Index tobacco taxes to inflation — Tañada
DEPUTY House Speaker Lorenzo ‘Erin’ R. Tañada III cautioned against the passage of an “incomplete measure” on tobacco tax reform that would only lift price classification freeze because such taxes also need to be indexed to inflation.
Indexing to inflation tobacco taxes simply means that when prices of common commodities, such as food, go up, then so will taxes on tobacco products increase.
Tañada explained that without indexation, sin taxes will eventually be eroded by inflation while tobacco products would be made affordable, thereby defeating the very purpose of taxing cigarettes to discourage smoking.
“The need to reform the current sin tax law and to simplify the administration of tobacco taxes is urgent, but we also need to ensure that the reforms are comprehensive,” Tañada said.
“The removal of the price classification freeze is definitely a big step toward correcting the flaws in the sin tax law — and this has cost the government billions worth of revenues in the past years. But tobacco taxes should also be indexed to inflation so that collections can keep pace with the rise of cigarette prices,” he pointed out.
He explained that lifting the price classification freeze only corrects a flaw in the current sin tax law, which assigned 2011 as the last year for raising tobacco taxes and classifying cigarettes for tax purposes based on their 1996 prices.
He added that adopting the simplest tax system for tobacco taxes can help prevent billions of pesos from being lost yearly due to tax leakage from cigarette sales alone.
He stressed that ideally, all three reforms — lifting the price classification freeze, indexing to inflation, and adopting the simplest tax system — should be taken as a single package.
Tañada said raising tobacco taxes will reduce smoking, save more than 80,000 Filipino lives lost yearly to lung cancer and other smoking-related diseases, and raise much-needed government revenues.
He added that revenues raised from tobacco taxes can be used to fund the government’s Universal Health Care program.
“For poor Filipino families today, falling ill becomes a catastrophe,” he said. “Six out of 10 Filipinos who succumb to illness will die without ever seeing a doctor.”
He stressed that with a third of all Filipinos living in poverty, government must step in and effect a more equitable distribution of access to health care by expanding the healthcare coverage to include all Filipinos.
At present, there are seven tobacco bills being deliberated by the House Ways and Means Committee.
Tañada’s statement echoes that made in May by Batanes Rep. Henedina Abad. [See: Lawmaker warns vs rushing sin tax bill]
Cigarettes cheaper now
Meanwhile, a new study shows how cigarettes have become even cheaper and more affordable.
The Affordability Study, authored by Filomeno Sta. Ana III of Action for Economic Reforms and Jo-Ann Latuja of HealthJustice, shows that cigarettes have remained extremely affordable despite the dwindling purchasing power of Filipinos with average income.
“Due to the insufficient tobacco tax increase, majority of the cigarettes consumed have become cheaper relative to other commodities. While food prices have increased by 59% over the past 10 years, tobacco prices only increased by 34%. A stick of yosi [cigarettes] is cheaper than an egg, or pandesal—it’s about the same price as kwek kwek,” exclaimed Latuja, referring to cheap Filipino street-food made out of quail eggs.
Both authors blame the current problematic cigarette excise tax system, noting that the price classification freeze had pegged the majority of the cigarettes to their 1996 net retail prices (NRP). (GMA News)