Sintax Reform Law

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Don't expect sharp drop in smoking with new sin tax bill — economist SIEGFRID O. ALEGADO, GMA NewsDecember 12, 2012 7:52pm
The sin tax reform measure will definitely raise the prices of cigarettes and alcoholic beverages, but there won't be an immediate and marked decrease in the number of smokers kicking the habit just because a stick of Marlboro Lights – for instance – has become more expensive.

But government officials are confident that the measure, awaiting President Benigno S. Aquino III's signature, will eventually curb cigarette consumption. 

“The sin tax law will increase taxes for cigarettes and alcoholic drinks. It will have the effect of increasing the price of smoking and drinking,” Finance Assistant Secretary Ma. Teresa Habitan noted in a text message to GMA News Online on Wednesday. 

How exactly will this measure impact on Filipinos who crave for the nicotine rush? Economic theory explains. 

“People will not reveal exact changes in consumption [of cigarettes] until the sin tax bill has been fully implemented,”  University of Santo Tomas economist Alvin Ang said in a phone interview. 

Theoretically, any form of price increase stemming from new taxes or not takes time to be realized by consuming public, the economist noted.

Targeting the poor

Ang said such taxes target price-sensitive sectors, particularly the poor and youth. “In time, those who could not afford cigarettes will lower consumption or quit all-together,” he said.

Habitan noted the rationale behind the reformed sin tax measure is to curb smoking and drinking in these segments while providing additional funds for health programs. 

“These are not basic commodities – cigarettes and alcohol are pleasure goods, which have bad health effects if consumed excessively,” she said, noting consumers buy sin products because these are cheap. 

Filipinos spend around 0.8 percent of their total expenditure on tobacco, statistician Jose Ramon Albert wrote in his article...
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