A sin tax is levied on specific goods and services at the time of purchase. These items receive the excise tax due to their ability, or perception, to be harmful or costly to society. Applicable items include tobacco products, alcohol and gambling ventures. Sin taxes seek to deter people from engaging in socially harmful activities and behaviors, but they also provide a source of revenue for governments.
Sin taxes are typically added to liquor, cigarettes and goods that are considered morally hazardous. Because they generate enormous revenue, state governments favor sin taxes. Society accepts sin taxes because they affect only those who use sin taxed products or engage in sin taxed behaviors. When individual states run a deficit, a sin tax is generally one of the first taxes recommended by lawmakers to help fill the budget gap.
A sin tax is a type of Pigovian tax, which is levied on companies which create negative externalities with their business practices. Sin tax proponents maintain that the targeted behaviors and goods produce negative externalities. In other words, they foist an unfair burden on the rest of society. The effects of alcohol and tobacco products increase health care costs driving up the cost of insurance for everyone. Also, compulsive gambling compromises the security and well-being of stable home life, children and families of the gambler.
One purpose of a Pigovian tax is to create an incentive to reduce negative externalities. The sin tax seeks to reduce or eliminate consumption of harmful products by making them more expensive to obtain.” (Sin Tax, Investopedia, updated Aug. 14, 2019)
We have all heard of sin taxes, especially as they relate to the items above, which are generally accepted to have detrimental impacts to society as a whole. Alcohol and tobacco are good examples. It is well known what the social burdens of these are, with healthcare costs being impacted by the diseases and negative health conditions that consumption of these substances promote.
But there are other items that are even more ubiquitous, but not many have yet connected just as much as reason for the negative social costs, than even those from alcohol and tobacco.
Some years back, the famous British cooking celebrity Jamie Oliver initiated a campaign to subject sugar to some form of “sin tax” which would be similar to those levied on tobacco and alcohol products. The reasoning was elegantly simple. Metabolic disorders like diabetes, cardiac disease, high blood pressure, stroke etc. were being exacerbated by British society’s propensity to consume even greater amounts of sugar in their daily diet. The sin tax on sugar was meant, among other things, to pay for the increased costs to the United Kingdom’s National Health Service, since conditions aggravated by sugar consumption were sending patients to their GPs, and even to hospitals for treatment of various metabolic disorders. The proposed tax was also seen to cover costs of educating people on the harmful effects of sugar on the human body, preventing a large-scale health crisis before it actually goes out of control.
This Jamie Oliver idea makes a lot of sense from a Philippine perspective. In one of Jamie’s case studies, he was looking at the harmful effects that sugar-laden products had on the health of the population in Mexico (with a similarly large lower-class population like the Philippines), and especially on the lower classes. The addiction to sugar was also causing a heavy burden on the country’s healthcare system, and something that the tax—like the proposal in the UK—would help to alleviate.
So why not do it in the Philippines? We are well known as a people for having a sweet tooth, but also predisposed as a society to having the ills that excess in sugar consumption unfortunately brings.