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Home Op-Ed Columns Opinion on Page One Is sin tax just syntax?

Is sin tax just syntax?



IN the Bible, the cost of sinning is eternal damnation; in government, the cost is made more pecuniary. And it usually arrives in the form of a bill.

Mid-week, the House of Representatives, on third and final reading, approved House Bill 1206 with a staggering vote of 184-2-1 — the first measure to sail past this 18th Congress. In it, sin taxes for alcohol, tobacco and e-cigarettes are to rise by 2020, and incrementally thereafter, in a multi-tiered imaginaire, depending on alcohol and tobacco content. This updates Republic Act 10351 of 2012, the first iteration of such an excise tax on these vices. Indeed, the cost of sinning will soon be more expensive.


For the Department of Finance, this bill will help balance bills, namely those that pay for universal healthcare (UHC). Quoting Executive Secretary Salvador Medialdea, revenues from excise taxes “maintain a broader fiscal space to support the implementation of the Universal Health Care Act.” Especially with the recent suspension of some of the lotteries of the Philippine Charity Sweepstakes Office (PCSO), whose charity fund, too, finances the UHC Act, this is a welcome addition to government coffers.

However, let us focus less on what sin taxes do — namely, raise costs and generate income for the government — and rather on what they cause to be done.

In governance, the purpose of an excise tax is not to raise revenue, though that certainly is a welcome offshoot. The purpose is to change a pattern of behavior, what we call in political science, a path dependency. The argument is simple: if a vice is too expensive, perhaps citizens will become more virtuous.

Critics, of course, besides stressing the emergence of a “nanny state” that meddles in the personal affairs of its citizens, have insisted that there is little impact on behavior, if any. Some studies have even gone to prove a reverse impact of spurring consumption, transforming an otherwise normal good into a “Veblen good” whose demand increases as price increases. Why bother with an excise tax, then, if man cannot be taught?

But perhaps the problem is that public policy is too weak. Perhaps our nanny state is not stentorian enough. Perhaps we need higher taxes and more stringent policy to discipline our citizens. If man be tough, then our love need be tougher.

In the Gulf States, sin taxes levied on alcohol and tobacco range anywhere between 100 and 200 percent. Once agreed upon by the council of ministers, they are imposed overnight — not in increments, as we plan to do here.

There, too, exists in Gulf States, a monthly cap, calculated as a percentage of income, that places a ceiling on alcohol consumption per consumer. What this means is that customers must necessarily be gainfully employed to afford their vices. Granted, the Middle East comprise Islamic states which frown on alcohol. But so, too, do we. In the words of Health Undersecretary Rolando Domingo, alcohol drinking leads to a host of social ills, including “crimes, drunk driving, domestic abuse, and loss of productivity.”

It is often the unproductive and unemployed who lend themselves most to vices. Idle minds, after all, are the devil’s workshop. Those with jobs care more about productivity: they cannot fall ill from smoking too much, nor can they binge-drink lest their work product suffer. They are not the ones who indolently loiter, prone to vice. It is the behavior of this latter segment that policy targets most. It is also these for whom price is not inelastic. Reliant on remittances, rents, or feudal sources of income, they have less disposable income. They are the ones less able to absorb the shock of higher prices. Contrary to Aristotle, who never did have to balance budgets, man is not a political animal. He is a financial animal: he thinks with his purse.

If we institute an income-based monthly quota system on tobacco and alcohol, all who “sin” will necessarily be employed. With a job, they are least likely to sin to maintain that job. Win-win.

The alcohol and tobacco lobby no doubt will not be pleased by these recommendations. But, such reform provides an opportunity for alcohol and tobacco manufacturers to pursue foreign markets where profits can be made more lucrative given the higher purchasing power of consumers abroad. This has the potential to improve our balance of payments by increasing our GDP through exports. In other words, manufacturers need not suffer, and the economy benefits. Also, a win-win.

Good governance creates good citizens. The ‘nanny state’ steps in where the family has failed. Through effective macroeconomic policy, the citizen can be disciplined. But, we need to be intent on doing so.

Let us not stop here. Alcohol and tobacco are not the only vices. In Texas and Chicago, for instance, the state enforces an excise tax on strip clubs and night life — called a “pole tax” in the case of the former, and a “naked tax” in the latter.

Another ill that ails is television that detracts from the intellectual life of the average citizen. With President Duterte’s less than salutary attitude toward ABS-CBN entertainment, one could easily imagine a tax levied on consumers who spend hours idly watching soap operas and talk shows. We could either tax subscriptions themselves, or television sets, for instance. Doing so would shift recreation to the internet where literacy and digitization would be incentivized, bringing us closer to Sustainable Development Goal targets.

The point is that governments must be concerned with what detracts from the intellectual life and healthy habits of its citizens. The negative externalities of “sins” must be borne into their financial costs — and with interest! It is true that the wealthy, in spite of costs, will continue with their ways. And there will always be the underground black market. But the decadence of the wealthy will not sin taxes alter, nor policy deter. The purpose of government is to care for the life of the average citizen.

By changing the behavior of the populace, more funds can be directed to other — more beneficial — sectors of the economy, such as real estate, education and other forms of consumer spending. Less money spent on vices means more money available for virtues. In other words, we can reorder funds and direct spending towards other sectors.

Alexis de Tocqueville, the father of federalism and the first to truly study modern democracy, wrote of the latter in his Democracy in America: “I praise [it] less for what it does and more for what it causes to be done.” The same is true of sin taxes. It births a good Filipino.

Is sin tax just syntax—namely the reordering of funds to balance sheets? Perhaps. But just as good grammar requires syntax, so, too, does good governance the homonym.

The author is an economist who holds master’s degrees in government and international history from the London School of Economics, and a bachelor’s degree in international politics from Georgetown University. She has trained at Harvard University on international education and admissions. She has held teaching positions at Georgetown University, and research positions at the Carnegie Endowment for International Peace, the Center for International and Regional Studies, and the Arab Gulf States Institute in Washington, D.C.


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