The government should revisit policies and processes under the Sin Tax Reform Act of 2012 (Republic Act [RA] 10351) to ensure that tax revenues are used “efficiently, equitably, and effectively” for health programs.

This was according to a recent study published by state think tank Philippine Institute for Development Studies (PIDS). Authored by PIDS research consultants Miharu Kimwell, Frances Lois Ngo, Vicente Alberto Puyat, and George Douglas Siton, the paper evaluated the performance of public health budget allocations arising from RA 10351’s earmarking policy.

Aligned with the country’s commitment to the World Health Organization Framework Convention on Tobacco Control, the government established the sin tax law, which sought to increase revenue for public health spending and reduce the burden of tobacco smoking and alcohol use.

Some of the main reforms of the law include substantial increases in excise tax rates, an annual increase rate in excise tax, and earmarking of revenues to support progress toward universal health coverage (UHC).

According to the study, around 85 percent of incremental tax revenues collected from excise tobacco and alcohol taxes are earmarked for the health sector. The revenues fund the Department of Health’s (DOH) programs and activities and premiums for the Philippine Health Insurance Corporation.

While the health outcomes of select public health programs have improved since the implementation of RA 10351, the authors said the funds “have not necessarily been efficiently and equitably utilized” by the recipient programs.

“The DOH should exhibit its capability and accountability to utilize its annual budget effectively,” they noted.

The researchers also underscored that health programs need to be more strategic in requesting, allocating, and utilizing funds to address gaps in service coverage.

“Given the increase in fiscal space and autonomy to use the budget, monitoring and evaluation of the outcomes achieved by the allocations provided by sin tax revenues must be continuously reported,” they added.

In terms of equitable budget allocation, most of the funds from sin tax revenues are used to finance the membership of the disadvantaged sector in the national health insurance program. Thus, poverty incidence must be consistently included among the criteria and administrative processes when allocating funds to projects and activities.

Lastly, the authors emphasized the need to revisit the performance indicators for different health programs and activities so that the targets can “effectively and clearly quantify” the services and outcomes toward the achievement of UHC and other health programs.

This press release is based on the PIDS discussion paper titled “Efficiency and Effectiveness of Earmarking for Public Health in the Philippines”. ###

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