Senator Sonny Angara on Monday endorsed to the Senate plenary a bill increasing the excise tax on tobacco products in a bid to reduce smoking prevalence among Filipinos and raise crucial funding for the government’s Universal Health Care (UHC) program.

This developed as the Senate Committee on Ways and Means, which Angara chairs, adopted a committee report on the consolidated measure that will raise the excise tax for every cigarette pack from P35 to P60 for the next four years.

The committee report proposes a starting rate of P45 in 2020 or an increase of P10 in the first year of implementation, followed by a series of annual P5 increases until the rate reaches P60 in 2023. Thereafter, the rate automatically increases by 5 percent.

In resorting to gradual tax increase instead of an immediate P25 bump to the current rate, Angara said the committee did a delicate balancing act in considering a measure that will reconcile the competing interests of the government, health advocates, the cigarette industry and tobacco farmers.

Angara said that committee members consider tobacco tax hike bill as an important legislation that would not only help reduce deaths and disabilities due to smoking, but also generate the much-needed revenues for the UHC program.

At the same time, Angara said they could not ignore the impact of raising the excise tax on tobacco farmers, whose families are also dependent on the industry.

“We’re legislating not so much a single sweet spot, but a ladder where we hope all stakeholders involved can make a smooth transition,” Angara said.

“In essence, we’re providing up to four years of graduated increases so that more of our tobacco farmers can shift crops; the tobacco companies can recast their financial projections; and the DOH (Department of Health) can catch up with its underspending,” he added.

Angara’s committee tackled four tobacco tax rate proposals, including House Bill 8677 which sets the excise tax rate at P37.50 per pack starting July 1 this year.

Senators Manny Pacquiao, Sherwin Gatchalian and JV Ejercito also filed separate bills seeking an increased tax of P60, P70 and P90 per pack, respectively. 

President Duterte had certified as urgent Pacquiao’s proposal—Senate Bill 1599–raising the current unitary excise tax rate to P60 per pack with a yearly increase of 9 percent.

The Department of Finance said the measure will help fill in the P40 billion funding gap for the UHC.

According to the DOH, 85 percent of the proceeds from the excise tax is used to finance government health programs—80 percent for the UHC and 20 percent for improvement of facilities in government hospitals.

The remaining 15 percent of the proceeds goes to livelihood programs and financial assistance to tobacco farmers, the DOH said.

Anti-smoking and health advocates have been pushing for much higher excise tax to curb the prevalence of smoking and significantly reduce tobacco-related deaths in the country.

They said the smoking prevalence in the Philippines remains relatively high at 23 percent compared to other countries with successful tobacco control initiatives.

They warned that with the current excise tax rate, an increase of 1.4 million smokers is projected in 2022 and the additional P2.50 tax approved by the House will result in an additional 1.2 million smokers.

Angara said that two considerations have to be made by his committee in adopting a staggered approach to the new tobacco tax rates—the livelihood of tobacco farmers and the spending capacity of the DOH. 

Angara warned that higher excise taxes would imperil the livelihood of more tobacco farmers who have already sustained significant losses in recent years on account of the additional taxes.

“More time is needed for them to transition to non-tobacco crops like rice, corn and high-balue vegetables,” he pointed out. 

Citing 2017-2018 data from the National Tobacco Administration, Angara said that less than 14 percent of tobacco farmers have actually shifted away from tobacco to other crops like corn, rice, watermelon, garlic, onions or high-value vegetables—corresponding to only 10.5 percent of the country’s total hectarage devoted to tobacco growing.

Angara, meanwhile, noted the low absorptive capacity of the DOH’s Health Facilities Enhancement Program (HFEP), which is a key component of the UHC law.

Last year, a compromise between the Department of Budget and Management had to be struck about the latter’s 2019 HFEP budget because it was initially slashed from P30 billion to only P50 million on account of poor obligation and disbursement rates—apparently only 30 percent (P9.2 billion) and 6.8 percent (P2.44 billion) respectively.

“Ibig sabihin, kahit na may pondong nakalaan para sa pagpapaganda ng health facilities, may kabagalan sa paggastos ang DOH para rito,” Angara said.

“Hindi maikakaila na hanggang ngayon hindi pa tayo makasisiguro na talagang gaganda ang serbisyo ng DOH at maiimplimenta nang tama ang UHC, kapag dinagdagan natin ang kanilang pondo.” #