Sin Tax Reform Act of 2012

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[REPUBLIC ACT NO. 10351]
AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO PRODUCTS BY AMENDING SECTIONS 141, 142, 143, 144, 145, 8, 131 AND 288 OF REPUBLIC ACT NO. 8424. OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO. 9334, AND FOR OTHER PURPOSES Commonly known as

SIN TAX REFORM ACT OF 2012
“Stick to One”

OVERVIEW
Sin Tax is a tax levied on products or activities, which are considered sinful or harmful and considered as objects of social disapproval, such as liquor and tobacco. Sin tax or sometimes called sumptuary tax is meant to reduce the consumption of those products or services by taxing them, aside from the common sales tax, to make them more expensive, less affordable and less accessible by consumers.

According to the Department of Health (DOH), the Philippines has an estimated 17.3 million tobacco consumers, the most number of smokers in Southeast Asia. Filipinos on average consume 1, 073 cigarette sticks annually, while the smokers in the region consume less than a thousand sticks yearly. This high consumption rate is seen as a result, among others, of the very low cigarette prices in our country.

Smoking is responsible for 71 percent of lung cancer deaths in the world. Consequently, lung cancer is the leading form of cancer in the Philippines. DOH statistics reveal that 10 Filipinos die every hour because of smoking.

According to the DOH, a 10 percent increase in tobacco taxes will reduce the number of smokers by two million by 2016. A significant decline in the number of smokers will likewise reduce the number of smoking-related deaths.

Meanwhile, drinking alcohol, though effects are relatively less severe health-wise than smoking, has posed a number of costs on the individual and society.
House Bill 5727, commonly known as the Sin Tax Bill and now the Sin Tax Reform Act of 2012, restructured the taxes imposed on alcohol and tobacco goods patterned since its last amendment. Duties on these products are a potential revenue source that will help fund the Universal Health Care Program of the administration. Likewise, higher taxes—and consequently higher costs—are seen as a deterrent to the consumption of “sin” products, whose adverse effects are mostly borne by the poorer segments of society. It is like hitting two birds with one stone. The passage of the excise tax reform on tobacco and alcohol thus marks a historic victory for health and revenue reform in the Philippines for five main reasons.

First, the measure achieves all essential reforms by correcting inequities in tax structure that have plagued the system for decades. These inequities have made sin products cheaper than they should be, to the detriment of public health objectives.

The version that was passed removes the price classification freeze that has pegged tobacco products to 1996 prices as the basis for their tax classification.
This version removes annexes that have unfairly favored brands introduced at an earlier date.
This version provides for a unitary tax regime by 2017 for tobacco and fermented liquor, a shift from the current multi-tiered system that has allowed smokers to downshift to lower-priced products.

This version indexes the tax rates of tobacco and alcohol by 4% every year so that these products do not become more affordable over time, consequently exposing the poor and the young to the harmful effects of smoking and excessive drinking;

Second, the excise tax incidence for tobacco products jump from a measly 29% in 2012 to a respectable 63% by 2017, close to the international standard recommended by the World Health Organization and the World Bank that tobacco products be taxed excise at two-thirds their net retail price.

Third, this version will allow a collection of P33.96 billion in incremental revenues from tobacco and alcohol for this year and P184.31 billion over the next four years, adequately covering the financing...
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