Sin tax bill

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Saturday, October 13, 2012

THE best version of the sin tax bill remains the original one authored by House Appropriations Committee Chair Joseph Emilio “Jun” Abaya of the 1st district of Cavite, now secretary of Transportation & Communication.

The original bill sought to raise P60 billion (P30 billion from tobacco and P30 billion from alcohol products) through a revised excise tax structure. A watered-down version of the bill that would generate P31 billion in revenues, practically half of what was originally sought, eventually passed in the House. P27 billion would be raised from tobacco and only P4 billion from alcohol products.

According to University of the Philippines Economics professor Solita Monsod, this was made possible by the National People’s Coalition's (NPC) affiliation with the San Miguel group, makers of alcohol products in the country. As it was crucial to get the NPC votes for the bill to be passed, compromises had to be made.


So it comes as a great shock that even after Sen. Miriam Defensor-Santiago adopts Abaya’s original version of the bill, thereby recognizing its merits, Senator Recto now comes up with a report that recommends an even more diluted and almost dead version of the bill. This version now seeks to generate only a measly amount of P15 billion in total from the original P60 billion.

What are the arguments against the sin tax bill?

First, tobacco farmers will be deprived of their livelihood. These farmers can change crops. In fact, 15 percent of the revenues generated by the Sin Tax bill are earmarked to assist tobacco farmers in shifting to viable, alternative crops.

Are we not going to wipe out prostitution because it will deprive a lot of people of their livelihood? This is a fallacy. While we draw the line at legislating smoking out of existence, we need to regulate tobacco use because it is a health hazard.

Second, government will lose out. Reduced consumption will lead to reduced tax revenues. The worldwide trend proves this argument wrong. It’s been found that revenues from higher taxes will more than offset drop in demand. Government will see net gains.

The demand for tobacco is inelastic, meaning it is not dependent on price. Despite increased prices, addicts will continue to smoke. The poor, however, will be encouraged to drop the habit while the young will be deterred from starting this deadly habit.

Third, increased taxes will promote smuggling. Should we legalize drugs and prostitution to prevent it from going underground? We don’t promote something because we cannot defeat it. If we can’t beat them, should we join them? Good governance, NOT lower taxes combats smuggling.

Why must we fight for a sin tax bill that seeks to generate greater revenues from both alcohol and tobacco equally? First, because both are health hazards that do society no good. Second, we want to reduce government spending on tobacco and alcohol-related diseases. Third, the revenues generated from the sin tax bill will fund much-needed universal health care in our country.

In the ideal world, Jun Abaya’s bill would be passed.

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Published in the Sun.Star Cebu newspaper on October 14, 2012.


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