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 Tier 1 Unitary
30.00

25.00
Tier 2
20.00
High
15.00

10.00 Medium

5.00 Low 341%

0.00
2012 2013 2014 2015 2016 2017
Key Features 2013 2014 2015 2016 2017
 Removal of price classification freeze/tax
Projected Incremental
advantages of legacy brands. 23.4 29.6 33.5 37.1 40.9
Revenue (Tobacco)
 Unitary tax structure by 2017.
 Tax rates indexed to inflation starting Projected Incremental
10.6 13.3 17.1 19.8 23.3
2017. Revenue (Alcohol)
 Health impact/WHO FCTC compliance a
major consideration in rate setting. Projected Incremental
34.0 42.9 50.6 56.9 64.2
 Bulk of incremental revenues earmarked Revenue (Total)
for UHC. Estimated Earmark for
30.5 38.4 45.6 51.3 58.0
 Safety nets for tobacco farmers/others. Health as of 2012
 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 9
70

8
60
$0.15 $0.14 64.2 7
6.1 6.0 73.1
50 56.9
6
In billiion Pesos

50.6
40 51.2 50.2 5
42.9
4
30 34

3
20
2
$ 1.21 B $ 1.13 B $ 1.61 B
10
1
$ 0.80 B $ 0.97 B $ 1.11 B $ 1.29 B $ 1.46 B
0 0
2013 2014 2015 2016 2017

Projected Actual BIR VAT

 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
20 Law 6
(RA 10351) 19

18 One time, 12% 36%

increase in 2000
(RA 8240) 5
16

14
14
4
2004 Sin Tax Law (RA 9334)
12 Bi-annual tax increases
(2005 – 2011)
Tax rate
10 rose
3
150%

2
6 5.6

4
1
2

0 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Weighted Average Tax Rate (Peso per Pack) Volume of Removals (Billion Packs)
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
$ 0.5 B
$ 0.4 B $ 0.5 B
$ 0.2 B

Source: GAA, DBM

 Sin Tax Revenues for Health
140
122.6 Prescribed Allocation 2016
120

100 Universal
83.7 87.0 69.4 Health Care 80% 55.5
80 Expenditure
30.5 33.8 Medical
60
Assistance 20% 13.9
40
& HEFP

20
53.2 53.2 53.2 53.2 Total 69.4
0
2013 2014 2015 2016
Baseline Sin Tax Rev for Health
 Win for the Poor
National Government Allocation for
Health Insurance Premiums for the Poor
$.92 B
50.0
43.8
45.0 $.82 B

40.0 $.79 B 37.1

35.3
35.0
30.0
25.0
20.0 $.30 B
$.30 B
15.0 12.5
$.11 B $.08 B 12.6
10.0 $.10 B
$.10 B

4.5 5.0 5.0 3.5

$.06 B $.08 B

5.0
$0.01 B $0.01 B $0.01 B $0.01 B $0.02 B
2.9 3.5
0.5 0.5 0.5 0.5 0.8
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: PhilHealth, DOH, GAA

 Physical Accomplishment Targets
Particulars 2014 2015 2016
National Health Insurance Program Php 35,338 M Php 37,060 M Php 43,836 M
No. of NHTS-PR Indigents covered 14.7 M 15.4 M 15.4 M
No. of Senior Citizens enrolled 2.8 M
Health Facilities Enhancement Program Php 13,829M Php 13,356 M Php 26,984 M
No. of Barangay Health Stations upgraded
Birthing Facilities 1,754 1,661 3,886
PHIC-TSEKAP Accredited BHS 17,541 796
Rural Health Units/ City Health Centers 1,028 2,617 2,623
School-Based BHS 3,200 3,200
Preventive and Promotive Health Program
Health Human Resource Php 2,970 M Php 4,256 M Php 7,073 M
Doctors 320 398 946
Nurses 11,292 13,500 15,727
Midwives 2,700 3,100 3,100
Dentists - 214 324
Public Health Associates - 787 713
Medical Technologists - 308 308
National Immunization Program Php 2,542 M Php 3,884 M Php 3,990 M
No. of children fully immunized 2.07 M 2.2 M 2.2 M
No. of pneumococcal vaccines provided
infants 429,000 429,000
senior citizens 1.4 M 1.2 M

Source: DBM
 Physical Accomplishment Targets
Particulars 2014 2015 2016
Family Health and Responsible Parenting Php 2,539 M Php 3,274 M Php 3,275 M
of which:
Micronutrient Supplementation
No. of children below 5years old provided with vitamin A 4.4 M 4.4 M
supplement.
Family Planning
No. of clients provided with FP commodities & services 2.2 M 2.7 M 2.7 M

TB Control Program Php1,062 M Php1,094 M Php1,080 M

No. of cases treated 257,972 253,089 253,381

Treatment of Public Health Diseases Php 827.3 M Php 788.5 M Php793.0 M

No. of persons treated:
Malaria (No. of Diagnosed & Treated cases) 6,962 4,365 3,885
Schistosomiasis (No. of mass drug treatment) 2M 2.58 M 2.48 M
Filariasis (No. of mass drug treatment plus ICT and 17 M 17.6 M 17.9 M
disability kit)
Other Infectious Diseases Php 781.7 M Php 744 M Php1,058 M
No. of HIV/AIDS cases diagnosed and given treatment 8,030 16,000 35,000
Hospital Staffing Standards Php 2,900 M Php 5,800 M Php4,336 M
No. of Positions 2,152 6,686 3,488

Source: DBM
 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

90 14.2 8.8
2014 Balance 14.2
2015 Balance 8.8
70
30.5 33.8
Total 23.0
50

Allocation of Balance
30
53.2 53.2 53.2 DOH 2015 MBPF 9.1
PGH 2015 GAA 3.2
10
Total 12.3

-10
2013 2014 2015 Remaining Balance 10.7
Baseline Projected Balance from
Actual Collection