Continued improvements in the taxation of tobacco products and the significant reduction in cigarette affordability gave the Philippines the highest score among its peers in the Association of Southeast Asian Nations (ASEAN) in an independent global study that rated cigarette tax policy performance over a six-year period from 2012 to 2018.
The Tobacconomics Cigarette Tax Scorecard, a study published last year involving cigarette taxation in more than 170 countries, said the Philippines was 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.”
A report to Finance Secretary Carlos Dominguez III during a recent executive committee (Execom) meeting of the Department of Finance (DOF) said the Philippines got an overall score of 3.75 out of 5 in the Tobacconomics Scorecard, the highest among the ASEAN countries.
“This was mainly due to our cigarette tax reforms—Republic Act (RA) No. 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,” said Finance Assistant Secretary Ma. Teresa Habitan in her presentation on the Tobacconomics Scorecard during the Execom meeting.
Dominguez congratulated officials and employees of the DOF and of the Bureaus of Internal Revenue (BIR) and of Customs (BOC) for this accomplishment.
RA 10351, implemented starting in 2013, 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.
This was followed by provisions in the TRAIN that was signed into law by President Duterte in 2017 and implemented starting January 2018 that further increased the excise tax rates on tobacco products.
The two other “sin” tax reform laws passed during the Duterte administration (RAs 11346 and 11467), which imposed additional substantial increases in the excise tax rates of tobacco products, and later, on electronic cigarettes, were excluded from the Tobacconomics study because its scope only covered the period from 2012 to 2018.
Habitan said in her report during the Execom meeting that the study used data from the World Health Organization (WHO) and focused on four aspects of cigarette tax systems: cigarette prices; changes in cigarette affordability over time; share of taxes in retail cigarette prices; and cigarette tax structure.
The Philippines scored 5, which is the highest, on changes in cigarette affordability owing to the significant tax increases over the 2012-2018 period, Habitan said.
On the share of taxes in retail cigarette prices, the study followed the WHO recommendation that cigarette excise tax should account for at least 70 percent of the retail price of the product.
Habitan said the Philippines, along with Singapore and Thailand, scored 4 in this aspect, because their excise tax is at least 65 percent but less than 75 percent of the cigarette retail price.
The Philippines was the only country in ASEAN to get the highest score of 5 on cigarette tax structure because of its unitary tax system with an annual indexation rate for tobacco products, Habitan said.
Habitan said the Philippines’ only low score was 1 for cigarette prices because the cost of cigarettes per pack in 2018 was still relatively cheap compared to those in other ASEAN countries.
The Tobacconomics Scorecard’s five-point grading system is derived from the data in the tax/price-related appendices of the biennial WHO Report on the Global Tobacco Epidemic (RGTE).
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.
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