Economic cost of smoking outweighs tax on cigarettes — Finance Dept.

The economic cost of smoking on health “far outweighs” the excise tax collected on cigarettes, the Department of Finance argued on Thursday during the first Senate hearing on the sin tax reform bill.   While the excise tax from cigarettes totaled P26 billion in 2011, the economic costs of smoking on health amounted to P177 billion in the same year, Finance Secretary Cesar Purisima noted in a presentation.   The 2011 excise tax collection accounts for 15 percent of total economic cost health, according to the numbers Purisima presented before the Senate ways and means committee.   “Nearly 6 million people [in the world] die every year because of smoking, and its economic costs are just as great,” the finance chief added.   Health care costs and productivity losses due to cardiovascular diseases amounted to P74 billion in the Philippines alone, according to Department of Health data.   That amount does not include the P71.8 billion incurred from coronary artery disease, P24.9 billion from chronic obstructive pulmonary disease, and P6.5 billion from lung cancer.   Foregone revenues   The Philippines ranked fourth in the world in terms of the cheapest excise tax, making cigarettes affordable even to the poor, Purisima noted.   Thus, “the poor and the young are the most vulnerable” to smoking-related diseases, the Finance chief said.   Cheaper cigarettes riding on low excise tax simply “downshifted” smokers to low-priced brands, he added.   “They do not realize that health risk of tobacco is the same regardless of the price,” the finance secretary noted.   Purisima claimed government lost P19.5 billion in revenues from 2006 to 2010 when cigarettes brands were simply downshifted.    This “foregone revenues” could have been spent on PhilHealth premium subsidies for 8 million indigent families, vaccines for 9 million children, rotavirus vaccine for 29 million children, and influenza and pneumonia vaccine for 11 million senior citizens, according to the finance chief.   Purisima then called for the passage of the sin tax reform bill or HB 5727, “An Act Restructuring the Excise Tax on Alcohol and Tobacco Products.”   He said it would help generate P60 billion in revenues for government, adding that a higher tax rate for cigarettes would “be effective to keep the young [and the poor] from starting to smoke.   “By reforming the sin tax, we make the poor and young less vulnerable. We affirm the fundamental proof that human life is of the highest priority,” Purisima noted.   The Bureau of Internal Revenue, using the rates under the House version of the sin tax bill, expects to rake in P31.35 billion in 2013, P39.02 billion in 2014, P42.68 billion in 2015 and P41.51 billion in 2016 once the measure is in place. — VS, GMA News