Filipino smokers outflank sin tax

Implementation of the so-called sin tax law in the Philippines has not reduced the consumption of licit products by as much as had been expected because many smokers have shifted to lower-priced brands, according to a story in the Philippine Star.

And in any case, Jo-ann Latuja, a senior economist with the private think tank Action for Economic Reforms (AER), said AER had found that previous estimates of the reduction in smoking that would follow the introduction of the higher tax rates most likely had been overstated.

According to industry estimates, 25 percent of the smokers of premium and sub-premium brands have switched to one-peso brands since the sin tax law took effect last year.

These estimates indicate also that the average daily consumption rose to 14.13 cigarettes per smoker in the second quarter of the year from 13.53 cigarettes per smoker in the first quarter.

For 2013, the government expects to raise PHP64.5 billion from the tobacco industry, made up of PHP51.6 billion in excise tax, PHP6.2 billion from VAT, and PHP6.7 billion from corporate income tax.