Measly increase in tobacco tax in TRAIN to increase number of smokers in PH

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Metro Manila (CNN Philippines, December 15) — A regional anti-smoking alliance on Friday warned of a possible spike in the number of smokers in the country after Congress failed to pass a higher tobacco tax as part of a key tax reform bill.

Congress approved on Wednesday Package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN) which lowers income taxes, while raising excise taxes on a number of items.

However, despite lobbying from health advocates and lawmakers, the TRAIN bill merely incorporated a meager P2.50 ($ 0.05) excise tax on tobacco. This means a pack of cigarettes which now costs P30 ($0.60), will cost P32.50 from January until June 2018, then P35 until December 2019, P37.50 until 2021, then P40 until 2023, with an increase in tax of four percent annually from 2023 onwards.

"The very small tax increase is both alarming and unsatisfactory because it is totally inadequate to further discourage youth from smoking and to generate revenues to finance the expanded universal health care in the medium to long-term," said Sopaphan Ratanachena, Tobacco Tax Program Manager of the Southeast Asia Tobacco Control Alliance (SATCA) in Bangkok.

The alliance called on President Rodrigo Duterte to veto the tobacco excise tax before he signs the TRAIN bill into law. The tobacco excise tax is in "package 1" of the tax reform bill, which is expected to take effect January 2018 and generate P130 billion in revenues.

SATCA is a multi-sectoral alliance supporting Association of Southeast Asian Nations members in their tobacco control policies.

Up to 10 percent tobacco tax proposed

During Senate deliberations on the bill, there were moves to more than double tobacco taxes to 10 percent annually. This should result in additional P50 billion ($1 billion) in revenues and at the same time force more than 1.5 million smokers to kick the habit, said Senator Risa Hontiveros, vice chair of the Committee on Health and Demography.

Another anti-smoking lobby group, Health Justice Philippines, proposed "at least" a 60 percent hike in tobacco tax by 2018, with a subsequent rise of nine percent annually.

"To our legislators, please think of the 200,000 more Filipinos who will fall prey to smoking every year if we fail to increase the tobacco tax by at least 60 percent in 2018, and by at least nine percent yearly thereafter. There is no more time to waste. Lives are on the line," said Mary Ann Fernandez Mendoza, president of Health Justice.

Republic Act 10351 or the Sin Tax Reform Law of 2012 raised tobacco tax by four percent per year. At the outset, the law was seen as a significant deterrent to smoking, and it reduced smoking among the youth and the poor. It also generated revenues, part of which went to health coverage for the the poor.

But economists have said the four percent tax is not enough to discourage tobacco consumption because the health gains are eclipsed by inflation.

"To sustain the reduction in tobacco use, cigarette tax should be increased immediately from its current rate of 30 pesos per pack to at least 60 pesos per pack," said Ratanachena. The regional coalition also cited the same figure as Health Justice, stating that "every year of delay has been estimated to result in 200,000 more smokers, who will be at high risk of smoking-caused diseases, disabilities, and early death."

Increasing tobacco tax generates big revenues

In the Philippines, 240 people die every day from smoking-related diseases, said Health Justice.

The group cited Bureau of Internal Revenue statistics that showed tobacco excise tax collection in 2016 amounted to P163.5 billion, even as smoking set the economy back by P204 billion in 2015 due to illnesses from smoking, and lost productivity due to absences.

Increasing tobacco taxes regularly is one of the most practical and cost-effective ways to reduce tobacco use and save lives, health advocates and the World Health Organization (WHO) have said. The Philippines is one of 181 states that has committed to the global tobacco control treaty or the WHO Framework Convention on Tobacco Control.

Prior to the passage of the tax reform bill, tobacco growers and farmers lobbied lawmakers not to increase the tobacco excise tax which they considered "exorbitant." The National Tobacco Administration cited the fall in tobacco production to 52 million kilograms (kg) in 2015 from 68 million kg in 2013. It also said that 9,232 tobacco farmers left the trade in 2015 alone.