A new study on smoking consumption by think-tank Action for Economic Reforms (AER) shows that despite the new high sin tax rates that have improved revenue collections, further tax increases can be done in the medium-term, which will satisfy both revenue and espe-cially health goals.
The study, based on a three-month survey of nearly two thousand respondents in Mega Manila and Metro Cebu in the last quarter of 2012, reveals that while cigarette consumption will decrease, the drop in consumption will be less than what has been previously estimated by previous studies, which were presented in last year’s Congress hearings on the sin tax.
“Our new study fills in a key gap in the literature on smoking consumption in the Philippines,” said Jo-ann Latuja, AER senior economist. “Compared to 2012, where most projections of the benefits of the sin tax reforms were based from general surveys that were not focused on cigarette consumption, we have instead gathered new data on the factors affecting cigarette demand among Filipinos—especially price.”
“We have found that the previous estimates on reduction of smoking consumption arising from the higher tax rates are most likely overstated. Our report demonstrates that a 10-percent increase in the prices of cigarettes would bring smokers in the city to decrease consumption by 2.84 percent. DOF [Department of Finance], however, had earlier projected that the fall in tobacco intake would be 5.8 percent,” she explained.