DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Prevalence of diabetes, by location Prevalence of diabetes, 2013 7 6 5 4 Percent 3 6 4.3 2 1 0 Location Source: FNRI 8/30/2017 28 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Prevalence of diabetes, by income class, urban Prevalence of diabetes (urban), 2013 9 8 7 6 5 Percent 4 7.8 6.1 3 5.7 4.9 2 3.4 1 0 Household income class Source: FNRI 8/30/2017 29 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Prevalence of diabetes, by income class, rural Prevalence of diabetes (rural), 2013 8 7 6 5 Percent 4 7.4 3 5.9 4.4 2 3.8 2.6 1 0 Household income class Source: FNRI 8/30/2017 30 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Sugar consumption 8/30/2017 31 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. 866 grams 8/30/2017 33 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. 855 grams Source: FNRI 8/30/2017 34 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Products in “miscellaneous" food group include beverages, condiments and others. Source: FNRI, Philippine figures: Facts and Nutrition 8/30/2017 35 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Sugar consumption Cases Percent share Grams of sugar Teaspoon WHO recommended: 10 50 12 10% WHO recommended: 5 25 6 5% NNS total 10.7 53 9.9 Sugar and syrup 1.4 12 2.9 Milk and 5.3 18 (45*0.4) 4.3 milk products* ((45*0.4)/4.2) Miscellaneous* 4.0 23 (34*0.67) 2.7 (includes other SSB) ((34*0.33)/4.2) Coke (to compare) 39 9.3 One teaspoon of granulated sugar is equal to 4.2 grams. *For milk and misc, assume half of calories comes from sugar. 8/30/2017 36 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE.
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. SSB consumption 8/30/2017 38 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. What are sugar sweetened beverages (SSBs)? • SSBs are pre-packed drinks with free/added sugar. o Free sugars are monosaccharides and disaccharides that are added to foods and beverages by the manufacturer, cook, or consumer, and sugars that are naturally present in honey, syrups, fruit juices, and fruit concentrates. • One gram of sugar has 3.9 calories. • One teaspoon of granulated sugar is equal to 4.2 grams. 8/30/2017 39 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Trends in SSB consumption • Philippines ranked 11th worldwide in the consumption of soft drinks. In 2009, Filipinos consumed around 1.6 billion liters or an average of 17.8 liters per capita. ( World Health Organization). • FNRI list of most consumed products with sugar: 3-in-1 coffee, sugar brown and white, powdered milk, pandesal bread, soft drink, and chocolate flavoured drinks . 8/30/2017 40 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Sugar consumption from SSBs has been increasing over the years. Highest consumption is from the richest quintile. Income quintile 2003 2003 2006 2006 2009 2009 Poorest 454 590 780 Poorer 1,037 1,247 1,521 Middle 1,755 1,970 2,256 Richer 2,734 2,847 3,177 Richest 4,873 4,929 5,179 National average 2,031 2,217 2,484 Sources: FIES and DOH staff estimates Numbers are in grams per person per year calculated based on the PSA Family Income and Expenditure Surveys. 8/30/2017 41 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. The top 3 deciles consume more than 50 percent of total SSBs in the Philippines 8/30/2017 42 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. The top 3 deciles consume more than 50 percent of total SSBs in the Philippines 8/30/2017 43 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. The poor spend around 4 percent of their income on SSBs (unadjusted) Average income, expenditure, and SSB expenditure per income decile (unadjusted) Share of SSB Total SSB Share of SSB Income Total income exp. to expenditure expenditure exp. to total decile (PHP) total income (PHP) (PHP) exp. (percent) (percent) 1 55,489 56,976 2,299 4.1 4.0 2 87,841 85,781 3,711 4.2 4.3 3 111,800 104,970 4,864 4.4 4.6 4 135,731 124,655 5,859 4.3 4.7 5 163,435 147,290 6,779 4.1 4.6 6 199,148 174,528 8,179 4.1 4.7 7 248,691 213,466 9,664 3.9 4.5 8 319,221 265,497 11,715 3.7 4.4 9 439,779 350,851 13,824 3.1 3.9 10 908,654 624,251 18,937 2.1 3.0 Average 266,962 214,816 8,583 3.2 4.0 Sources: PSA and DOF staff estimates Note: Sugar sweetened beverages include softdrinks, fruit juices, and sweetened milk, among others. 8/30/2017 44 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. The poor spend around 4 percent of their income on SSBs (adjusted) Average income, expenditure, and SSB expenditure per income decile (adjusted) Share of SSB Total SSB Share of SSB Income Total income exp. to expenditure expenditure exp. to total decile (PHP) total income (PHP) (PHP) exp. (percent) (percent) 1 55,489 56,976 2,299 4.1 4.0 2 87,841 85,781 3,711 4.2 4.3 3 111,801 104,971 4,864 4.4 4.6 4 135,738 124,661 5,859 4.3 4.7 5 163,473 147,324 6,781 4.1 4.6 6 199,354 174,709 8,188 4.1 4.7 7 249,844 214,456 9,709 3.9 4.5 8 325,857 271,016 11,958 3.7 4.4 9 480,750 383,536 15,112 3.1 3.9 10 1,288,033 884,887 26,843 2.1 3.0 Average 281,310 226,361 9,044 3.2 4.0 Sources: PSA and DOF staff estimates 8/30/2017 45 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Detailed consumption of SSB, total unadjusted Average annual detailed SSB consumption, total unadjusted, PHP Condensed, Fruit juice and Coffee and evaporated, and Total SSB Income decile Softdrinks Energy drinks concentrates cocoa, instant other consumption sweetened milk 1 235 189 1,109 22 744 2,299 2 398 330 1,674 41 1,268 3,711 3 527 410 2,146 56 1,726 4,864 4 600 533 2,509 71 2,146 5,859 5 721 615 2,745 93 2,605 6,779 6 822 758 3,191 95 3,313 8,179 7 952 900 3,554 117 4,141 9,664 8 1,081 1,056 3,936 150 5,491 11,715 9 1,278 1,302 4,351 166 6,727 13,824 10 1,607 2,099 4,597 286 10,348 18,937 Total 822 819 2,981 110 3,851 8,583 Sources: PSA, DOF staff estimates 8/30/2017 46 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Detailed consumption of SSB, total adjusted Average annual detailed SSB consumption, total adjusted, PHP Condensed, Fruit juice and Coffee and evaporated, and Total SSB Income decile Softdrinks Energy drinks concentrates cocoa, instant other consumption sweetened milk 1 235 189 1,109 22 744 2,299 2 398 330 1,674 41 1,268 3,711 3 527 410 2,146 56 1,726 4,864 4 600 533 2,509 71 2,146 5,859 5 721 616 2,746 93 2,606 6,781 6 823 759 3,195 95 3,316 8,188 7 956 904 3,571 118 4,160 9,709 8 1,104 1,078 4,018 153 5,606 11,958 9 1,397 1,424 4,756 181 7,354 15,112 10 2,278 2,975 6,516 405 14,669 26,843 Total 866 863 3,141 115 4,058 9,044 Sources: PSA, DOF staff estimates 8/30/2017 47 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Detailed consumption of SSB, per capita unadjusted Average annual detailed SSB consumption, per capita unadjusted, PHP Condensed, Fruit juice and Coffee and evaporated, and Total SSB Income decile Softdrinks Energy drinks concentrates cocoa, instant other consumption sweetened milk 1 79 64 375 7 252 777 2 98 82 414 10 313 918 3 120 94 490 13 394 1,111 4 131 116 547 16 468 1,277 5 153 131 584 20 555 1,443 6 170 157 661 20 686 1,693 7 192 181 716 24 834 1,947 8 214 209 780 30 1,088 2,321 9 246 251 837 32 1,295 2,661 10 303 395 866 54 1,949 3,566 Total 179 178 648 24 837 1,865 Sources: PSA, DOF staff estimates 8/30/2017 48 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Detailed consumption of SSB, per capita adjusted Average annual detailed SSB consumption, per capita adjusted, PHP Condensed, Fruit juice and Coffee and evaporated, and Total SSB Income decile Softdrinks Energy drinks concentrates cocoa, instant other consumption sweetened milk 1 79 64 375 7 252 777 2 98 82 414 10 313 918 3 120 94 490 13 394 1,111 4 131 116 547 16 468 1,277 5 153 131 584 20 555 1,443 6 170 157 661 20 687 1,695 7 193 182 720 24 838 1,956 8 219 214 796 30 1,111 2,370 9 269 274 915 35 1,416 2,909 10 429 560 1,227 76 2,763 5,055 Total 188 188 683 25 882 1,966 Sources: PSA, DOF staff estimates 8/30/2017 49 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Young people “outgrow” milk products and “graduate” to other SSBs. Consumption of SSBs by population groups 3,500 Pre-school School-age Adolescents 3,040 3,000 Count, in thousand persons 2,534 2,425 2,500 2,310 2,108 2,000 1,678 1,551 1,382 1,337 1,500 1,020 1,015 1,000 790 529 500 284 28 - Plain milk Chocolate milk Softdrinks Coffee & tea Energy drinks Source: National Nutrition Survey, 2008 8/30/2017 50 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Young people “outgrow” milk products and “graduate” to other SSBs. Source: National Nutrition Survey conducted by FNRI 8/30/2017 51
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Students who usually drink carbonated soft drinks Students (ages 13-17) who usually drink carbonated soft drinks one or more times per day during the past 30 days, percent 90 80 70 60 50 Percent 40 77 62 30 57 54 52 50 46 45 44 42 20 38 34 34 33 31 29 26 22 10 19 0 Source: Youth risk behavior surveillance system 8/30/2017 52 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Proportion (%) of pre-school children, school-aged children and adolescents consuming different types of beverages by sex, NNS, Philippines: 2008 Beverage Pre-school children School-aged children Adolescents Male Female Male Female Male Female Milk 85.25 86.50 37.55 37.83 18.57 23.15 Chocolate-based 29.69 25.66 26.58 25.31 14.80 16.23 beverages Soy-based 0.00 0.10 0.00 0.00 0.00 0.00 beverages Fruit-flavored 0.17 0.25 0.32 0.21 0.23 0.40 juice drinks Soft drinks 14.07 13.46 16.20 16.73 24.66 26.67 Coffee and Tea 18.97 16.50 28.74 28.24 41.59 35.65 Energy drinks 1.14 0.00 7.00 0.00 15.81 1.77 Alcoholic 0.00 0.00 0.00 0.07 1.80 0.31 beverages Other beverages 15.65 16.87 20.71 22.08 15.84 20.76 Golloso-Gubat MJ et al. Philippine Journal of Science, 144 (1): 31-41, June 2015
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. SSB tax and better health 8/30/2017 54 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. SSB excise tax can help address the growing problem of obesity. National prevalence: Obesity, diabetes and dental caries (2015) 120 Children Adults 97 100 Diabetes is the 4 th 87 leading cause 80 in percent of disability in 60 the Philippines. 40 31 Source: Institute for Health Metrics and Evaluation (2015) 20 6 5 1 0 Overweight/ Obesity Diabetes Dental caries Source: National Nutrition Survey, International Diabetes Federation, National Monitoring an Evaluation Dental Survey, Philippine National Oral Health Survey (2015) 8/30/2017 55 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Why impose excise tax on SSBs? • SSBs contribute to obesity, diabetes, and dental caries. o Soft drink consumption is significantly linked to overweight, obesity, and diabetes worldwide, including in low- and middle- income countries. o Habitual consumption of SSBs is associated with greater incidence of Type 2 diabetes, independently of adiposity; consumption of SSBs over years may be related to a substantial number of cases of new onset diabetes. o Higher consumption of SSBs is associated with development of metabolic syndrome, Type 2 diabetes and weight gain. • Diabetes, in turn, increases the risk of other NCDs such as cardiovascular diseases (stroke, heart attack), hypertension, chronic kidney diseases. Sources: DOH, Basu, Imamura, and Malik 8/30/2017 56 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. High SSB consumption is linked to increased obesity and diabetes incidence • Soft drink consumption is significantly linked to overweight, obesity, and diabetes worldwide, including in low and middle-income countries (Sanjay, Basu et. al). • Many studies show that drinking 1-2 SSBs a day increases the risk of developing type 2 diabetes by 26%. (Malik, et. al, 2010). • Higher consumption of SSBs is associated with development of metabolic syndrome, Type 2 diabetes, and weight gain (Vasanti, Malik et. al). • The more sugars are consumed, the more dental caries in both adults and children. • Habitual consumption of SSBs is associated with greater incidence of Type 2 diabetes, independently of adiposity; consumption of SSBs over years may be related to a substantial number of cases of new onset diabetes (Fumiaki, Imamura et. al). 8/30/2017 57 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Increased consumption of artificially sweetened beverages increase the risk of obesity, diabetes, and stroke • Artificially sweetened soft drink consumption was associated with a higher risk of stroke and dementia (Pase, et. al., 2017). 8/30/2017 58 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Case studies on effectiveness of SSB taxation in other countries • Sustained SSB taxation at a high tax rate could mitigate rising obesity and type 2 diabetes in India among both urban and rural subpopulations (Basu, et. al, 2014). 8/30/2017 59 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Reading the evidence right • Health impact: overweight, diabetes, obesity, dental caries, and even heart ailments. But takes long to see the link. • The short-term evidence is reduction in consumption. • Studies should be of long duration to show evidence. It must be published in peer reviewed journals. • Renowned health agencies supportive: US institute of medicine, European food safety agency, World cancer research fund, and American heart association. 8/30/2017 60 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. The SSB tax 8/30/2017 61 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. 8/30/2017 62
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. CTRP-Package-ONE_SSB-HB292 - Copy.png 8/30/2017 63
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Proposed products in HB 5636 to be excluded from the SSB excise tax PLAIN MILK ALL MILK PRODUCTS MEDICALLY INDICATED BEVERAGES & MILK DRINK including infant formula Meal replacement PRODUCTS and milk alternatives (soy milk, almond milk, therapies without added sugar flavored milk such as chocolate milk) 100% NATURAL 100% NATURAL UNSWEETENED GROUND FRUIT JUICES VEGETABLE JUICES TEA COFFEE 8/30/2017 64 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Rationale on the proposed rate • The proposed rate is based on Powell, Chriqui, Khan, Wada & Chaloupka ( 2013 ), which stated that in order to reduce soda consumption, the tax rate should raise prices by at least 20 percent. This is equivalent to 10 pesos per liter for the most popular brand. 8/30/2017 65 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Proposed earmarking provisions for SSB excise tax in HB 5636 • 85% of the tax collected shall accrue to the general fund supporting: o Operationalization and monitoring of non-tax measures to prevent NCDs including: – Regulatory measures on marketing – Mandatory labeling and sale of unhealthy food and beverages – Nationwide information and advocacy measures to curb lifestyle related risk factors – Direct provisions and incentive-based measures increasing access and affordability of healthier products – Promotion of oral health o Provision of sports facilities for public schools and access to potable drinking water supply in all public places. o Develop and sustain school-based feeding programs. o Prevention and awareness programs against obesity, overweight and dental caries. o Funding FDA to fulfill its mandate of ensuring safety and quality of health products. 8/30/2017 66 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Proposed earmarking provisions for SSB excise tax in HB 5636 • 15% of the tax collection shall accrue to fund programs under the Sugarcane Industry Development act of 2015 o To help farmers increase productivity. o To provide livelihood opportunities, develop alternative farming systems and ultimately enhance farmers’ income. 8/30/2017 67 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Arguments to tax certain products; Tax options 8/30/2017 68 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Implementing a volume-based SSB tax Pros Cons It is simple, transparent, and easy to administer. May not directly • address the health It is fair and neutral with respect to volume. objectives • Almost all countries that impose tax on SSBs have single • rate applied on all forms. Tax burden increases with quantity consume, therefore it is • progressive. Differentiating the tax structure to accommodate product • forms leads to unequal tax burden in the long-run. For instance, applying a lower effective tax rate to powdered forms of SSBs will shift consumption to those forms relative to ready-to-drink forms of the same volume. 8/30/2017 69 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Implementing a sugar-based SSB tax Pros Cons It is an ideal practice since it can address Difficult to implement. the health objective Not all products in available in the market have sugar content in the nutrition label. It would entail FDA to validate the declared and actual sugar content of each product. It is not a transparent way of taxing unlike the volume excise tax and would be more costly to operationalize and administer. 8/30/2017 70 DEPARTMENT OF FINANCE
Some are obviously SSB, but there is no sugar content in the nutrition label. 8/30/2017 71 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Why sodas should be taxed • A 375 ml (12 fluid oz) Coke product has approximately 40g of added sugar, equivalent to 10 teaspoons of sugar. • A person does not manually add 10 teaspoons of sugar in his drink on a daily basis. • SSBs basically contain sugar levels that an average person won't usually add for his personal consumption as part of his daily routine. • Since SSBs are a non-core food, they are not recommended for consumption in government dietary advice. Consuming just one serving of SSBs will bring a person above the recommended intake for sugars (and this has yet to take into consideration the food products and other drinks that a person will be consuming for the rest of the day). 8/30/2017 72 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Why 3-in-1 powdered coffee should be taxed • 3-in-1 coffee has approximately 12 g of added sugar which is equivalent to 3 teaspoons of sugar/3 sugar packets. • An average person does not sweeten his cup of brewed coffee with 3 sugar packets on a daily basis. 8/30/2017 73 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. It is cheaper to make a cup of coffee and mix the ingredients than buying 3-in-1 powder coffee Coffee 3-in-1 DIY 3-in-1 preparation Actual price: PHP 5.50 Estimated price: PHP 3.30 Breakdown: Estimated cost: 12.5 grams of sugar 12.5 grams of sugar: PHP 0.1 5 grams of creamer 5 grams of creamer: PHP 1.20 2.5 grams of coffee 2.5 grams of coffee: PHP 2 Estimated price after excise: PHP 7.00 Estimated price after excise: PHP 3.30 Price change: 27% Price change: 0% (no excise imposed on raw sugar) 8/30/2017 74 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Why not tax coffee-shops instead? • Even with the proposed SSB excise tax, the VAT component of a Starbucks drink is more than double the combined VAT and excise tax of a Coke in can, assuming equivalent volumes. Current Proposed Price Price Selling VAT and Volume before VAT Selling before Serving size price excise (ml) VAT (PHP) price VAT (PHP) (PHP) (PHP) (PHP) Standard serving sizes Starbucks while chocolate mocha 355 150.0 133.9 16.1 150.0 133.9 16.1 (tall size) Coke in can 330 22.0 19.6 2.4 25.6 19.6 6.0 Implied prices per liter Starbucks while chocolate mocha 1,000 422.5 377.3 45.3 422.5 377.3 45.3 (tall size) Coke in can 1,000 66.5 59.4 7.1 77.7 59.4 18.3 Source: DOF staff estimates 8/30/2017 75
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Economic cost 8/30/2017 76 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Health cost of diabetes • Most people are short-sighted, especially the poor and less educated, so we need to use public policy to help them. They do not know or factor in well the true cost of SSB. • In 2015, the government reimbursements on hemodialysis patients totaled to about PHP 7.4 billion to cover 1.1 million patients. • Each hemodialysis session costs approximately PHP 4,000. PhilHealth covers 90 days of sessions at PHP 2,600/session. • Depending on the severity of the case, a complete HD for an entire year is typically 120-150 sessions so the costs can go up to PHP 480,000 to 600,000. The patient only gets 90 sessions covered. • This is considerable wastage for PhilHealth especially on benefit payout for diseases that are preventable with evidence-based and recommended public policy interventions. 8/30/2017 77 DEPARTMENT OF FINANCE
Top 10 benefit payments January – June 2017, in pesos Payment Pneumonia, Moderate Risk 4,828,023,095 Hemodialysis 2,913,825,724 Caesarian Section, Primary 1,383,325,782 Maternity Care Package 1,120,226,800 Normal Spontaneous Delivery 1,047,558,141 Septicemia 961,858,613 Caesarian Delivery 958,933,943 Acute Gastroenteritis 757,952,803 Cerebral Infarction 775,933,363 Urinary Tract Infection 627,364,590 Source: PhilHealth
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. PhilHealth case rates Case Subsidy (PHP) Non-insulin dependent diabetes 2,800 Insulin dependent diabetes with no complications 2,800 Diabetes with complications other than coma or ketosis 12,600 Diabetes with coma or ketosis 15,800 Source: PhilHealth 8/30/2017 79
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Health cost of diabetes Case Day (PHP) Month (PHP) Year (PHP) Type 2 diabetes 60 1,825 21,900 + hypertension 26 780 9,360 + cholesterol 30 900 10,800 + blood test ~13 ~400 4,800 + kidney dialysis ~1,000 ~30,000 ~360,000 60 1,825 21,900 Total (without complications) ~125 ~3,750 ~45,000 Total (without dialysis) ~1,130 ~34,000 ~408,000 Total (with dialysis) Note: Numbers may not fully add up, as the frequencies for each treatment vary (i.e., dialysis is usually held twice a week, while a blood test is usually help once every two or three months. 8/30/2017 80
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Health cost of diabetes • Monthly maintenance is PHP5,000 or PHP60,000 per year for those taking medicines. This is not affordable for 80 percent of the population. If 5 million are taking medicines, this costs us 300 billion pesos per year. • Direct cost related to obesity 0.06 to 0.5 percent of GDP and total cost from 1.5 to 9.9 percent of total healthcare expenditure in other countries. We have yet to do this. • US: Obese people spend 30 percent more than normal people n health care. • Japan: 9.8 and 22 percent more health spending for overweight and obese respectively. 8/30/2017 81 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Economic cost • From 2011 to 2030, loss in GDP due to diabetes, total USD 1.7 trillion, of which 800 billion in low and middle income country. • In the Philippines this is expected to grow as the country becomes richer and NCD the main driver of sickness. Economic cost is huge given our young labor force. Instead of being productive, they are sick and waste potential life. 8/30/2017 82 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Industry sales will still be strong • However, industry sales will still be strong due to o Higher disposable income due to lower PIT o Rising middle class o Fast growing economy (6.5%) o Fast growing population (1.8%) o Moderate inflation (3%) o Falling poverty and unemployment o Substitute products • Even sari-sari stores will grow due to the above reasons. 8/30/2017 83 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Breakdown of sari-sari store sales Share of sari-sari store sales (percent) 100 6 Cigarettes 80 10 Soft drinks Food 60 31 Percent Laundry Hygiene 40 Powdered milk Others 43 20 0 Source: AC Nielsen 8/30/2017 84 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Breakdown of sari-sari store sales Retail mix (percent) Sari-sari stores Other retail stores 100 9 Percent 91 80 Source: AC Nielsen 8/30/2017 85 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Lessons from the Sin Tax Law • The imposition of heavy excise taxes on alcohol did not “kill” the industry, contrary to claims of some sectors and groups. o A robust economy and a growing middle class incentivized alcohol manufacturers to “ premiumise ” or to create new products that suit the new demand, resulting in growth in the industry (Euromonitor, Alcoholic Drinks in the Philippines, June 2017) o The SSB excise tax, coupled with increased investments brought about by revenues from tax reform, and middle class expansion due to lower PIT, will incentivize companies to create new, healthier product lines
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Lessons from the Sin Tax Law • Contrary to industry claims that tobacco farmers would face an immediate decline in revenues due to lower cigarette demand, tobacco farming remained strong. Production increased by 4.5% in 2013, and exports expanded by 35% ( AER, 2014). 8/30/2017 87 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Sari-Sari Store Training and Access to Resources (STAR) program • The Coca-Cola STAR Program is implemented in partnership with TESDA, where women around the country can enroll and undergo the Basic Entrepreneurship and Gender Sensitivity Training at the TESDA Women’s Center in Taguig City and other STAR Program trainings conducted in the regions. • The TESDA-COKE STAR Program aims to empower 200,000 women and sari-sari store owners by the year 2020 by giving them skills training in managing their business and since 2016, has already helped around 83,000 owners of sari-sari stores. • Began in 2014 during then TESDA Director General Joel Villanueva 8/30/2017 88
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Financial position of top SSB firms 8/30/2017 89 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Gross revenues of top beverage companies, 2015 150 121.6 125 100 PHP billions 76.8 75 55.3 50 19.0 25 9.1 9.1 8.2 6.1 5.0 0 Source: SEC 8/30/2017 90 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Net profit of top beverage companies, 2015 20 15.6 16 PHP billion 12 7.5 8 6.2 4 1.0 0.8 0.9 0.4 0.4 0.1 0 Source:SEC 8/30/2017 91 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Overall impact on the people 8/30/2017 92 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Combined tax-transfer effect * Targeted transfers will be crucial in protecting the poor from shocks and can help improve the progressivity of the tax reform. Combined effect Package 1 change in annual take home pay (in pesos) 2018 projected Change in Description Change in Decile/ monthly Personal Value- Petrol and Inflationary Transfer take home (assumes a family of 5 Automobile** SSB Net tax due take home percentile household total income tax added tax transportation effect*** (full year) pay after members) pay income* transfer 2 -210 -102 -197 -506 -298 -804 2,400 1,596 D1 Subsistence poor 5,106 84 -312 -161 -335 -725 -456 -1,180 2,400 1,220 D2 Subsistence poor 8,250 404 -423 -217 -406 -641 -555 -1,197 2,400 1,203 D3 Poor 10,652 1,063 -563 -276 -507 -283 -639 -922 2,400 1,478 D4 Near poor 12,987 2,377 -895 -365 -595 522 -744 -223 2,400 2,177 D5 Near poor 15,760 4,127 -1,372 -446 -1,129 1,179 -847 332 332 D6 Unskilled 19,335 7,684 -1,650 -581 -1,294 4,159 -992 3,167 3,167 D7 Partly skilled 24,524 13,539 -2,261 -771 -1,418 9,089 -1,183 7,906 7,906 D8 Skilled 32,565 25,494 -4,618 -1,091 -2,283 -2,007 15,495 -1,468 14,027 14,027 D9 Professional 47,710 61,738 -8,835 -2,887 -10,931 -2,670 36,415 -2,620 33,795 33,795 D10 Middle class 115,428 118,538 -16,525 -6,284 -87,360 -3,278 5,090 -3,879 1,212 1,212 P100 Executive 303,059 146,575 -20,672 -7,801 -131,533 -1,962 -15,394 -5,301 -20,695 -20,695 T1000 CEO 706,017 -470,879 -57,562 -15,206 -271,488 -1,505 -816,640 -8,241 -824,881 -824,881 Top taxpayer A 1,376,147 -1,495,740 -120,279 -30,411 -271,488 -1,062 -1,918,980 -12,361 -1,931,341 -1,931,341 Top taxpayer B 2,752,294 Source: DOF staff estimates using the preliminary Family Income and Expenditure Survey - Labor Force Survey 2015 Notes: This table is updated as of July 29, 2017 . Each household has about two income earners. * Total household income includes compensation income, income from entrepreneurial activities (i.e. businesses), and other sources of income (i.e. cash transfers). **Automobile excise tax impact were computed using 2016 prices, assuming 3 to 5 years of amortization. ***The inflationary effect was computed as a function of income, marginal propensity to consume (MPC), and estimates on the price effect of the increased oil excise on food. 8/30/2017 93 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. After the tax-transfer reform, the poor benefits the most. Percent increase in household income 4 2.6 2.5 2.4 2.0 1.2 1.2 1.1 0.9 0.9 2 0.1 0.0 0 Percent -0.2 -2 -4 -6 -5.0 -5.8 -8 -10 Average household Sources: PSA and DOF staff estimates Note: D1 refers to the first deciles or the poorest 10% of households based on the preliminary 2015 Family Income and Expenditure Survey (FIES). Each succeeding decile consists of the next 10% of households based on total household income. The figures above are averages for each decile. 8/30/2017 94 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Cross-country experience 8/30/2017 95 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Cross-country summary of specific and ad valorem SSB taxes Peso Country Base Type Rate equivalent SSB using locally - produced sugar PHP10/ L Philippines Specific Other SSB PHP20/ L Barbados All SSB Ad valorem 10% PHP 17.09/L €0.03 per litre Belgium Soft drinks Specific PHP 1.77/ L (1 cent per can) Cambodia Soft drinks Ad valorem 10% PHP 4.05/L Flavored drinks and other non-alcoholic 3% drinks Congo Soft drinks Ad valorem 5% Natural and carbonated mineral waters 10% Dominica All SSB Ad valorem 10% PHP 7.05/L Source: Grattan Institute and World Health Organization 8/30/2017 96
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Cross-country summary of specific and ad valorem SSB taxes Peso Country Base Type Rate equivalent Egypt Carbonated soft drinks Ad valorem 25% PHP 4.46/L Soft drinks, soda, mineral water, fruit 5% PHP 4.22/L Laos juices, and other similar drinks Ad valorem Energy drinks 10% PHP 8.44/L Malaysia Non-alcoholic drinks Ad valorem 10% PHP 2.74/L 25% + 0.77 PHP12.00+ Soda baht/440 cc PHP2.64/L 20% + 0.37 PHP19.47 + Thailand Juices Mixed baht/440 cc PHP1.27/L 20% + 0.37 PHP 19.76 + Other drinks baht/440 cc PHP1.27/L Fiji All SSB Specific 0.20 cents/L PHP 1.52/L Source: Grattan Institute and World Health Organization 8/30/2017 97
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Cross-country summary of specific and ad valorem SSB taxes Peso Country Base Type Rate equivalent Soft drinks FIM 0.045/liter PHP 0.44/L Finland Specific Solid ingredients for drinks FIM 0.34/liter PHP 3.35/ L Drinks containing added sugar or 7.45 euros/ PHP4.36/ L sweetened drinks hectoliter France Specific 1.00 euros/ Energy drinks PHP0.59/ L hectoliter Sweetened drinks HUF 7.00/L PHP 1.34/L Hungary Specific HUF 40/L to PHP 7.64/L to Energy drinks 250/L 47.76/L Mexico Soft drinks Specific MXN 1.00/L PHP 2.90/ L USA (Berkeley, All SSB Specific USD 0.35/kg PHP 17.77/L CA) Samoa Soft drinks Specific WST 0.40/L PHP 10.65/L Source: Grattan Institute and World Health Organization 8/30/2017 98
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Practices in other countries • There are currently no tiered sugary beverage taxes in effect. The closest one is Chile’s, which imposes a higher VAT (18%) on SSBs above 6.25g/100ml. • There are proposed or upcoming tiered volumetric SSB taxes in the United Kingdom, Ireland, and Portugal. All share the 8g/100ml content as a benchmark for “low -sugar beverages.” 8/30/2017 99 DEPARTMENT OF FINANCE
DRAFT FOR DISCUSSION. SUBJECT TO CHANGE. Practices in other countries • UK proposal is 3-tier volumetric tax, to be implemented this 2018. Tier 1: 0 < 5g caloric sweetener/100ml = Exempted Tier 2: 5g to 10g caloric sweetener/100ml = PHP 11.6/liter Tier 3: > 8g caloric sweetener/100ml = PHP 15.5/liter • In 2011, Hungary implemented a 2-tiered volumetric SSB tax. <25% fruit content and > 8g added sugar/100ml = PHP 1.27/liter Otherwise = exempted 8/30/2017 100 DEPARTMENT OF FINANCE
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