Local Study

Previously conducted study was reviewed by the researchers as it was deemed relevant to
the study to be undertaken.

According to the study about the analysis of the excise tax on cigarettes conducted by the
National Tax Research Center (NTRC, 2009) any proposal to increase the tax on cigarettes,
despite the varying responses of different categories of smokers, will still result in increased
revenue. While there is indications that corollary to such an increase, there will be a reduction in
the demand among all categories of cigarette smokers also at varying degrees, the end result is
still desirable, considering that it will help the government generate additional revenues and
reduce its costs in subsidizing smokers who have less financial capabilities to treat tobacco-
related diseases. Additionally, there is always a possibility that an increased tax on smoking may
eventually discourage or reduce smoking especially among the young ones and the low income
earners.

Uri and Boyd (1994) conducted a study pertaining to redistributing the Energy Tax
burden in the Philippines by examining the effects of replacing taxes and duties on crude oil and
refined petroleum products with a more broad base tax on manufacturing and service sectors.
They found out that redistributing the tax burden away from petroleum products to the
manufacturing and service sectors of the Philippine economy will be an increase in output by all
producing sectors by 3.5 percent or about 2.4 hundred billion Philippine pesos, a rise in the
consumption of goods and services by 6.1 percent or 1.6 hundred billion Philippine pesos, a rise
in total utility by 6.9 or 1.9 hundred billion Philippine pesos, and virtually no change in tax
revenue for the government. When it was subjected to a sensitivity analysis, the results are
reasonably robust with regard to the assumption of the values of the substitution elasticities. The
method used was an aggregate modelling approach to assess the impacts of redistribution of
taxes and duties that currently exist on crude oil and refined petroleum products on the
Philippine economy. The approach used in the analysis consists of a general equilibrium model
composed of fourteen producing sectors, fifteen consuming sectors, three household categories
classified by income and a government. The model’s equilibrium values do vary in response to
different assumptions of the values of these elasticities; the fluctuations are not so enormous to
suggest that the model is unrealistically sensitive to these parameters.
 Based on Moralista, Delariarte et. Al (2014) study about Sin Tax Law: Its effect to
Consumption of Liquor drinkers and smokers in Calinog, Iloilo, Philippines it was determined
that the effect of sin tax law in the consumption pattern of the respondents in liquor and
cigarettes when taken as a whole and classified as to age, gender, civil status, and monthly
family income will show that smoker increased in consumption in entire group, in all genders, in
all civil status and monthly family income of above 16,000, in the 20-40 years old age bracket
and in the 56 years old and above age bracket. However, the consumption of cigarettes remained
the same in 15-25 years old age bracket, 41-55 age bracket and monthly family income of below
15,000. Descriptive type of research was utilized in the study.

According to Quimbo, Casorla et.al (2012) their study about The Economics of Tobacco
and Tobacco Taxation in the Philippines, Philippines is one of the largest consumers of tobacco
in the Western Pacific Region. Prevalence of tobacco use has remained high for many years and
significant numbers of Filipino youth are smokers. As a result of the high levels of tobacco use,
the Philippines faces considerable adverse health and economic consequences from tobacco.
Given the existing low tobacco product taxes and prices in the Philippines, significant increases
in tobacco taxes will reduce tobacco use and its harmful health and economic consequences
while simultaneously generating new revenues. After an extensive research from a growing
number of countries, it has documented the inverse relationship between cigarette prices and
consumption. The researchers found out that the Philippines is no exception. Existing evidences
as well as new estimates produce for this report clearly indicate that falling cigarettes prices lead
to increases in cigarette consumption, while rising cigarette prices will reduce consumption. In
addition, both the existing and new evidence show that rising incomes will lead to significantly
more smoking in the Philippines unless steps are counter to the trend.

Based on Penamante (2011) he studied Value Added Tax: Its Impact in the Philippine
Economy; Value Added Tax or VAT was introduced less than 50 years ago and remained
confined to a handful of countries until late 1960’s. Today however most countries impose VAT,
which raises on the average about 25% of their tax revenues. After conducting the study, it
shows that VAT may be initially conceived as anti-poor. However, in a macro level, VAT is the
bitter pill that we need to take to boost the sagging Philippine economy in the face of an expected
0.04% GDP cut, the 1.0% GDP increases in the revenue and the additional inflation rate of 7.0%
over two years. It is governments’ intelligent equitable and honest dispose over the people’s
resources.