THE Philippines received the highest score among countries in Southeast Asia for its cigarette tax policy performance over a six-year period from 2012 to 2018 owing to continued improvements in the taxation of tobacco products as well as significant reduction in cigarette affordability.
The results of the study by the Institute for Health Research and Policy (IHRP) of the University of Chicago revealed the Philippines got an overall score of 3.75 out of 5, the highest in Southeast Asia.
The Philippines was cited as among the countries “with the greatest improvement in cigarette tax policy” resulting from “the simplification of previously complicated tiered cigarette excise tax structures, accompanied by large tax increases,” the IHRP’ said citing results of its “Tobacconomics Cigarette Tax Scorecard.” The scorecard rated cigarette tax policy performance of more than 170 countries.
“This was mainly due to our cigarette tax reforms—Republic Act (RA) 10351 (first Sin Tax Reform Law) and RA 10963 (Tax Reform for Acceleration and Inclusion Act or Train)—that removed the inherent weaknesses of the excise tax system like the multi-tiered structure, price classification fees and the lack of automatic indexation,” Finance Assistant Secretary Ma. Teresa S. Habitan said in her presentation at a Department of Finance (DOF) executive committee meeting.
The Tobacconomics Scorecard’s 5-point grading system is derived from the data in the tax/price-related appendices of the biennial Report on the Global Tobacco Epidemic of the World Health Organization. The WHO report monitors the status of the tobacco epidemic and the most effective and cost-effective government interventions—both price and non-price measures—for reducing tobacco consumption.
Habitan said the study used the WHO data and focused on four aspects of cigarette tax systems. These aspects are: cigarette prices; changes in cigarette affordability over time; share of taxes in retail cigarette prices; and, cigarette tax structure.
The country received the perfect score of 5 in two of aspects: cigarette affordability and cigarette tax structure.
Habitan said the Philippines scored the highest on cigarette affordability due to the implementation of significant tax increases during the 6-year period. In terms of cigarette tax structure, the country was the only country in Southeast Asia to get the highest score of 5 because of its unitary tax system with an annual indexation rate for tobacco products.
On the aspect of share of taxes in retail cigarette prices, Habitan said the Philippines scored 4—the same with Singapore and Thailand—because their excise tax is at least 65 percent but less than 75 percent of the cigarette retail price.
The Philippines, meanwhile, got its lowest score of 1 on cigarette prices because the cost of cigarettes per pack in 2018 was still relatively cheap compared to those in other Association of Southeast Asian Nation-member countries.
Implemented beginning 2013, RA 10351, which was signed by then President Benigno S. Aquino III, imposed an increase in the excise or “sin” taxes on tobacco products and mandated an across-the-board uniform tax rate of P30 per pack beginning 2017.
Excise tax rates on tobacco products were further increased via the Train law, which was enacted in 2017 and implemented starting January 2018.
Two other “sin” tax reform laws—RA 11346 and RA 11467—that imposed additional increases in excise tax of tobacco products and, later, on electronic cigarettes, were excluded from the Tobacconomics study as these were passed beyond the period under the study’s scope.
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