Sin Tax Bill In the Philippines

By Han Son

Excise on the ‘Merchants of death’

Excise on the ‘Merchants of death’

After 15 years of drawn out debate, the number one smoking country in Southeast Asia successfully ushers in the effects of House Bill 5727 (aka the Sin tax bill) into 2013. Effective since the beginning of the New Year, the bill restructures taxes imposed on alcohol and tobacco goods sold in the Philippines and aims to achieve the commonly adopted unitary tax rate system by 2017.

The Philippines is home to more than 17 million tobacco consumers and prior to the sin tax, was the second cheapest cigarette retailer in the world. Consequently, it comes to no surprise that the tax reform has manifested itself into a topic of great controversy within the country.

Justifying the bill

The duties imposed on the ‘sin’ products are projected to generate a revenue of ₱248 billion for the Philippine government in just 5 years. Under the bill, the funds collected from these sin taxes would be used to finance the Universal Health Care Program of the administration.

Conservative estimates set (tobacco related) government healthcare costs at approximately ₱150 billion a year; and with this figure outweighing the ₱103 billion generated from annual cigarette sales, one can begin to see the intuition and arithmetic behind the bill. As the country enjoys better health conditions the government stands to enjoy healthier balance sheets- giving rise to what appears to be, a win-win situation.

Syntax Error

Despite the relative simplicity and short-term nature of the bill, some of its features raise problematic concerns. First, given that 65% of cigarette demand in the Philippines comes from the poor, could the bill that sees excise tax increase by more than 700% eventually create a situation that prompts people to find alternative ways to smoke (i.e. smuggle cigarettes)? It is possible, given that the country has borne first hand witness to ‘blue seal’ cigarettes smuggling in the past.

Second, establishing a unitary tax rate regardless of packaging volume and brand may weaken the competitiveness and market share of local tobacco producers- who will now have to compete with ‘superior’ foreign brands at similar price levels.

Third, with the absence of a refined system to enforce and collect these new sin taxes, trade authorities can only rely on tax stamps and the mouthed honesty of foreign producers when volumes are declared at custom. With the tax hike, companies may be tempted to under declare.

In what seems to be hurried attempts to improve the Philippine way of life, the sin tax may begin to serve very different purposes in the near future.


The table below briefly outlines the tax changes on a few of these goods:

2013 2014 2015 2016 2017
Cigarette Packs
(<11.5 Pesos)
₱12 ₱17 ₱21 ₱25 ₱30
(with a 4% annual increase thereafter)
Cigarette Packs
(>11.5 Pesos)
₱25 ₱27 ₱28 ₱29 ₱30
(with a 4% annual increase thereafter)
Fermented liquor (Beer)
(NRP < ₱50.6 per liter)
₱15 per liter ₱17 per liter ₱19 per liter ₱21 per liter ₱23.5 per liter (with a 4% annual increase thereafter)
Fermented liquor (Beer)
(NRP > ₱50.6 per liter)
₱20 per liter ₱21 per liter ₱22 per liter ₱23 per liter ₱23.5 per liter (with a 4% annual increase thereafter)

*NRP=net retail price

A full special report on the sin tax bill can be found on YouTube:

BISYO (Part 1 of 7):

Interesting facts/statistics about smoking & alcohol in the Philippines:

Image retrieved from

Agence France-Presse, Philippines ‘sin tax’ introduced, dampens New Year fun, (1 Jan 2013) Retrieved from;
Mary Swire, Philippines Sin Tax Guidelines Published (3 Jan 2013) Retrieved from;

Ducky Paderes, How to collect higher sin taxes (16 Dec 2012)
Retrieved from;
Amado P. Macasaet, Favoritism in sin tax (27 Jan 2013)
Retrieved from;
Official Gazette, Sin Taxes, (19 Sept 2012)
Retrieved from;, Higher booze, cigarette prices as sin tax law takes effect (1 Jan 2013)
Retrieved from;,-cigarette-prices-as-sin-tax-law-takes-effect

11 thoughts on “Sin Tax Bill In the Philippines

  1. Fiona López (3035078408)

    I found this post quite well formulated and highly interesting as it treats a multifaceted issue that concerns most of the countries in the world. In fact, almost every government tries to find a viable solution to decrease the tobacco and alcohol consumption, but mostly its consequences.
    In this context, it is then interesting to point out the accuracy of the solution implemented by Philippine authorities. Is sin tax the best solution? Doing some research I found that according to the World Health Organization a 10% increase in the price of cigarettes goes into an 8% reduction of consumption in developing countries. This is very encouraging. However, concerning alcohol, price hasn’t such an effect on people’s consumption. POS, opening hours and legal age have equally a high importance in such habits, as said in the article The Effects of Price on Alcohol Consumption and Alcohol-Related Problems.
    Philippines may then reinforce the law in various aspects and not only regarding tax bill if their primary objective is people’s health.


  2. Anton Kadura (2011538038)

    Thank you for your post.

    Taxing tobacco products is the right way forward but not necessarily the panacea. In countries such as the Philippines, government funds are extremely scarce so we need to examine which policy best serves our objective of decreasing the number of smokers at the lowest cost. Looking at the statistics we see that the adult smokers have a relatively inelastic demand, thus the tax policy will not considerably affect their consumption habits. The tax-effect is far more effective against the underage smoking population. This is explained by a lower purchasing power and dependency to cigarettes than adult smokers. Similarly they have a more elastic demand for cigarettes. This being said, an increase in tax corresponds to a lower demand for cigarettes among the youth, which in turn results in a lower total consumption. To target the youth population is also the best way to deal with future health problems. However, this approach leaves the problem of adult smokers partially unsolved. What we can conclude is that the Philippines cannot deal with everything right now. Imposing a tax on tobacco products is a good way forward and paves the way for a brighter future.


    Philip DeCicca, Donald Kenkel, Alan Mathios.

    Serginio Sylvain.

    Tobacco in Australia.

  3. CHOW Sai Cheung Calvin (3035015377,10/01/92)

    Thanks Hanson for addressing this hotly discussed issue, for the sake of both the consumers and the rest of the society.

    On one hand, the society could not deprive one’s rights of consuming the products, even though they are killing themselves when they do so. However, researches have shown that domestic violence, increasing pressure on medical system and other social issues are related to the consumption of tobacco and alcohol. The problem has to be tackled.

    Having heavy tax is probably the most direct way to discourage such consumption. Indeed, WHO has recommended that the tax rate on tobacco shall be over 70%. The results, in many other countries, are seen to be successful. The revenue could also be used to subsidize the health hazard generated by such “sinful” consumption.

    It has to be stressed that taxing is not the single, only way to solve the problem. Solving social issues requires not only financial incentives but also education. Taxing itself possibly generates some side effects, say smuggling mentioned by Hanson. However, if taxing is proved to be essential and effective (thanks Fiona for the stats), other measures are to be carried out to solve those minor problems instead.


  4. ROH GI YOUNG (2011534549) (09/28/92)

    Thanks for your post addressing one of the most debatable issues these days.

    The most interesting thing I take from this post is smuggling, a representative negative externality regarding tax laws. I somehow agree that sin tax bill is a wise measure for Philippines since its laws for ‘sinful’ commodities have been seriously vulnerable.

    However, I wonder if its side effect would become much larger in long-term. The Philippines government would enjoy benefits from tax revenue for coming few years; however, lost revenue is expected to increase in later periods as black market grows. In fact, opportunity cost of US$20mn a month has incurred in New York City’s tobacco tax revenue. The article further concerns easy cash might intensify rivalries among criminal gangs, causing social chaos. Philippines government would suffer from regulating the underground economy likewise.

    Regarding Snowdon’s report, as actual cigarette/alcohol consumption receives no big impact from increase in tax, while government statistics drops in a huge figure, the government might also be unable to fulfill one of sin tax’s intended purposes: creating healthy community.


    Available at (visited 11 Feb 2013).

    Christopher Snowdon, “The Wages of Sin Taxes” (2012) Adam Smith Institute.

  5. Hinaho Kasajima (3035024483)

    Thank you for your post! I find this issue interesting because sin products bring death each year but support families of farmers and workers who are reliant on the tobacco industry. The implementation of the bill is controversial since the economic impact outweighs the health issue. The sin tax bill may encourage the reduction of tobacco consumption in the short term, nevertheless, its effectiveness in the long term is not promising.

    I agree that it is inevitable for the black market to emerge as addiction is a serious consequence of smoking. The bill is quite harsh, especially for the poor. I believe that a 700% rise in excise tax is too high, it neglects the health of people addicted to nicotine; smoking cannot be stopped instantly. Therefore, the sin tax itself would not be sufficient to foil the purchase of sin products. There is a need to combine measures. Thus, by putting limitations to health care may reduce consumption. For instance, cigarettes in Japan are sold in vending machines which requires a card. However, the smokers’ right over cancer insurance would be lost if the card is purchased. This allows smokers to hold responsibility for their health.

  6. Vegard Braathen

    I went to The Philippines for my “Lunar new year” vacation. I found this issue very interesting, and even more after I read your blog post. I experienced that people with very low wages were addicted to cigarettes. Without any clear evidence I can tell you that some of them used almost half of their wage to purchase cigarettes. And this amount goes to something that will increase their probability to die young! In my opinion the price level isn’t the biggest problem in this case. They must stop powerful international and national cigarettes providers from doing aggressive marketing in The Philippines. Cigarettes aren’t a “normal good” (higher price leads to lower demand) because of its addictive side. As you mentioned the poor people is more likely to start smoking, and without help they won`t quit. They don’t have the same educational background to take the same rational decisions. To indirect give them the bill it will only leads to a bigger step between the poor people and the rich people in The Philippines and in the long term the tax bill income will only lead to more costs and make it harder to build a nation based on equal rights for everyone.

  7. Liang Yue (2011812094)

    The article is really good because it thoroughly discusses both positive and negative effects of Sin Tax Bill. I agree with Han Son that the bill is good for public health—not only for smokers and drinkers, but also for second-hand smokers and public security. As prices increases so much, there may be black market or smugglers. However, the bill’s benefits in a long run will probably outperform the influence of those bad behaviors. Instead of being afraid of bad behaviors, they can take more efforts to consider how to regulate people’s behavior, such as strengthening police force and introducing harsh punishments. Because many cigarette producers or farmers will lose their job or even livelihood, government can offer professional training for them to find other jobs. For smokers, they are strongly against the bill because many of them cannot afford the high tax to buy cigarettes but feel pretty uncomfortable without cigarettes. But those uncomfortable feelings will disappear after they avoid smoking for around 3 months. Government should show bad effects of smoking and good outcomes when they give up smoking. Also, government should introduce how to quit smoking, such as via TV programs or posters in public places.


    U.S Department of Health & Human Services, Secondhand Smoke Is Toxic and Poisonous, (Jan 4 2007)
    Retrieved from:

    Achoice2live, Quit Smoking Side Effects Timeline, (Dec 2012)
    Retrived from:

    Quit Smoking Timeline–Benefits & Advice, (visited Feb 17, 2013)
    Retrived from:

  8. Mahajan Pranay (2011547534)

    I find that the debate is more complex than just weighing the socio-economic benefits of implementing this bill. This is due to the Philippines primarily being a third world country, where a lower level of education can affect the logicality with which people approach the issue.

    We must ask, yes, the bill will pierce into the incomes of local producers and lead people to smuggling but should we not implement it at the cost of health, pollution, potential ‘significant’ government revenue not only assisting the UHC program but also the more important sectors of the country (aren’t the sin goods ultimately luxuries?)?

    The issue also becomes a moral one; would giving into the negative externalities or benefitting the political lobbyists and producers (a fairly niche group, in front of an entire country) bent on promoting lung cancer be ideal? There are however, several issues to be solved simultaneously especially for countries with astronomical demand in these industries. Changing public perception shall also be a long drawn, extremely taxing job for the government. But, there always has to be a first step (albeit a slower one perhaps, to prevent everyone fleeing to the black market and causing more problems).,-cigarette-prices-as-sin-tax-law-takes-effect

  9. Michail Helminen

    The idea behind raising taxes for cigarettes and other products that are harmful for society in general is something positive. But at the same there are factors and unwanted consequences that need to be taken into account. As Anton touched upon, that raising the prices on cigarettes has a far larger effect on the poorer population than on the wealthier smoking population due to different price/demand elasticity. But due to the addictiveness variable in the equation the poor smokers will find ways to buy cigarettes illegally from the black market anyways, which will reduce the tax income for the state and at the same time not solve the issue in any remarkable way.
    Another point that hasn´t been mentioned is that higher prices of certain products also enhances the exclusivity of it, which can be observed when looking at the pricing in the luxury industry. This could turn into reality in the case of cigarette consumption, which the big players in the industry can take advantage of. This could make smoking even more desirable for both the poor and the wealthier smokers and could in a worst case scenario even lure new potential cigarette consumers into buying cigarettes.


  10. Great post. This is a very interesting topic because is asks the question ‘Who should we really be taxing’ the people sining or the companies who create the products. On one hand people have the right to make their own decisions and not forced to drink or smoke. But companies in South East Asia have been know for targeting a specific demographic, youth. With little advertising regulation cigarette companies have been targeting young people to be the next generation of customers. With commercials with cartoon animals smoking and kids show that depict smoking as cool. Companies that use predatory marketing campaigns to exploit a demographic that is so easily influenced should absolutely pay, but at this point it seems too little to late and the goverment should have been doing a better job protecting its citizens.

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