Phillipines: Sin Tax Share to GDP Drops

Source from:  Malaya Business Insight  12/03/2012

The share of excise tax on goods to the country's gross domestic product (GDP) has consistently been declining from 1998 to 2010 despite the regular excise tax increases in tobacco and alcohol products, data from the National Statistical Coordination Board showed.

In his latest Sexy Statistics column titled "What is so sinful about the sin tax?" NSCB Secretary General Jose Ramon Albert showed that taxes from sin products contribute less than a percent to GDP in 2010, down by half from 2.13 percent in 1998. 
 
INCREASING EXCISE TAX PAYMENTS
 
Data showed that in 2010, the government's total revenue collection amounted to P823 billion, 8.2 percent of which or around P67 billion was attributed to excise tax payments.
 
Of the P67 billion excise tax collections, P21.8 billion came from alcohol products, while P31.7 billion was generated from tobacco products. A regular increase in total excise tax payments can be seen from 2002 to 2010.
 
The current excise tax law or Republic Act 9334 requires that the excise tax rates for alcohol and tobacco products be hiked every two years from 2005 to 2011.
 
With the last increase imposed last year, a new law on excise taxes is expected to be implemented in 2013. The House approved excise tax proposal is expected to generate P31 billion in incremental revenues on the first year of implementation, while the Senate excise tax version is seen to produce around P40 billion.
 
Both versions will soon be deliberated by the bicameral conference committee.
 
DECLINING SHARE TO GDP
 
However, despite the regular increases in excise taxes on alcohol and tobacco products, Albert said that the ratio of excise tax on goods collected in the country to GDP has consistently gone down from 2.13 percent in 1998 to 0.75 percent in 2010.
 
In fact, from the time that the current excise tax law was implemented in 2005, the share of total excise to GDP fell below the annual average of 1.2 percent to GDP.
 
Furthermore, the share of excise tax on goods to total revenue collection has generally been declining, from 14.4 percent in 2002 to 8.2 percent in 2010.
 
Albert said that this may be attributed to the generally decreasing share of tax collected from alcohol products to total revenues, from 3.3 percent in 2002 to 2.6 percent in 2010; as well as tobacco products, from 5.1 percent in 2002 to 3.9 percent in 2010.
 
SPENDING MORE FOR 'SIN PRODUCTS'
 
Data further showed that while there have been regular increases in excise tax rates in alcohol and tobacco products, Filipinos in the bottom 30 percent income group generally spends the same amount for "sin products" as compared to necessities such as education and medical care.
 
Using the 2009 Family Income and Expenditures Survey of the National Statistics Office, Albert said that Filipinos in the bottom 30 percent income group uses 1.1 percent of their expenditures on alcoholic beverages, and 1.6 percent on tobacco products.
 
This compares to the 1.2 percent and 1.7 percent of their expenditures spent on education and medical care, respectively.
 
Among all income groups, Filipinos spend 0.7 percent of expenses on alcoholic beverages and 0.8 percent on tobacco products.
 
HEALTH COST
 
"But we must not forget that the cost of smoking and/or alcohol drinking is not solely monetary! There are also costs to our health that we should also think about!" Albert said.
 
The NSCB chief said that based on data from the Department of Health, included among to the top 10 leading causes of morbidity that may be considered to be related to tobacco smoking and alcohol drinking are Acute Respiratory Infection, bronchitis/bronchiolitis, and TB respiratory/all forms.
 
The Department of Health earlier said that there are more than 17 million Filipinos who are into cigarette smoking. On the average, each Filipino smoker consumes 1,073 sticks each year.
 
This makes the Philippines the top smoking country in the South East Asian region.
 
Health Secretary Enrique Ona earlier said that smoking can lead to illnesses such as lung cancer, chronic obstructive pulmonary disease, coronary artery disease, and cardiovascular disease -- to which the medical-related expenses for the cure of these diseases is something that the poor can barely afford.
 
He said that these smoking-related diseases resulted to a "staggering" economic burden of P177 billion last year. Enditem