aldric de ocampo,
Opinion: First Step: Excise Taxes
Photo Credit: Sophia Loriega
Wouldn't it be great to have all Filipinos healthy and in good condition?
Well last Wednesday, February 20, President Duterte signed Republic Act 11223 or the Universal Health Care Law (UHC), which expands health services and grants health coverage for all Filipino citizens.
This a noble yet daring move from the government as it is in line with the goals of our society for health. As mandated by Article XIII, Section 11 of the 1987 Constitution, “The State shall endeavor to make essential goods, health, and other social services available to all the people at affordable cost… (and) …shall endeavor to provide free medical care to paupers.”
However, the UHC may still not meet the expectations of the public. According to Health Secretary Francisco Duque III, the UHC will need about P257 billion in its first year of implementation to meet the demands for facilities, equipment, services, medicine, treatments, and the like provided by the law.
This is important because it means failure for the law if it cannot commit to its promises.
To address this, Duque urged the Congress last Thursday to raise the excise tax on tobacco and alcohol, or sin tax, to fund the implementation of the law. Senator JV Ejercito also proposed to increase the tax on each pack of cigarettes to P90, while Senator Manny Pacquiao proposed P60 to also help in funding.
But what are the pros and cons of using excise tax for the UHC really?
First of all, a good reason for using it is that it can help with preventing negative health effects on consumers caused by the levied products. Since the tax on the product is raised, it's price will also increase proportionally. This means that the consumer base of said products will also inversely decrease, leading to less people being affected by their negative health effects.
A second and very obvious point is that the money collected from the excise tax can be used to fund the law. Excise tax can generate a relatively stable source of income for the government which is very essential for executing the programs in this project.
Now a counter for the first point is that although the demand for products such as alcohol and tobacco must go down once the price goes up, a study in economics shows that sin products have an inelastic price-demand curve.
Because of this, it is believed that raising the tax will not deter the consumers from buying these products. Instead, it might lead them to sink more into poverty rather than having them abstain from usage.
Despite this belief, there was a 2013 study in Bayawan City, Negros Oriental that found a decrease in consumption of cigarettes from the respondents after a higher excise tax was implemented. With these results, it can still be said that raising the taxes on these products can still discourage people from buying them.
Another thing that may happen by raising the tax is the loss of revenue for the particular businesses targeted. Losing a consumer base may lead to lower sales, and lower sales may lead to less money to pay people with. It can create a large-scale loss of jobs for many people in the industry, if not addressed properly.
Though this sounds far-fetched, policymakers take these concerns into account when selecting the amount to levy from the sin products.
But regardless of the policymakers’ discernment, the argument for the inelasticity of the products’ demand can also be used in retaliation to show that people will still buy and pay for the products, even at a high price.
For now, another criticism for excise taxes is that they are anti-poor. This is because they naturally do not serve vertical equity, meaning all people will equally have to suffer the increase in the products’ prices regardless of a person's income bracket and so on.
Due to this, rich people can also avail these sin products more as opposed to poorer ones, and that the government must then find a way to penalize them to maintain equity.
But then again, from the government's standpoint, these richer people would be able to contribute more to the funds for the law due to their patronage. Thus, there is a twisted moral action that can result from the tax.
Still, the law, as mentioned, will equally provide health opportunities for all Filipino citizens which means one way or another, equity is preserved.
In the end, it is up to the consumers to be responsible when purchasing products under the excise tax. It is their cooperation with the government that will eventually benefit not only them, but also the rest of the Philippine nation when the actions for the UHC are enacted.
Now, the best thing to do as community members is to engage in efforts for the UHC law, to be able to truly further its progress in implementation. And now, it’s by supporting the increase of excise taxes.
Good health and well-being is not a far dream for us as long as we work together to realize it. It only takes a little bit of understanding and commitment from us to actually achieve the goals we've set for ourselves.
“One step at a time” as they say, and the first step for upholding the UHC is through these excise taxes. //by Owen Bernos and Aldric de Ocampo
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