Tobacco Tax Increases in the Philippines: More Revenue and Better Health

This Policy Note was written by the Economics for Health team. The policy note assesses the trends in tobacco consumption, government tax revenues, and company profits. Following the Sin Tax Reform of 2012, which included a significant tax increase on cigarettes and annual adjustments, smoking prevalence has been declining, both among youth and adults. Tax revenues, on the other hand, were increasing through 2021, before beginning to decline, from 6.3% of total tax revenue collection to 3.2% by 2024. Cigarette prices reveal that the industry is over-shifting the annual excise tax increase of 5% to maximize profits. Breaking down the average price of a cigarette pack into components, the researchers find that the sum of the value chain and company profits components increased 35.3% from 2020 to 2023. Furthermore, company profits are self-reported and relatively easy to manipulate. An analysis of cigarette exports also reveals some consistencies that require additional research. The policy note concludes with recommendations for the government to increase cigarette taxes at a higher pace to ensure that public finance, rather than the industry is benefiting from higher prices, as well as to strengthen tax administration