing and shelter (Dumlao & Arcelo 1979, 71-89). The considerable part of the family budget allocated to food and clothing makes sense. However, it's perplexing why a significant chunk of families' income goes to cigarettes and alcohol (Dumlao & Arcelo 1979, 71-89). Despite education being highly valued in the country, it's quite odd and illogical for its spending to be seen as a low priority in household budget distribution. Additionally, only surpassed by the U.S., the Philippines ranks second globally concerning school-aged population attending school (Hunt 1966).

The FAPE research indicated a concerning trend that lower-income groups were seen to allocate a bigger share of their earnings towards alcohol and tobacco. This habit was prevalent across all the regions under study (Dumlao ; Arcelo 1979, 71-89). The expenditure patterns of Filipino families have largely remained constant over time. As per the National Census and Statistics Office data from 1985, just 2.1 percent of a Filipino family's income was spent on medical

requirements such as doctor's fees, medicines, and hospital charges. On the other hand, they dedicated a higher percentage - at 3.4 percent for buying tobacco and alcoholic beverages (Casayuran 1991, 9; Carlos 1987; Alparce 1986, 11). This signifies that out of every P100 pesos earned by a Filipino family, only P2.10 is utilized for health-related needs while an amount of P3.40 goes towards consuming tobacco and alcohol (Carlos 1987).

The statistics reveal the affinity of Filipino families towards alcohol consumption and smoking. In the year 1987, it was noted that national beer intake amounted to eight million hectoliters (Alparce 1986, 11), which equates to nearly 2.3 million bottles of beer. If we break this down per bottle based on the price of beer in 1987, it indicates that these families spent close to P14,950,000 solely on beer. Besides locally produced alcoholic beverages, information on the volume and expenditure of imported liquor underscores a noticeable inclination among Filipinos for foreign alcoholic drinks as well - mirroring their fondness for local ones too. For example, during 1987 itself, the Philippines registered an average import value worth P3 million specifically for liquor (Carlos 1987).

The initiative to elevate the tax burden on tobacco and alcohol merchandise largely stems from the grave health risks associated with smoking and drinking. Research conducted globally has substantiated a substantial association between smoking and serious health complications (Cruz 1987,7). Dr. Judith McKay of the World Health Organization provides an illustrative example, predicting that deaths attributed to cigarette consumption will hit "at least two million Filipinos" by the end of this century. Given these significant health threats linked to smoking, Dr. McKay

suggests a tax increase on tobacco goods as a strategy to discourage its consumption and protect public well-being (Cruz 1987, 7; Rodriguez 1987, 1, 13).

B. Definition of Operations

'Sin tax' is a term that denotes a particular kind of sumptuary tax levied on products and services commonly viewed as harmful or unsanctioned by societal norms. This includes substances like tobacco and alcohol, sugary indulgences such as candies, drinks such as sodas and coffee, quick-serve food offerings, and activities synonymous with addiction like gambling.

The condition of being trapped in a particular behavior, routine or dependency on something, like drugs, which is either psychologically or physically addictive to a point where terminating it results in extreme distress. 3. Cigarette

A cigarette is a device for smoking that consists of finely cut and aged tobacco formed into a thin cylinder. It's notably smaller than a typical cigar and is wrapped in thin white paper. In the sphere of alcoholic drinks, 'liquor' denotes those derived from distillation procedures like whiskey or brandy, as opposed to fermented varieties such as wine or beer. The word 'Alcohol' applies to inebriating beverages containing this substance including whiskey, gin, vodka among others.

II. Backing Information

2. Participating in harmful activities such as smoking cigars and drinking alcohol can lead to adverse health effects. These behaviors are often interpreted not only as a penalizing charge but also as an intended tax to fight diseases like cancer. Specifically, the threat that smoking presents to our health is primarily due to Nicotine, one of its key components. This alkaloid comes from the nightshade plant family

(Solanaceae) and it acts both as a stimulant for nicotinic acetylcholine and a blockage for monoamine oxidase. In addition to increasing blood pressure and heart rate, Nicotine intensifies the harm by prompting dysfunction of venous endothelial caused by smoking.

Nicotine can instigate abnormal proliferation of vascular endothelial cells, a trait similarly seen in atherosclerosis. It has the ability to trigger potentially harmful genes in human coronary artery endothelial cells. While nicotine's impact on nicotinic acetylcholine receptors (nAChRs) could lead to harm in microvascular systems, other factors are likely involved as well. Currently, male adolescent smokers aged 13 to 15 constitute 28.3%, whereas females make up 17.5% among Filipino adolescents who smoke. Furthermore, out of an estimated adult smoking population of around 17.3 million nationwide, males account for nearly 47.6%, while females comprise only about 9%.

Smoking and long-term exposure to secondhand smoke are the primary causes of lung cancer, which is the most common type of cancer in Filipino men. The World Health Organization states that 71% of global lung cancer deaths can be attributed to tobacco use and it may be associated with as much as a quarter of all cancer cases. Remarkably, in the Philippines, there is one death from lung cancer every hour. Furthermore, almost half of the country's male population are regular smokers.

The expected surge in male lung cancer cases in the future is not surprising. There could also be a rise in occurrences among females due to their contact with second-hand smoke. This impending health disaster may result in premature deaths, potentially leaving numerous children parentless. The upcoming medical crisis might also place massive financial strain

on the healthcare system of the Philippines, including expenses for chemo and end-of-life care which could run into billions of pesos. Additionally, this health calamity has the potential to deplete funds reserved for universal healthcare services. Given the seriousness of this predicament, it's vital to focus on prevention methods.

The 2008 research findings showed that cancer accounted for 11 percent of total deaths in the Philippines. Without preventive actions, the mortality rate from this disease could surge, leading to a possible health crisis and multiple premature deaths among those still in their working years. A single puff of cigarette contains roughly 4,000 chemicals, with around 60 identified as carcinogenic1. Unfortunately, our indifference persists even though these lethal substances are legally accessible to everyone. The easy availability and affordability of tobacco associated with death, sickness, addiction and self-destruction is alarmingly worrisome.

The Philippines faces a major issue with tobacco consumption, which is responsible for approximately ten fatalities every hour. This harmful habit is associated with lethal health complications like heart attacks and stroke. The annual death toll from cigarette smoking stands at around 87,600 (or about 240 daily), surpassing other health threats such as obesity, high cholesterol levels, hypertension and diabetes. The country's extensive tobacco farming also contributes to its ranking among the nations with the greatest smoking prevalence in the Western Pacific Region. Disturbingly, nearly one-third (31%) of Filipinos are either current or ex-smokers according to the 7th National Nutrition and Health Survey II (NNHeS II, 2008) data; this represents an estimated total of 25 million adults aged over 18.

The Global Adult Tobacco Survey in 2009 (GATS) revealed that over 17

million Filipinos aged 15 and above are smokers. It's distressing to note that seven of the top ten causes of death in the country are related to smoking. When we look specifically at four diseases - lung cancer, cardiovascular diseases, coronary artery disease, and chronic obstructive pulmonary disease - all tied to tobacco use, it becomes evident that an economic burden between 218 and 416 billion pesos annually is incurred due to medical costs and loss of productivity. The Southeast Asia Tobacco Control Alliance (SEATCA) suggests a solution: raising tobacco prices by 70% could potentially reduce global deaths caused by smoking by up to one quarter. Additionally, it's crucial to acknowledge that alcohol consumption also poses health risks as it increases the likelihood of various types of cancer affecting organs like liver, pancreas, rectum, breast, mouth among others along with other parts of the body such as heart and kidneys.

2. The incidence of accidents will be reduced. Alcohol is a key contributor to accidents and unintentional harm. Studies have shown that the existence of alcohol in one's system can escalate the severity of accident-induced injuries1. Hence, because of these factors, the consumption of alcohol is typically tightly controlled in connection with the running of transport systems and other safety-critical settings and ventures.

Global research indicates that alcohol plays a substantial role in unintentional mishaps, which take place at residences, on roads, at work sites and during leisure activities. It is recognized as a factor contributing to events like falls, crashes, blazes and near drownings. For example, an investigation in Frankfurt showed heavy alcohol consumption was involved in 23 out of 43

deadly fall incidents (which equates to 53.5%). Accidental deaths from alcohol overdoses are relatively prevalent as well. The estimated share of fatalities involving individuals who have consumed alcohol ranges from 35-63% for falls, 21-47% for drowning occurrences and 12-61% for burn-related injuries; lesser percentages are reported for non-lethal accidents.

The application of the SIN TAX could potentially decrease incidents of accidents. Research shows that alcohol consumption is a primary factor in many recent accidents. It's not rare for people under the influence of alcohol to get behind the wheel, leading to car crashes. Moreover, instances of violence caused by alcohol resulting in injury or loss of life are not uncommon. In certain cases, those suffering from depression may turn to alcohol and tragically contemplate suicide. These scenarios occur due to how alcohol affects judgment and decision-making skills. Concerning smoking, its decline as a result of the SIN TAX could reduce rates of disease transmission linked with tobacco use, possibly leading to fewer overall smokers.

There will be limitations on the consumption of tobacco and alcohol among individuals. Instead of wasting money on these items, it is expected that people will spend their money on essentials. If prices increase, they are likely to focus more on buying necessary commodities like food, clothes, and water. The Philippines offers some of the cheapest prices for cigarettes (and alcohol) in Asia which makes them easily accessible to low-income groups and youngsters. Unlike many other Asian countries, in 2007, the Philippines had the highest per capita cigarette usage along with some of the lowest cigarette prices and minimal taxes.

4. Health issues related to lifestyle choices do

not discriminate on the basis of socio-economic status, however, they tend to affect economically deprived individuals more significantly. This trend is especially observable in the Asean region where a higher propensity for smoking exists among those with lower financial capabilities, resulting in substantial medical expenses over time due to their unhealthy habits. These people often allocate more funds towards tobacco consumption than they do for education, clothing or even healthcare. 4.In addition, such circumstances may lead to increased air pollution.

Air pollution can be worsened by the smoke from cigarettes. The toxins emitted from smoking not only damage the ozone layer, but also impact various forms of life including plants, animals and especially humans. Passive smoking refers to non-smokers inhaling smoke that a smoker exhales, which could potentially be more harmful than active smoking itself. If the primary smoker suffers from lung-related issues, it significantly increases the likelihood of passive smokers developing similar health problems. Such factors may eventually result in halting the production of cigars and alcoholic beverages.

The high costs of the company's products could lead to reduced purchases, resulting in a drop in sales and profits. This could potentially spark a financial downturn, leading to the possible closure of the business.

Summary: Governments have, for many years, relied on the revenue generated from indirect taxes levied on consumer goods. Items categorized as 'harmful', such as tobacco and alcohol, typically attract considerable taxes. Suggestions to impose more taxes on unhealthy food items and sugary drinks have also been made, along with establishing a minimum price for each unit of alcohol.

Frequently, proponents and law-makers use large amounts as the

'taxpayer's burden' for certain commodities, yet these claims are devoid of economic basis. These figures largely originate from research involving 'expenses' that aren't monetary or borne by taxpayers. Such 'expenses' take into account theoretical computations of the value of a life-year lost, potential income forfeited due to premature death, and consumer expenditure on the item under discussion. These numbers tend to be exaggerated; however plausible they appear, they shouldn't justify sin taxes because these 'expenses' affect only the individual concerned and aren't shouldered by the taxpayer.

A prevalent perception exists suggesting that consumers of 'hazardous' products impose an excessive strain on public resources, particularly healthcare. This notion advocates for additional taxes to discourage the use of such harmful items and offset any supplementary costs incurred by the government. Nevertheless, this argument has its flaws. Strong evidence suggests that smokers and obese people tend to place less pressure on public services compared to non-smokers and healthy individuals. These groups typically have shorter life spans which leads them to utilize fewer pensions, prescription services, nursing homes and other entitlements. Consequently, their overall health-related expenditure is often lesser than those maintaining a 'healthy lifestyle'. Hence, if the actual objective of public policy is ensuring users bear their own expenses, taxing products like fruits and vegetables might be more fitting.

Alcohol's case differs from that of tobacco and so-called 'unhealthy' food because it has extra external impacts like violence, drunk driving, and property destruction. The social costs associated with alcohol use and drunkenness likely outweigh any advantages or savings. However, the current alcohol taxes effectively compensate for these expenses, resulting in a surplus valued at billions of

pounds. Similar to how smokers economically subsidize non-smokers, those who consume alcohol financially support those who don't indulge in drinking.

Sin taxes, utilised as social engineering tools, frequently fail to capture the attention of their intended audience while unintentionally leading to harmful consequences for health, stimulating criminal behaviours, and, past a certain threshold, reducing the government's tax earnings. They serve as an expensive and ineffective strategy for inducing behavioural modifications.

Imposing levies on goods that exhibit price inelasticity, particularly those that create addiction, is more likely to impoverish consumers than turning them against the products. High prices do not usually discourage alcoholics from consuming alcohol and there's research indicating that ramping up tobacco taxes any further will yield lesser returns due to their already high levels. Various research works indicate that 'fat taxes' and 'soda taxes' exhibit minimal or no influence on obesity rates. It is more appropriate to regard such taxes as hidden taxes rather than sin taxes.

In essence, sin taxes, similar to nearly all indirect taxes, impact the less affluent more than the wealthy. Levies on items such as tobacco, sugary drinks, and fast food are especially unfair as these products are primarily consumed by those with lower incomes. Implementing a minimum price for alcohol is particularly unfair too, as it disproportionately targets beverages favoured by the financially disadvantaged and leaves those preferred by the affluent unscathed.

This is a workpiece I've been involved in since October, stimulated by Denmark's resolution to implement a 'fat tax', France's move to put forward a 'soda tax' and Scotland's approach to instate minimum pricing (also referred to as a sin tax).