CHAPTER 1

INTRODUCTION

BACKGROUND OF THE STUDY

Twenty-eight percent or 17.3 million Filipino adults age 15 years

and older are current tobacco smokers, according to the results of the
2009 Global Adult Tobacco Survey (GATS). Almost half (48 percent or
14.6 million) of adult males and 9 percent (2.8 million) of adult
females are current smokers. Moreover, 23 percent of Filipino adults
are daily tobacco smokers: 38 percent for males and 7 percent for
females. (https://psa.gov.ph/article/173-million-filipino-adults-are-
current-tobacco-smokers May 6, 2017 1:59 pm)

Filipinos mainly smoke cigarettes, which include manufactured

cigarettes and hand-rolled cigarettes. Cigarettes are smoked by 47
percent of men and by 9 percent of women. On the average, male daily
smokers consume 11 cigarettes per day while female daily smokers
consume 7 cigarettes per day. Among adults who smoked 12 months before
the survey, 48 percent made a quit attempt, while only 5 percent made
a quit attempt and successfully quit smoking. More than one-third (37
percent) of adults who worked indoors or outdoors with an enclosed
area at their workplace were exposed to tobacco smoke. Among adults
who used public transportation a month prior to the survey, more than
half (55 percent) were exposed to second-hand smoke, while among those
who visited government buildings or offices, more than one-third (37
percent) were exposed to second-hand smoke.
(https://psa.gov.ph/article/173-million-filipino-adults-are-current-
tobacco-smokers May 6, 2017 1:59 pm)

Euromonitor said that adults in the Philippines each take 5.4

shots of distilled alcohol weekly, making the country third in the
list of the world's heaviest drinkers."Philippine alcoholic beverages
slowed down but recorded stable growth in 2012. The maturation of the
beer category, which is the biggest category in the Philippines,
contributed to the slower rate," the firm specializing on consumer
insights and consumer markets writes in an executive summary.
(http://www.philstar.com/newsfeature/2014/02/06/1286936/infographic-
filipinos-3rd-heaviest-drinkers-world May 6, 2017 2:48 pm)

To address the issues concerning tobacco and alcohol use in the

country which affects both the adults and young alike the Philippine
congress passed House Bill No. 5727 and Senate Bill 5249. These bills
were used to hamper R.A. 10351 also known as Sin Tax Reform Law of
2012. The two main purpose of the law were to: 1. increase Government
Revenue, and 2. to reduce alcohol and tobacco consumption.

House Bill 5727, or the Sin Tax Bill, aims to restructure the
existing taxes imposed on alcohol and tobacco goods. Duties on these
products are a potential revenue source that will help fund the
Universal Health Care Program of the administration. Likewise, higher
taxes—and consequently higher costs—are seen as a deterrent to the
consumption of “sin” products, whose adverse effects are mostly borne
by the poorer segments of society. According to the Department of
Health (DOH), the Philippines have an estimated 17.3 million tobacco
consumers, the most number of smokers in Southeast Asia. Filipinos on
average consume 1, 073 cigarette sticks annually, while the smokers in
the region consume less than a thousand sticks yearly. This high
consumption rate is seen as a result, among others, of the very low
cigarette prices in our country. (http://www.gov.ph/sin-tax/ May 6,
2017 1:53 pm)

Sin taxes may help to promote a healthier society. The logic is

that by making it more expensive to engage in unhealthy activities,
such as smoking or excessive alcohol consumption, less people will do
it or at least not do it as often. As a result, people will have lower
chances of dying from lung disease, liver disease, and other health
complications brought on from these products. These taxes are often
more acceptable over other types of taxes. Since not everyone enjoys
or participates in smoking tobacco, gambling, or drinking alcohol, it
is much easier for the general public to accept these taxes since they
may not be taxed, and it won't affect them. In general, the public
realizes the dangers in many of these products or services, and it
morally seems more acceptable to tax them as compared to other vital
goods, such as food, milk, or vitamins. They can increase government
revenue. These taxes can often raise huge sums of money that can go
towards education, better roads, parks, and other special projects for
communities. (http://study.com/academy/lesson/sin-taxes-definition-
pros-cons.html May 6, 2017 2:09 pm)

Some feel that sin taxes are a form of personal discrimination.

Those who are against sin taxes believe that they should be allowed to
make their own personal decisions regarding what 'vices' to consume or
not consume and that these activities really have no material negative
consequence on the general public. Therefore, they should not have to
pay special taxes for certain goods, and the government should not
meddle in their daily affairs. Some people also feel the lower income
class suffers. Many argue that sin taxes hurt the poor more than high
income individuals. An extra dollar tax on a pack of cigarettes eats
up a higher percentage of income for a low-income individual than it
does for a wealthy person. (http://study.com/academy/lesson/sin-taxes-
definition-pros-cons.html (May 6, 2017 2:09 pm)

Objectives of the Study

This study aims to assess the implementation of R.A. 10351 also

known as Sin Tax Reform Law of 2012 and to provide possible
suggestions for the proposed amendments or revision of the law.

Specifically this study aims to answer the following:

1. What is R.A. 10351 and the reasons for creating this

law?

2. Who are affected and the main beneficiaries of R.A.

10351?
 3. What are some of the government programs with regard to
those who are affected by the law?

4. Are there any vague, ambiguous or weaknesses in any

provisions of the law?

These are the main question that the researcher would want to
answer. And as I go along with the study I may formulate more
questions to be answered throughout the process for much clarity in
the analysis of R.A. 10351. The focus of the study is the
effectiveness of the law and every question or concern I have will be
answered through the perspective of the selected adult consumers of
alcohol and tobacco that will be subject to an interview.

Variable

Implementation and effectiveness of R.A. 10351

Indicators

1. Examining the intent and purpose of creating R.A. 10351

2. Government programs dealing with those affected by the law

3. Surveys and statistical data about Tobacco and alcohol

consumption.

Theoretical Framework

This study is supported by Regulation Theory. This theory is

currently-fashionable type of Marxist economic theory. Regulation in
this case does not just mean rules and regulations; it means the self-
regulation mechanisms of a system. The economy is not something
abstract which happens in isolation, it happens in the context of
social, cultural, political and other systems. These systems interact
with the economy and make it work. Regulation theory therefore sees
the intimate interconnections between the economy and society. Most
of its terminology is designed to allow you to talk about social and
cultural systems alongside economic activity.
(http://www.yorku.ca/anderson/Intro%20Urban%20Studies/Unit2/regulation_
theory.htm May 9, 2017 10:43 am)

As enshrine in our constitution the government has the power to

make laws that is beneficial to the people. Laws created shall be the
mechanism to be followed for in order for the economy and society to
work together. Therefore by regulating the use of tobacco and alcohol
which would result in the increase of revenue for our government and
reduction in its consumption that will result to healthier environment
is a win-win situation for all.

Another theory to be used is the Social Control Theory - served

as a central concept both for relating sociology to social philosophy
and for analyzing total societies. In its classical sense, it referred
to the capacity of a social group to regulate itself. (Morris
Janowitz, 2014 University of Chicago)

Control Theory in sociology can either be classified as

centralized or decentralized or neither. Decentralized control is
considered market control. Decentralized control or market control is
typically maintained through factors such as price, competition, or
market share.
(http://dictionary.sensagent.com/Control_theory_(sociology)/en-en/ May
10, 2017 2:26 pm)

Assumption

It is anticipated that the implementation and effectiveness of

R.A. 10351 will be challenged. The research should point out the
circumstances that lead to the implementation of the Sin Tax Reform
Law.

1. Twenty-eight percent or 17.3 million Filipino adults age 15

years and older are current tobacco smokers, according to the results
of the 2009 Global Adult Tobacco Survey (GATS). Thus, it can be
assumed that there is alarming number of tobacco users in the
Philippines.

2. Almost six million people die from tobacco use and 2.5 million
from harmful use of alcohol each year worldwide, the World Health
Organization (WHO) reports. The assumption is that tobacco and alcohol
contributes to a high percentage of death in the world.

3. To reduce harmful alcohol use, WHO recommends a number of

measures including increasing excise taxes on alcoholic beverages,
regulating availability of alcoholic beverages (including minimum
legal purchase age), restricting exposure to marketing of alcoholic
beverages through marketing regulations or comprehensive advertising
bans, and treatment of alcohol use disorders and brief interventions
for hazardous and harmful drinking. By following the suggestions of
the World Health Organization, it is assumed that the imposition of
higher taxes will reduce the consumption of tobacco and alcohol.

4. Despite the imposition of R.A. 10351 the percentage of alcohol

and tobacco consumers are still high, thus it is assumed that the law
is weak.

Significance of the study

It is very timely to study the effectiveness of the

implementation of R.A. 10351 to point out possible reasons why despite
the presence of this law, alcohol and tobacco consumption have not
reduced to a great extent. By studying the law the researcher could
suggest factors and propose amendments or revisions that would improve
its implementation and to achieve its purposes.

Beneficiaries of the Study:

Law Student. This study will help law students for a deeper
understanding of R.A. 10351 and its application.

Law Makers. Law makers will also benefit from this study by
giving them an idea on the provisions on R.A. 10351 that the
researcher would want to amend to provide a more detailed and clear
intent of the law.

Consumers. The study will definitely call the attention of the

consumers of alcohol and tobacco and will give them much awareness of
the law, on how it works and on how it could affect their living.

Department of Health. Sin Tax Reform Law as a health bill will be

helpful to the DOH for it will open a perspective on how important the
allocation of such revenue to the departments fund. The allocation of
such revenues will be used to provide basic health services to those
persons who suffer from diseases caused by alcohol and tobacco use.

Department of Agriculture. If the law will attain its purpose on

reducing tobacco consumption, it will surely affect those farmers who
are engage in tobacco plantation production, thus after conducting
this study the DA will have a view on how to reach those farmers by
providing them alternative livelihood programs.

Definition of Terms

Spirits or distilled spirits’ is the substance known as ethyl

alcohol, ethanol or spirits of wine, including all dilutions,
purifications and mixtures thereof, from whatever source, by whatever
process produced, and shall include whisky, brandy, rum, gin and
vodka, and other similar products or mixtures. (R.A. 10351)

Proof spirits’ - is liquor containing one-half (1/2) of its

volume of alcohol of a specific gravity of seven thousand nine hundred
and thirty-nine ten thousandths (0.7939) at fifteen degrees centigrade
(15°C). A ‘proof liter’ means a liter of proof spirits. (R.A. 10351)

Suggested net retail price’ - shall mean the net retail price at
which locally manufactured or imported distilled spirits are intended
by the manufacturer or importer to be sold on retail in major
supermarkets or retail outlets in Metro Manila for those marketed
nationwide, and in other regions, for those with regional markets.
(R.A. 10351)
 CARBONATED WINE – shall refer to an effervescent wine
artificially charge with carbon dioxide and containing more than 0.392
of carbon dioxide per 100 millilitres of wine;

CIGARETTES PACKED BY HAND – shall refer to the manner of

packaging of cigarette sticks using an individual person’s hands and
not through any other means such as a mechanical device, machine or
equipment;

COMPOUNDED LIQUOR – shall refer intoxicating beverages whatever

concocted by or resulting from mixture of or addition to distilled
spirits, either before or after rectification, of any coloring matter,
flavoring extract or essence or other kind of wine, liquor or other
ingredient;

NET RETAIL PRICE – shall refer to the price at which the alcohol
and tobacco products are sold on retail in at least five (5) major
supermarkets in Metro Manila, excluding the amount intended to cover
the applicable excise tax and the value-added tax. For alcohol and
tobacco products which are marketed outside Metro Manila, the „net
retail price‟ shall mean the price at which the alcohol and tobacco
products are sold in at least five (5) major supermarkets in the
region excluding the amount intended to cover the applicable excise
tax and the value-added tax;

SPARKLING WINE OR CHAMPAGNE – shall refer to an effervescent wine

containing more than 0.392 grams of carbon dioxide per 100 milliliters
of wine resulting solely from the secondary fermentation of the wine
within a closed container;

STILL WINE – shall refer to wine containing not more than 0.392
of carbon dioxide per 100 milliliters of wine

Ad Valorem - Shall mean additional charge put on an item that is

a percentage of its value. (Black's Law Dictionary)

Tobacco - is any of a genus (Nicotiana) of chiefly American

plants of the nightshade family with viscid foliage and tubular
flowers; especially: a tall erect annual tropical American herb (N.
tabacum) cultivated for its leaves. (Merriam-Webster)

Alcohol - is an ethanol especially when considered as the

intoxicating agent in fermented and distilled liquors. (Merriam-
Webster)

Variant of a brand - shall refer to a brand on which a modifier

is prefixed and or suffixed to the root name of the brand.

New brand - shall mean a brand registered after the date of

effectivity of R.A. No. 8240.

Scope and Limitations of the Study

The study would assess provisions of Section 244 in relation to

Section 245 of the National Internal Revenue Code (NIRC) of 1997, as
amended, these Regulations are hereby promulgated to implement the
provisions of Republic Act No. 10351, “An Act Restructuring The Excise
Tax On Alcohol And Tobacco Products By Amending Sections 141, 142,
143, 144, 145, 8, 131 And 288 of Republic Act No. 8424, Otherwise
Known As The National Internal Revenue Code Of 1997, as amended By
Republic Act No. 9334, And For Other Purposes”, as well as to clarify
certain provisions of existing revenue regulations on alcohol and
tobacco products.

However, due to a time constraint of this research the

study is only limited assessing the implementation of R.A. 10351 also
known as Sin Tax Reform Law of 2012, the possible amendments to be
proposed, to clarify vague and ambiguous provisions of the law and its
constitutionality. It will also worth noting that since the law is
new, information and data to be used are limited only to surveys, news
reports published and the governments departmental reports.