"It has been a long battle for the sin tax reform measure proposed as early as 1997. For almost 16 years, the bill was debated on, scrutinized and sometimes set aside... but we have proven that nothing is impossible for a country that rows in one direction," Mr. Aquino said.
Davao Rep. Isidro T. Ungab (3rd district), the House of Representatives ways and means committee chairman, called Republic Act 10351’s approval "a victory against lobby groups."
"We got what we wanted -- the removal of the annexes, the removal of the price classification freeze, indexation to inflation, unitary rates in five years and leveling of the playing field."
Prior to the reform, taxes on tobacco and alcohol products continued to be pegged to 1996 prices.
Internal Revenue Commissioner Kim S. Jacinto-Henares said the law’s passage would be instrumental in securing an upgrade from credit agencies. The Philippines currently stands one notch below investment grade.
Higher taxes on tobacco and alcohol products will be imposed next year, she said, with the tax bureau to issue guidelines within the month.
"We will be coming up with a revenue regulation and it will be published before the end of the year," Ms. Henares said.
The measure is expected to generate P33.96 billion in fresh revenues during the first year of implementation. The bulk, or P23.4 billion, will come from tobacco products.
British American Tobacco country manager James Lafferty congratulated the government for pushing an important reform through.
"We now have a system that benefits the entire nation by raising government revenues, addressing health needs, and leveling the playing field fueling greater investment in Philippines," he said in a text message.
Tobacco farmers, however, claimed it marked a"death knell" for their livelihood.
"They did not listen to any of our appeals. Our only weapon left is through the ballot," said Saturnino Distor, president of the Philtobacco Growers Association, referring to next year’s midterm elections.
"Sin taxes" are taxes imposed on products or services that are viewed as unnecessary, detrimental to health or morally harmful. The two most common examples of products that face sin taxes are tobacco and alcohol. Sin taxes have several potential advantages and disadvantages. Discouraging Harmful Behavior
* One of the main purported benefits of sin taxes is that they tend to reduce harmful behaviors. For instance, tobacco use is associated with various health problems such as cancer and heart disease. Imposing high taxes on cigarettes reduces the amount of tobacco consumers can afford, which may in turn reduce the overall negative health impacts of smoking. Other activities with known negative health effects that are taxed include drinking alcohol and using tanning beds. Increasing Tax Revenue
* Another benefit of sin taxes is that they can provide additional tax revenue to the government bodies that impose them. According to the New York Times, 22 states increased their tobacco taxes between January 2009 and April 2010 to bring in more tax revenue. Certain states like California are considering legalizing marijuana as a way to bring in more sin tax revenue. According to Reuters, "the U.S. federal government collected $20.6 billion in taxes on alcohol, tobacco, firearms and ammunition in fiscal year 2009." *
* Sin taxes can potentially result in reduced economic activity which could reduce the amount of tax revenue they generate. If a gas station has to charge $1 more per pack of cigarettes, they will sell fewer cigarettes and make less profit overall as a result. This can hurt businesses that rely on the sale of products like alcohol and tobacco. If a consumer pays $100 a month due to sin taxes, that is $100 less that he can spend...