Sin Tax Reform

7/23/2019 Sin Tax Reform

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JEREMIAS N. PAUL, JR.Undersecretary, Department of FinanceRepublic of the Philippines

PH SINTAXREFORM:Lessons for Financing

Malaria Elimination


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Presentation Outline

I. The Philippine Sin TaxReform

BackgroundWins from the reform

II. Lessons Learned

III. Concluding Remarks


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An Ac t Restruc tur ing the Excise Tax onAlcohol and Tobacco Products (Signed 19

December 2012) Landmark legislation under the Aquino Administration

Fundamentally a good governance measure withpositive impact on both public health and fiscalhealth

Repub l ic Act No . 10351


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Background

The Philippines is among the top smokingcountries in SEA, has one of the strongesttobacco lobbies in the region, and is one of thecountries with the lowest cigarette taxes andprices in the world.

Estimated annual economic burden of smokingdwarfs revenues from cigarette excise taxes:

PHP177 billion vs. PHP 25 billion The Philippines ratified the WHO Framework

Convention on Tobacco Control in 2005.


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Help finance Universal Health Care (UHC)

Address public health issues relating toalcohol and tobacco consumption

Simplify the current excise tax system onalcohol and tobacco products and fix long-standing structural weaknesses.

Bulk of incremental revenues from Sin TaxLaw will finance UHC.

Rationale


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The Winning Numbers

Generated US$ 2.3 billion in incrementalrevenues for the first two years ofimplementation far exceeding government

projections. Increased funding for DOH budget by 57.3%in

2014 and 63.2% in 2015 (from PHP53.3 billionto PHP 87 billion) over 2013 levels.

Revenues enabled NG to subsidize the healthinsurance premiums of 14.7 million poorprimary members in 2014, upfrom only 5.2

million registered primary members in 2012.


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Higher than projected incremental revenue collections

34.0

42.9

50.6

56.9

64.2

51.2 50.2

2013 2014 2015 2016 2017

Projected vs Actual Incremental Revenue from RA 10351(In Billion Pesos)

Projected Actual

Win fo r Fiscal Health


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Share of tobacco and alcohol excise collectionsto GDP in 2013 highest since 2000.

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

Tobacco & Alcohol Excise Collections as % of GDP

Tobacco & Alcohol Excise CollectionSource: BIR and NSCBPrelim data for 2014

Win fo r Fiscal Health


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11.4

18.9 23.7 24.6

31.8

42.2

53.3

83.7 87.0

0.0

10.0

20.0

30.0

40.0

50.0

60.070.0

80.0

90.0

100.0

2007 2008 2009 2010 2011 2012 2013 2014 2015

DOH Budget (In B PhP)

$ 2.1 B

$ 2.0 B

$ 1.3 B

$ 1.0 B

$ 0.7 B

$ 0.5 B$ 0.5 B

$ 0.4 B

$ 0.2 B

Source: GAA, DBM

Win for Pub l ic Health


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Excise tax collections from locally manufactured cigarettes risesteeply as volume drops.

Source: BIR

Win fo r Fiscal & Pub l ic Health

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

0.0

2.0

4.0

6.0

8.0

10.0

Volume of Removals (B Packs) Excise Tax Collections on Locally Manufactured Cigarettes (PB)


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0.5 0.5 0.5 0.5 0.8

2.9 3.5 4.5 5.0 5.0

3.5

12.5 12.6

35.2

37.1

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

In Billion Pesos

National Government Allocationfor Health Insurance Premiumsfor the Poor

$ 0.3 B

$ 0.3 B

$ 0.8 B

Source: PhilHealth, DOH2015 based on NEP

$ 0.9 B

Win for the Poor


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LESSONS LEARNED

Frame reform issue very well. Build political support, particularly

at the highest levels. Use whole of government

approach.

Build a coalition for reform. Engagestakeholders constructively.

Do your homework.


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CONCLUDING REMARKS

Understand the Finance Ministrymindset Need to balance various competing

financing demands, i.e. health, education,

infrastructure. Spending wisely. Looks at value for money

and outcomes.

Usually provides a budgetary ceiling persector and leaves prioritization to sectoralministers.

Looks at opportunities to leverage

resources.


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CONCLUDING REMARKS

Adopt an integrative & whole-of-government approach. Avoid Silos.Compartmentalized thinking

must change.

Think Convergence. Public serviceagencies should be able to work acrossportfolio boundaries to achieve a sharedgoal and an integrated response to issues.

Actively look for synergies.Finance &investment policies, among others, shouldbe able to synergize with health and othersocial policies for the common good.


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CONCLUDING REMARKS

Build coalitions.

As in other policy areas, settingfinance and health policies must be

inclusive and involve the participationof various stakeholders, including civilsociety, to ensure that equally -- if notmore -- important values will be takeninto account.


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THANK YOU

Sin Tax Reform

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