Taxes to protect and fund universal health care (UHC)—such as those slapped on so-called "sin" products like cigarettes, alcoholic drinks, and sweets—still have room for further increases, according to a global task force.
"Health taxes continue to be underutilized despite the powerful impact they have in reducing preventable death and disease—a particularly glaring act of neglect in a world that has experienced a massive pandemic," the Task Force on Fiscal Policy for Health, co-chaired by philanthropist Michael "Mike" R. Bloomberg, said in its newest 2024 report titled "Health Taxes: A Compelling Policy for the Crises of Today."
Former Philippine finance secretary Cesar V. Purisima, under whose watch the landmark Sin Tax Reform Act of 2012 was enacted, is part of this Task Force.
The Philippines' Sin Tax Law, whose implementation has been extended through succeeding tax reform laws, has shored up public revenues to finance the national budget in general and UHC in the country in particular.
The report said tobacco taxation in the Philippines has been "substantial, sustained, and successful."
"Since 2012, Philippine governments have significantly increased tobacco excise taxes through four successive reform bills and across two different administrations, led by Benigno Aquino III and Rodrigo Duterte. The success was in part the result of the government framing the taxes as a health reform, in partnership with health campaigners, as well as leadership from President Aquino and successive governments," the report noted.
Slapping higher taxes on tobacco, and later, electronic or e-cigarettes, resulted in also higher retail prices, estimated to be by a factor of six in 2020.
This not only slashed smoking prevalence among adults to 20 percent in 2021 from 30 percent in 2009, as well as among the youth to 10 percent in 2019 from 18 percent in 2027; it also generated more tax revenues for the government.
Citing data from the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR), the report said tobacco excise tax collections jumped to P160.3 billion in 2022, equivalent to 0.7 percent of gross domestic product (GDP), from only P40.8 billion or 0.3 percent of GDP a decade earlier in 2012.
"The portion of this funding earmarked for the country's national insurance fund, PhilHealth [the Philippine Health Insurance Corp.], finances about 90 percent of the insurance premiums to include people who are poor, aged, or unemployed due to disabilities," the report pointed out.
Finance Secretary Ralph G. Recto had said the Marcos Jr. administration isn't keen to jack up taxes or introduce new taxation besides those pending in Congress since the previous Duterte administration, as consumers reeled from two years of elevated inflation that tempered spending and borrowings for productive activities.
"After reviewing the large body of evidence on the benefits of health taxes, the Task Force on Fiscal Policy for Health called on all countries to rapidly and significantly increase health taxes on tobacco, alcohol, and sugary beverages to save lives and raise tax revenues. The Task Force also called for countries to adopt efficient excise tax structures, to improve tax administration, and to join in resisting undue influence by industries that manufacture, sell, and distribute these unhealthy products," the report read.
"Health taxes are an underutilized tool for addressing fiscal constraints. Despite facing multiple global crises—a pandemic, recession, increasing poverty, wars, climate change, inflation—few countries have implemented one of the simplest and most beneficial ways to help ease fiscal pressures: increasing health taxes on tobacco, alcohol, and sugary beverages," the Task Force said.
"Raising excise taxes on tobacco, alcohol, and sugary beverages and improving their design, administration, and enforcement is critical for improving health while providing an excellent source of additional revenue, in the short-term as well as the long-term," it added.
"Urgency is required, for both health and economic reasons. It is time for countries and the international community to work together and substantially raise effective excise taxes on tobacco, alcohol, and sugary beverages. The simple act of raising health taxes can improve health and generate revenues, thereby giving countries more resources to face other big challenges of our times," according to the Task Force.
Citing the Task Force's report, the Washington-based Center for Global Development (CGD) noted that global consumption of tobacco, alcohol as well as sugary drinks causes more than 10 million deaths and costs the world economy over $4 trillion yearly.
"If taxes were increased such that the price of these products increased by 50 percent, 50 million lives would be saved over 50 years and $3.7 trillion raised in just five years. $2.1 trillion of this would be raised in low- and middle-income countries (LMICs)—enough to increase government health spending in these countries by 40 percent," CGD said, citing the report's findings.
In particular, the Task Force urged all countries to jack up and reform tobacco taxation as the "highest priority."
"Tobacco continues to cause the most deaths and illness in the world and extensive guidance and country experience on effective tax policy is available. Despite this, tobacco tax policy has actually regressed in 76 countries; some 87 percent of the world's one billion smokers now live in countries where cigarettes are equally or more affordable than in 2019," the Task Force explained.
On the flipside, domestic tobacco industry players are lamenting that higher excise taxes have been fostering illicit trade of fake and smuggled cigarettes, especially in poorer and coastal parts of the country, respectively.
To recall, cigarette smuggling surged at the height of the Covid-19 pandemic, as many smokers turned to cheaper alternatives due to the harder times. Industry estimates had shown that about eight out of every 10 cigarettes being sold in Mindanao are considered illicit—either illegally entered through the waters surrounding the southern island or counterfeited by unscrupulous traders, hence depriving the government of billions of pesos in tax collections.
Last year, BIR estimates showed that the government loses up to P100 billion in tax revenues from illicit tobacco trade. These foregone revenues should have been funding the UHC program aimed at providing free health care access to all Filipinos.