EconomyEditor's PickSin tax revenues not efficiently used for public health programs — PIDS

January 23, 2023
A man arranges bottles inside a liquor store in Quezon City, March 15, 2021. — PHILIPPINE STAR/MICHAEL VARCAS

THE GOVERNMENT should reevaluate policies and processes under the Sin Tax Reform Act in order to further improve the use of its tax revenues for public health programs, a study by the Philippine Institute for Development Studies (PIDS) said.

“Our main finding is that although program and health outcomes of select public health programs have improved since the implementation of sin tax revenues, these funds have not necessarily been efficiently and equitably utilized by the recipient programs,” the study said.

The study, “Efficiency and effectiveness of earmarking for public health in the Philippines,” was authored by PIDS research consultants Miharu Kimwell, Frances Lois Ngo, Vicente Alberto Puyat, and George Douglas Siton.

Republic Act No. 10351 or the Sin Tax Reform Act (STRA) of 2012 increased excise taxes on tobacco, alcohol, and e-cigarette products in order to reduce consumption and help fund the government’s health programs.

After the law was enacted, there was an estimated increase in the overall appropriations for health by an average of P35.207 billion per year from 2014 to 2020, according to the study.

Around 85% of incremental tax revenues collected from excise tobacco and alcohol taxes are allocated for the health sector.

“Although the STRA has brought about improvements in program and health outcomes, there is a need to revisit policies and processes to reap the benefits of earmarked funds adequately, efficiently, equitably, and effectively in the public health sector,” the study said.

The PIDS study noted that additional financing sources are needed to implement universal healthcare and improve the access of patients to public health services.

“Sin tax revenues have been an essential driver to increase fiscal space for health and have thus consistently provided a primary source of funding for health. Sustainability of this financing strategy must be reviewed using a standardized method to ensure that the National Government is the primary source of financing for health,” the study said.

It also showed that other earmarked funding sources should remain supplementary to the main provisions of the National Government for public health programs.

“Even for programs where there have been considerable increases in constant and per capita appropriations that can be considered adequate for projects and activities, utilization of appropriations and sin tax revenues did not necessarily lead to increased effectiveness, efficiency, and equity of target outcomes,” the study added.

PIDS said that the Department of Health (DoH) should also utilize its budget more effectively.

“There is no information asymmetry in terms of the actual budget received by the DoH from different funding sources lumped into the General Appropriations Act, therefore, the agency can clearly allocate funds from specific budget sources, rather than only attributing specific amounts, to clearly delineate specific program outcomes to the sources of inputs,” it added.

The study also recommended a review of the quality of performance indicators monitored for each program with an earmarked sin tax revenue budget.

“Focusing only on national indicators for different public health programs instead of localized targets will not capture benefits of increases in budget allocations and will thus lead to insignificant or opposite effects to target health outcomes,” PIDS said. — Luisa Maria Jacinta C. Jocson

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