Earmarking Revenues for
Health: A Finance
Perspective on the
Philippine Sintax Reform
Jeremias N. Paul Jr.
CONTEXT







Aquino Administration Social Contract with the Filipino
People including Universal Health Care.
“No new taxes” promise of President Aquino.
Philippines among top smoking countries in Southeast
Asia. Tobacco taxes and prices among lowest in the
world.
Strong tobacco lobby with deep business and political
connections. Tobacco lobby hindered previous excise
tax reform efforts.
Alcohol: Deadline for Philippine compliance to WTO
decision on distilled spirits.
Tight deadline during Aquino Administration – one
year to make it happen.
The Philippines ratified the WHO Framework
Convention on Tobacco Control in 2005.
REPUBLIC ACT NO. 10351

An Act Restructuring the Excise Tax on
Alcohol and Tobacco Products (RA
10351)
(Signed into Law - Dec. 19, 2012)

Landmark Legislation under the
Aquino Administration.

Fundamentally a good governance
measure with positive impact on both
fiscal and public health.
Philippine Tobacco Tax Reform Path at a Glance
In Philippine Peso
35.00
Premium
Unitary
Tier 1
30.00
25.00
Tier 2
20.00
15.00
High
10.00 Medium
5.00
341%
Low
0.00
2012
2013
2014
2015
Key Features
 Removal of price classification freeze/tax
advantages of legacy brands.
 Unitary tax structure by 2017.
 Tax rates indexed to inflation starting
2017.
 Health impact/WHO FCTC compliance a
major consideration in rate setting.
 Bulk of incremental revenues earmarked
for UHC.
 Safety nets for tobacco farmers/others.
2016
2017
2013 2014 2015 2016 2017
Projected Incremental
Revenue (Tobacco)
23.4
29.6
33.5
37.1
40.9
Projected Incremental
Revenue (Alcohol)
10.6
13.3
17.1
19.8
23.3
Projected Incremental
Revenue (Total)
34.0
42.9
50.6
56.9
64.2
Estimated Earmark for
Health as of 2012
30.5
38.4
45.6
51.3
58.0
REPUBLIC ACT NO. 10351
Incremental revenues earmarked for health
Section 8 (C): After deducting the allocations under
Republic Act Nos. 7171 and 8240,


Eighty percent (80%) for:

National Health Insurance Program

Attainment of the Millennium Development Goals

Health awareness programs
Twenty percent (20%):

Medical assistance

Health enhancement facilities program
Sintax Reform – Win for Revenues
 Generated US$ 3.9 billion in incremental excise tax
revenues during the first three years of implementation,
far exceeding government projections. About 80% of this
increase is accounted for by tobacco.
 Tobacco and alcohol excise tax revenues as a
percentage of GDP, increased from 0.5% of GDP in
2012 to 1.1% of GDP in 2015. Sintax Reform reversed
the declining trend of share of these excise taxes to
GDP beginning 1997.
 The incremental revenues does not yet consider VAT
and additional fiscal space generated resulting from the
investment grade rating following passage of law.
Win for Revenues
Projected vs. Actual Incremental Revenue from RA 10351
80
10
$0.19
8.8
70
9
8
60
In billiion Pesos
50
$0.15
6.1
$0.14
6.0
64.2
73.1
7
56.9
6
50.6
51.2
40
42.9
30
50.2
5
4
34
3
20
2
$ 1.21 B
$ 1.13 B
10
$ 0.80 B
$ 0.97 B
$ 1.61 B
$ 1.11 B
$ 1.29 B
$ 1.46 B
0
1
0
2013
2014
2015
Projected
Actual
2016
BIR VAT
2017
Win for Revenues
Share of tobacco and alcohol excise
collections to GDP highest in 2015.
Tobacco & Alcohol Excise Collection
1.2%
1.1%
1.1%
1.0%
0.9%
0.9%
0.9% 0.9%
0.8% 0.8% 0.8%
0.8%
0.8%
0.7%
0.7%
0.7% 0.7%
0.6% 0.6% 0.6% 0.6%
0.6%
0.5% 0.5%
0.5%
0.4%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tobacco & Alcohol Excise Collection
Source: BIR and NSCB
Earmarking Sintaxes – Win for Health
 DOF primary responsibility is revenue. Did its homework to
ensure that all risks that will affect revenue are properly
evaluated.
 DOF supported earmarking as a political imperative. As a
result sintax reform was framed as a health measure and not a
revenue measure.
 DOF chaired the interagency team that drafted the Sintax
Implementing Rules and Regulations to ensure PFM
safeguards were incorporated.
 Soft earmarking - While DOH is assured of funding from the
Sintax Law, details of its expenditure program still have to go
through the annual General Appropriations Act.
 Earmarking for health is not time bound.
Framing Sintax Law as a health measure than a
revenue measure paved way for significant tax
increases.
2012 Sin Tax
Law
(RA 10351)
20
18
One time, 12%
increase in 2000
(RA 8240)
16
19
6
36%
5
14
14
4
2004 Sin Tax Law (RA 9334)
Bi-annual tax increases
(2005 – 2011)
12
Tax rate
rose
150%
10
3
8
2
5.6
6
4
1
2
0
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
Weighted Average Tax Rate (Peso per Pack)
2006
2007
2008
2009
2010
2011
2012
Volume of Removals (Billion Packs)
2013
2014
Earmarking Sin Taxes – Win for Health
 DOH budget in 2016 (P122.6 billion) almost triple its budget
in 2012 (P42.2 billion). If you use 2013 as the baseline, DOH
budget increased by 57.3% in 2014, 63.5% in 2015 and
130.4% over 2013 levels.
 Earmarking enabled the National Government to subsidize
the health insurance premiums of 15.4 million poor primary
members in 2015, up from only 5.2 million registered primary
members in 2012.
 Philhealth has also expanded its services and now
implementing case rates, no balance billing for indigents,
more Z packages for cancer patients and has introduced
primary care benefit package for the poor.
 Sintax Law also now covers 2.8 million senior citizens with
free Philhealth insurance coverage.
Win for Public Health
$ 1.9 B
$ 2.0 B
$ 1.3 B
$ 1.0 B
$ 0.7 B
$ 0.4 B
$ 0.2 B
Source: GAA, DBM
$ 0.5 B
$ 0.5 B
Sin Tax Revenues for Health
140
122.6
120
100
83.7 87.0 69.4
80
30.5
60
33.8
40
20
53.2
53.2
53.2
53.2
2013
2014
2015
2016
0
Baseline
Sin Tax Rev for Health
Prescribed Allocation
2016
Universal
Health Care
Expenditure
80%
55.5
Medical
Assistance
& HEFP
20%
13.9
Total
69.4
Win for the Poor
National Government Allocation for
Health Insurance Premiums for the Poor
$.92 B
50.0
43.8
45.0
$.82 B
$.79 B
40.0
37.1
35.3
35.0
30.0
25.0
20.0
$.30 B
12.5
15.0
10.0
5.0
0.0
$0.01 B $0.01 B
$0.02 B
0.5 0.5 0.5 0.5 0.8
$.11 B
$.08 B
12.6
4.5 5.0 5.0 3.5
3.5
2.9
$.06 B
$0.01 B $0.01 B
$.10 B
$.10 B
$.30 B
$.08 B
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: PhilHealth, DOH, GAA
Physical Accomplishment Targets
Particulars
National Health Insurance Program
No. of NHTS-PR Indigents covered
No. of Senior Citizens enrolled
Health Facilities Enhancement Program
No. of Barangay Health Stations upgraded
Birthing Facilities
PHIC-TSEKAP Accredited BHS
Rural Health Units/ City Health Centers
School-Based BHS
Preventive and Promotive Health Program
Health Human Resource
Doctors
Nurses
Midwives
Dentists
Public Health Associates
Medical Technologists
National Immunization Program
No. of children fully immunized
No. of pneumococcal vaccines provided
infants
senior citizens
Source: DBM
2014
Php 35,338 M
14.7 M
2015
Php 37,060 M
15.4 M
Php 13,829M
Php 13,356 M
1,754
1,028
Php 2,970 M
320
11,292
2,700
Php 2,542 M
2.07 M
1,661
17,541
2,617
3,200
2016
Php 43,836
15.4
2.8
Php 26,984
M
M
M
M
3,886
796
2,623
3,200
Php 4,256 M
398
13,500
3,100
214
787
308
Php 3,884 M
2.2 M
Php 7,073 M
946
15,727
3,100
324
713
308
Php 3,990 M
2.2 M
429,000
1.4 M
429,000
1.2 M
Physical Accomplishment Targets
Particulars
Family Health and Responsible Parenting
of which:
Micronutrient Supplementation
No. of children below 5years old provided with vitamin A
supplement.
Family
Planning
No. of clients provided with FP commodities & services
TB Control Program
No. of cases treated
2014
Php 2,539 M
2015
Php 3,274 M
2016
Php 3,275 M
4.4 M
4.4 M
2.2 M
2.7 M
2.7 M
Php1,062 M
257,972
Php1,094 M
253,089
Treatment of Public Health Diseases
No. of persons treated:
Malaria (No. of Diagnosed & Treated cases)
Schistosomiasis (No. of mass drug treatment)
Filariasis (No. of mass drug treatment plus ICT and
disability kit)
Php 827.3 M
4,365
2.58 M
17.6 M
3,885
2.48 M
17.9 M
Other Infectious Diseases
No. of HIV/AIDS cases diagnosed and given treatment
Hospital Staffing Standards
No. of Positions
Php 781.7 M
Php 744 M
8,030
16,000
Php 2,900 M Php 5,800 M
2,152
6,686
Php1,058 M
35,000
Php4,336 M
3,488
Source: DBM
6,962
2M
17 M
Php 788.5 M
Php1,080 M
253,381
Php793.0 M
Challenges Remain
 Improving absorptive capacity and budget
execution.
 Managing political expectations and
effectively communicating wins on the ground.
 Strengthening Philheath’s information
systems and risk management capabilities.
 Enhancing health systems delivery under a
decentralized system.
CONCLUDING REMARKS
 Raising tobacco taxes is a low lying fruit for raising
revenues for health. Without additional revenues,
there is nothing to earmark.
 Think Political and Win-Win. Listen and understand
the mindset of finance officials. Finance ministries
generally do not like earmarking but politicians do.
Take advantage of this political reality and get the
support of your finance colleagues by demonstrating
you can spend wisely. They look at value for money,
outcomes and concerned that UHC can be a
bottomless pit, if left uncontrolled.
CONCLUDING REMARKS
 Money can’t buy health. It is a necessary but not
sufficient condition for increasing spending on
health. Efficiency, effectiveness and execution
capacity are key to delivering services on the
ground.
 Perfection is the enemy of the good. Focus on the
substance rather than the form.
 Importance of strategic communications and
coalition building.
 Legislative earmarks are not a guarantee that there
will be more resources for health. Need to monitor
budget execution closely.
CONCLUDING REMARKS

Work with finance and other ministries to adopt a
systems and whole of government/society approach.

Avoid Silos. Compartmentalized thinking must
change.

Think Convergence. Work with other sectoral
agencies to achieve a common goal and an
integrated response to cross cutting issues. e.g.
water and sanitation.

Actively look for synergies. Work towards achieving
synergies with other sectors. eg. Tobacco taxation
and prevention of NCDs/Support for WHO FCTC
implementation.
THANK YOU
Any excess over projections is carried
over to the next year
110
Sin Tax Balance
14.2
90
70
30.5
8.8
33.8
2014 Balance
14.2
2015 Balance
8.8
Total
23.0
50
Allocation of Balance
30
53.2
53.2
53.2
10
-10
2013
Baseline
2014
Projected
2015
Balance from
Actual Collection
DOH 2015 MBPF
9.1
PGH 2015 GAA
3.2
Total
12.3
Remaining Balance
10.7