A CASE STUDY ON THE EFFECTS OF INCREASED TAX

ON TOBACCO IN THE PHILIPPINE ECONOMY

AS A PARTIAL FULFILLMENT

OF THE REQUIREMENTS IN ECONOMICS

SUBMITTED BY GROUP 15,

LABRADO, BENISA AUDINE MARIK

SISON, MA. MARA

TALAG, SHAUN EDWARD

TANDOC, ALYSSA

TOJINO, DANA AGNES

TOLOP, SARAH JOYCE

ULPINDO, BERNADETTE

OF BSN2-4 FROM

MANILA CENTRAL UNIVERSITY

SUBMITTED TO MR. RODANTES RIVERA

ON THE 12TH OF MARCH, 2011

 Acknowledgement

It is a pleasure to thank those who made this study possible: Nursing Students of

Manila Central University, who willingly cooperated and served as our

respondents; to Mrs. Fe P. Arias, section chief of tobacco in Bureau of Internal

Revenue, who smartly and honestly answered our interview questions; to the

authors of the books, newspaper and magazine articles, and websites that we

used as our sources; and to all those who supported and believed in us. This

wouldn’t be done without your help.

Group 15, BSN2-4

Table of Contents
I. Chapter I: The Problem and its Background

Introduction

Statement of the Problem

Statement of the Objectives

Significance of the Study

Scope and Limitation

Definition of Terms

II. Chapter II: Review of Related Literature

Local Related Studies

Foreign Related Studies

III. Chapter III: Methodology

Research Design

Research Local

Data Gathering Procedure

The Population and Sample Size

Sources of Data

Instrumentation

Statistical Treatment of Data

IV. Chapter IV: Presentation, Analysis, and Interpretation of Data

Respondents’ Personal Data

Respondents’ Personal Views

V. Chapter V: Conclusion

VI. Bibliography

Chapter 1
 The Problem and its Background

Introduction

Tobacco is one of the main sources of living in the Philippines. On the other hand,

tobacco also is the only legal consumer product that kills, when used as intended, and is highly

addictive with half of all long-term users are dying from their addictions. This is the reason why

its use is discouraged by putting retail tobacco products to high levels of taxation.

Philippines is one of the countries who has increased, and has still increasing tobacco tax.

But this doesn't seem to be high enough to stop, or even just to minimize Filipinos from using

tobacco products, specifically cigarettes. Since they are known to be resourceful, they've thought

of different ways for the said product to be consumed easily, like selling single-stick cigarettes

instead of packs and/or cases. These single-sticks are sold not to adults ONLY, but to young

children too, exposing their early minds to curiosity for such vices. And so, the government has

come up with a proposal - the 400% increase in tobacco tax - to minimize the Filipino, especially

the young, smokers.

As to this, we are not sure if everyone will agree, we are not sure if everything will turn

to be good results, and we are not sure if every smoker would rather stop smoking than think of

other alternative, that's why surveys, interviews, and researches were conducted to obtain

different views and opinions from different individuals. A study has been made to present what

may be the economic effects of increase taxation on tobacco, both negative and positive.

Statement of the Problem

 This study primarily aimed to determine the effects of increased tax of tobacco in the

economy of the Philippines.

Specifically, this study sought to answer the following questions:

1. What is the profile of respondents in terms of

1.1 Age

1.2 Gender

1.3 Socio-Economic Status

2. What are the effects of increased tax of tobacco?

3. What are the benefits of increased tax of tobacco in the economy?

4. What are the problems met by the manufacturers of tobacco in the increase of tax?

Statement of the Objectives

This study aims to attain the following objectives:

1. To know the effect of increased tax tobacco.

2. To know the benefits of tax increase of tobacco in the economy.

3. To know the problems met by the manufacturers of tobacco in the increase of tax.

Significance of the Study

 This study shows the significance of the effects of tax increase of tobacco in the

Philippine economy.

The Administrator – for them to be more credible in raising and helping students about

the effect of tobacco tax increase in the Philippine economy, that may help them enhance their

self worth and become productive citizen someday. The study may also aid them in being more

vigilant on the increase of taxes, which help economy in the tax increase of tobacco.

Students – for them to be more aware that cigarette smoking is dangerous to their health.

They must also know that increased taxes can lessen smoking of students.

Researchers – for them to have an overview of the study they are going to conduct as it

may be similar to what the present study encompasses. They might also be enlightened that tax

increase helps the Philippine economy.

Manufacturers - as the major producers they also serve as the suppliers of the products,

knowing that their products can benefit the Philippine economy, thus, resulting to higher demand

among consumers.

Scope and Limitation

This study is about the effects of the increase tax of tobacco in the economy of the

Philippines. Data was taken from the nursing students of Manila Central University by

conducting a survey and interviewed one of the employees from the excise tax division of the

Bureau of Internal Revenue (BIR) of the Philippines last March 7, 2011. We have also collected

information about the benefits and problems that will occur when the tax on the tobacco

increases. The Republic Act No. 9334, which provides for automatic excise tax increases every

two years from 2005 to 2011, was also included.

Definition of Terms
 The terms indicated below were defined lexically and operationally in order to facilitate a

clearer understanding of this research study. It included:

Accumulation of capital - refers simply to the gathering or amassment of objects of

value; the increase in wealth; or the creation of wealth.

Benefits- refers to something that promotes or enhances well being; an advantage of

taxes increase in tobacco.

Economy - consists of the economic system of a country or other area,

the labor, capital and land resources, and the economic agents that socially participate in the

production, exchange, distribution and consumption of goods, distribution consumption of goods

and services of that area.

Economic system - is the structure of production, allocation of economic

inputs, distribution of economic outputs, and consumption of goods and services in an economy.

It is a set of institutions and their social relations.

Consumers - refer to one that consumes, especially one that acquires or services for

direct used of tobacco.

Profile - refers to a set of characteristics developed for use in identifying persons or

things as being likely to develop certain group.

Tax - is to impose a financial charge or other levy upon a taxpayer by a state or the

functional equivalent of a state such that failure to pay is punishable by law.

Tobacco - is an agricultural product processed from the leaves of plants in the

genus Nicotiana. It can be consumed, used as an organic pesticide and, in the form of nicotine

tartrate, used in some medicines.

Chapter 2
 Review of Related Literature

This chapter presents a review of related literature and studies, both local and foreign

which are clearly related in the present study.

LOCAL RELATED STUDIES

Tobacco in the Philippines experienced a decline in volume sales over the review period

as the effects of the global economic recession became more apparent in the Philippines. A

slowdown in inbound tourist arrivals, which are made up predominantly of foreign visitors and

Filipinos living overseas or balikbayans, caused a reduction in demand for cigars whilst increases

in cigarette unit prices and the lack of job security in the Philippines resulted in cutbacks in

cigarette consumption among low-income smokers. Nevertheless, the main industry players

attempted to offer attractive price promotions and introduced smaller pack sizes in more brands

in an attempt to minimize the drop in demand.

Increase in Excise Tax Pushes Cigarette Unit Prices Up

Unit prices of cigarettes rose during 2009 due to the scheduled excise tax increase

implemented in January 2009 as part of the measures contained within the Sin Tax Law (RA

9334). Despite the dismal economic situation in the Philippines, cigarette manufacturers and

distributors absorbed part of the unit price rise in a bid to sustain demand for their products and

prevent smokers from trading down to more affordable brands. Cigars also posted higher unit

prices despite no changes being made to cigar excise tax.

Fortune Tobacco Corporation Continues to Lead Tobacco in the Philippines

 Tobacco in the Philippines remained highly concentrated in 2009 and dominated by

cigarette manufacturers Fortune Tobacco Corp and Philip Morris (Phils.) Manufacturing Inc. The

strength of these companies is due to their extensive distribution networks which encompass

both traditional and non-traditional retail channels as well as their ability to offer their products

at affordable prices. Top player Fortune Tobacco Corp maintained its leadership position

throughout the review period as mass market cigarette smokers continued to purchase its

economy cigarette brands, particularly leading brand Fortune International.

Sari-sari Stores and Street Vendors Remain Significant Distribution Channels

In 2009, tobacco distribution was largely driven by cigarettes, which continued to

generate the bulk of tobacco volume sales. The popularity of the traditional convenience stores

known as sari-sari stores and street vendors as distribution channels reflects the nature of

cigarettes in the Philippines, which is focused on the sale of single sticks. Direct selling,

machine-based vending and internet retailing remained non-existent in tobacco in the Philippines

over the review period.

Volume Sales are Projected to Slow Down Over the Forecast Period

Growth in volume sales of tobacco is expected to slow down over the forecast period.

This is mainly due to the anticipated approval of picture-based health warnings on all tobacco

packaging and the mooted single tax system, both of which are expected to deprive tobacco

manufacturers and distributors of new, younger consumers to replace the long-term smokers who

are giving up due to ill health or dying as they age. Higher unit prices are also expected to

minimize tobacco consumption, particularly among poor Filipinos, who comprise the bulk of the

smoking population.
 One of the most commonly discussed issues in economics is how tax rates relate to

economic growth. Advocates of tax cuts claim that a reduction in the tax rate will lead to

increased economic growth and prosperity. Others claim that if we reduce taxes, almost all of the

benefits will go to the rich, as those are the ones who pay the most taxes.

The World Health Organization is strongly advising the government of the Philippines to

increase excise taxes on cigarettes, citing the low tax on such products in the country as one of

the catalysts in the increase of tobacco-related diseases, it has emerged.

The request was put forward in a letter sent to the Philippine Department of Finance,

which argued that the low tax on cigarettes is not helping to discourage their purchase.

According to reports in the national media this week, Finance Under Secretary Gil

Beltran commented: "They...asked us if we could raise the tax some more because it is true that

the tax here is low compared with what is imposed in neighboring countries." The Philippines

currently imposes the lowest excise tax on cigarettes among Southeast Asian countries. Beltran

reportedly went on to state that the DOF was willing to work with the idea of raising the excise

tax on cigarettes, and acknowledged that the existing tax rates were out of date.

August 13, 2010 - The Department of Health (DOH) is pushing for a 400% increase in

the tax on cigarettes. The tax hike would bring up the price of a cigarette stick from P2 to P7, and

a pack from P30 to P120. The DOH said the move would help reduce the number of smokers in

the country, deter the youth who comprise 20% of the smoking population while allowing

government to raise revenue to bring down the budget deficit. DOH research shows that 4 out of

10 Filipino adults smoke, while over 20% of Filipino smokers are between 15 to 20 years old.

Increasing the tax for cigarettes to P4.50 per stick or P90 per 20-stick pack was one of the

ideas proposed during a meeting between officials from the Department of Health and anti-
tobacco advocate Framework Convention on Tobacco Control Alliance Philippines (FCAP),

reports Inquirer.net. The current tax rate per cigarette pack ranges from P2.47 to P27.16 "placing

the Philippines among countries selling the cheapest cigarettes in Asia," according to FCAP.

Should the tax increase be implemented, the cost of a cigarette stick would range from P5.50 to

P7.50, and a pack from P97 to P190 (4.20 USD), according to the report.

The idea is inspired by the "Aquino model," according to Inquirer.net In February 2009,

Philippine President Binigno Aquino III, signed a bill legalizing the increase in cigarette tax

from 30 to 120 per pack to raise funds for the health insurance of poor children. In the

Philippines, the funds raised from the tax increase would be partly used for the health care of

about five million poor Filipinos.

Society as a whole would not be very productive if everybody spent a large portion of

their time trying to evade taxes. The government would earn very little income from taxation, as

very few people would go to work if they did not earn an income from it.

Almost 28.3% of Filipinos over 15 years old - more than 24.6 million people are

smoking, according to non-governmental groups like Health Justice. A Global Youth Tobacco

Survey in 2007 related that children with the age of 13 are among the smokers and are

contributing to the four million youth between 13 and 15 years addicted to cigarettes.

In 1995, Philip Morris International’s (PMI) advertising agency, Leo Burnett,

summarized the Philippine situation with the slogan “There can’t be a better time” for the

tobacco industry. According to the agency, international anti-tobacco activists had nominated the

Philippines as having the strongest tobacco lobby in Asia. By 1996, the Philippines ranked first

in sales for PMI’s Asian region and continued growth led to the establishment of a US$300

million manufacturing facility in the country which commenced production in 2003.

 The Philippines (population 80 million) is the 15th biggest consumer of cigarettes in the

world and the largest consumer among the Association of Southeast Asian Nations (ASEAN)

Some 54% of adult men and 11% of adult women smoke with overall adult smoking prevalence

being the fourth highest among ASEAN countries. Tobacco use among Filipino youth (18 years

or less) is high, with approximately 37% of young men and 18% of young women smoking on at

least a monthly basis. There has been a 33% increase in the prevalence of having ever smoked

since 1995. Alarmingly, almost one fifth of young Filipinos begin smoking before age 10. A

1999 government white paper on smoking calculated that two Filipinos die every hour from

tobacco use.

Cigarette prices in the Philippines are low, with the price of Marlboro being the second

lowest for all ASEAN nations. The cigarette market has been dominated by menthol brands for

several decades, although non-menthol volume has been steadily improving in recent years. La

Suerte Cigar and Cigarette Company and the Fortune Tobacco Company (FTC) have been the

two leading producers, and have had licensing agreements with PMI and RJ Reynolds (RJR)

respectively. FTC commands a 67% market share, while La Suerte holds a 25% share.

Unlike other Asian nations, the Philippines is a highly Christian country, with

approximately 80% of the population being Catholic. English is spoken widely, with a

recognizably American accent. There has been a strong US presence in the Philippines since the

American colonial period from 1901 until 1946. This presents a rare cultural consistency

between an Asian nation and the Anglophone tobacco transnational.

Poverty and unemployment remain the country’s gravest economic problems. Gross

national income is $1020 per capita, and approximately 28% of people live below the national

poverty line. Economic problems are higher in rural areas where some 55% live in poverty.
 For many years, the Philippines was governed by an administration with a global

reputation for corruption, particularly during the presidency of Ferdinand Marcos (1972–1986).

The commercial necessity of using contact men to facilitate cronyism in conducting business was

acknowledged in an early Philip Morris document. In the first paper to report on revelations from

the tobacco industry’s internal documents, this paper examines the conduct of the tobacco

industry in this political and commercial environment, highlighting tactics and episodes

illustrative of the companies’ conduct in thwarting tobacco control.

The tobacco industry was well aware of the economic advantages of cronyism. A

Lorillard executive highlighted this in 1973: “Again the government has postponed the

announced tax increase… It is entirely possible that there will be no increase as the

implementation dates have now twice been delayed and according to reliable sources will be put

off again for a price… the government has been bought off twice and it is possible for it to

happen again as the manufacturers stand to lose considerable revenue if the bill is enacted”.

The general manager of the FTC, business tycoon Lucio Tan, was able to evade and

hinder tax changes through his long established relationship with the Cabinet. Tan had close ties

with the Marcos regime and beyond, where embedded cronyism assisted him in instilling a

protectionist policy for his company. Tan was said to have “gotten his way” by convincing

Congress to stay with a two tiered ad valorem tax system which gave FTC a pricing advantage

over its competitors.

Increasing the tax on tobacco products may also contribute to several acts such as the

increase of cigarette theft, smuggling in and out of the country, producing counterfeit cigarettes

and numerous count of unemployment. In addition to that, the manufacturers will experience a
decline on their income as well as their customers. These are considered to be as rebound effects

in relation to the said study.

FOREIGN RELATED STUDIES

Taxes on tobacco products in the Philippines are at just 14 percent, in contrast to 70

percent Thailand, the highest in the region and 69% in the affluent city-state of Singapore and.

While a packet of the original Marlboro, a product of Philip Morris International (PMI), sells for

US$8.70 in Singapore and $2.50 in Thailand, the same packet of Marlboro Red goes for just 0.70

cents in the Philippines. This is cheaper than in Indonesia, where the same packet of 20 cigarettes

sells for $1, or Laos, where it sells for $1.73.

Because of the cheap cigarette prices Philippines is considered to be in the list of the top

15 cigarette-consuming countries in the world. A report was made which estimated that 84

billion cigarettes are smoked every day in the country. In that list we can find also Indonesia and

Vietnam. Indonesia has the highest number of tobacco smokers and especially cigarettes at some

63 million people - or 40% of Southeast Asia’s 125 million smokers.

Earlier this month, the manufacturer of Marlboro, Parliament and Virginia Slims, Philip

Morris USA, increased prices by 71 cents a pack, 9 cents more than the federal tax increase. The

maker of Camel, Kool and Salem cigarettes, R.J. Reynolds Tobacco, bumped wholesale prices

up by 44 cents a pack and reduced discounting.

The revenue from the tax increase, which will be used to expand coverage under the State

Children's Health Insurance Program to an additional 4 million low-income children, was signed

into law in February.

 It calls for a 62-cents-a-pack increase, to $1.01, in federal excise taxes on cigarettes for

the nation's estimated 45 million cigarette smokers as well as increases in taxes on little cigars,

cigars, and pipe and chewing tobacco.

The higher prices should have the positive effect of reducing teenage smoking, according

to Dr. Jonathan Klein, a professor of pediatrics at the University of Rochester.

New York also imposes a 4% state sales tax on tobacco products, said Tom Bergin,

spokesman for the state Department of Taxation and Finance. Local sales taxes push up the

overall sales tax to more than 8% in Yonkers and New York City and on Long Island.

But the biggest impact is expected to be hundreds of miles away from the Empire State,

where tobacco taxes are low. South Carolina has the nation's lowest tax on cigarettes — 7 cents a

pack. Missouri imposes a 17-cents-a-pack tax.

The current average among the states is $1.19 a pack, according to Eric Lindbloom,

director of policy research for the Campaign for Tobacco Free Kids. Dr. Irwin Redlener,

president of the Children's Health Fund in New York City, predicts that adult smokers who are

economically "on the edge" also may quit. But Redlender said he dislikes the fact that the tax

increase was used to finance an expansion of the State Children's Health Insurance Program

under legislation signed into law in February.

The Campaign for Tobacco Free Kids is hailing the fact that the tax increase will equalize

the way that small cigars, which are increasing in popularity, are taxed. "They really are

cigarettes pretending to be little cigars so you can pay less tax," Lindbloom said. "This is a

problem nationwide. It's a problem with state tax rates. It's a big deal because cigarette sales have

been going down, but little cigar sales have been going up."
 The International Premium Cigar and Pipe Retailers Association predicts that the nation's

estimated 12 million cigar smokers and 1.2 million pipe smokers will trade down to less-

expensive blends. The average cigar smoker smokes only two cigars a week, said Joe Rowe, the

group's executive director.

A proposed 500 percent excise tax increase on ‘other tobacco products’ could decimate

Maryland’s cigar and pipe tobacco businesses, according to the International Premium Cigar &

Pipe Retailers Association.

Maryland House Bill 853 and Senate Bill 654 both propose to increase the excise tax rate

on tobacco products other than cigarettes from 15 percent to 90 percent with a $3 cap on cigars.

“When will legislators realize that tax increases like this never produce the revenues predicted

and always result in negative consequences like lost jobs and businesses?” asked Chris McCalla,

legislative director of the IPCPR. “In a small state like Maryland, tobacco customers can easily

cross to another state or make their purchases online and pay little to no state or local taxes.”

According to the Tax Foundation, a nonpartisan educational organization founded in

1937, Maryland was the only state to raise every major tax in 2008 in order to fund new

spending programs including doubling of its cigarette tax from $1 to $2 per pack. The

Foundation said the tax increase served to introduce record levels of bootlegged product into the

state, hurt local businesses by sending thousands of the state’s smokers to surrounding states to

purchase their tobacco products, and generated only half the revenue increase predicted by tax

supporters.

In addition, the Children’s Health Insurance Program Reauthorization Act of 2009 is

funded solely by excise taxes on tobacco products. CHIP raised federal taxes on cigarettes to
more than $10 per carton and on roll-your-own tobacco from about $1.10 per pound to $24.78

per pound – a 2,253 percent increase.

“Now the Maryland legislature is considering raising excise taxes yet again on other

tobacco products from the current 15 percent of the wholesale price to 90 percent,” McCalla

believes the only result that would be sure to take place from such an action is the further

destruction of Maryland small businesses, which includes the loss of jobs and state, federal and

local tax revenues.

“Premium cigars are highly sensitive to price increases because they are more a choice

than a habit. They are adult products that make ordinary moments special and special moments

extraordinary, like a fine wine.” McCalla urged Maryland smokers and nonsmokers alike to tell

their state senators and delegates to vote no on tax increases such as these.
 Chapter 3

Methodology

This chapter presents the research design and procedures used in this study. This covers

the research method used, research locale, description of the subjects, population and sampling

scheme, instrumentation, data gathering procedures, and the statistical treatment of data.

Research Design

This studies on the effects of tax increase in the economy on tobacco. The researcher

made use of the descriptive method, which involves gathering of data, interviews and

information derived primarily from survey and with the use of questionnaires. According to

Good and Scates (2002) put in descriptive research purpose to presents facts concerning nature

and status of anything. (Good Carter & Scates B.E.)

The objective of descriptive research is to describe the market characteristics or

functions. It is characterized by a structured, preplanned approach. Surveys and consumer panels

are examples of descriptive research. The most common type of descriptive marketing research

is the cross sectional survey or longitudinal survey.

Research Locale

The researchers conducted at the Manila Central University (MCU) of Caloocan City

about the effects of tax increase of tobacco in the economy. Basically, the researchers chose this

topic to know the effect of the tax increase in the economy.

Data Gathering Procedure

The researchers personally gathered data needed for this study by means of reproducing

50 copies of questionnaires. The data gathered used the instrument developed for the purpose.

The researchers asked permission from the school premises to conduct study.

The Population and Sample Size

Fifty respondents (50) were requested to answer the questionnaires floated. The data

gathered were then analyzed and interpreted to come up with the conclusion. Since the number

of respondents did not exceed one hundred, the determination of sample size of the population is

not necessary so all of them were taken as our respondents in the study.

Sources of Data

The sources of data are the questionnaires that have been retrieved at the school premises

of Manila Central University. The researchers started to tabulate the raw data from which

statistical tables were constructed. Analysis used simple frequency count, percentage and

ranking.

Instrumentation

The researchers used questionnaire as their instrument in collecting data. It was on a

checklist form, where the respondents check the most applicable answer for the given questions.
Statistical Treatment of Data

The data gathered from the research instruments were grouped, statistically treated and

presented in table. Responses for every variable in the questionnaire were tallied to give reliable

and sound analysis and interpretation of the data. The researchers used the frequency distribution

having the formula:

P = _____ x 100

Where: P = percentage of respondents/response

F = frequency

N = total number of respondents/response

 Chapter 4

Presentation, Analysis, and Interpretation of Data

This chapter presents, analyzes and interprets the data gathered in order to know the

effect of tax increase in tobacco in the economy. Sets of questionnaires were distributed to 50

respondents to gather necessary information and data needed in the research study.

Respondents’ Personal Data

Table 1: Gender

Respondents Frequency Percentage

Female 25 50%
Male 25 50%
TOTAL 50 100%

From the 50 respondents, 50% were females and 50% were males(as shown on the table

above). The researchers purposely chose the gender of the respondents to compare the different

point of views as they may have various lifestyles.

Table 2: Socio-Economic Status

Respondents Frequency Percentage

Low Class 3 6%
 Middle Class 41 82%
High Class 6 12%
TOTAL 50 100%

It shows in this table that 6% of the respondents are from low class, 82 % from middle

class and 12% are from high class group. The data above helped the researchers analyze that the

majority of the respondents are of middle class.

Table 3: Age

Respondents Frequency Percentage

15-18 23 46%
19-21 27 54%
TOTAL 50 100%

It shows in this table that 46% of the total respondents are at the age 15-18, while 54%

are at the age of 19-21. It is shown that the majority of the respondents are 19-21 years old.

Respondents’ Personal Views

Table 4: Respondents Who Smoke

Response Frequency Percentage

Yes 16 32%
No 34 68%
TOTAL 50 100%
 Out of the 50 respondents, 32% are smokers and 68% are not. Most surveyed were not

using tobacco products, particularly cigarettes, but they still have an opinion about the increase

of tax on tobacco.

Table 5: Frequency of Smoking

Response Frequency Percentage

Everyday 13 26%
Once or Twice (weekly) 1 2%
Occasionally 2 4%
None at all 34 68%
TOTAL 50 100%

From the 50 respondents, 26% smokes everyday, 2% smokes once or twice in a week,

4% smokes occasionally and 68% doesn’t smoke at all. Most of the smokers are smoking

everyday.

Table 6: Stick(s) Consumed Per Day

Stick(s) Frequency Percentage

1-2 4 8%
3-4 2 4%
5-6 2 4%
7-8 1 2%
9 or more 7 14%
None 34 68%
TOTAL 50 100%
 Out of the 50 respondents, 8% consumes 1-2 stick(s) per day, 4% consumes 3-4, 4%

consumes 5-6, 2% consumes 7-8, 14% consumes 9 or more and 68% are non-smokers. Most of

the surveyed smokers, uses/consumes 9 sticks or more in just a day.

Table 7: Expenses for Cigarettes

Value Frequency Percentage

1-5 PHP 4 8%
6-10 PHP 2 4%
11-15 PHP 2 4%
16-20 PHP 1 2%
21 PHP or more 7 14%
None 34 68%
TOTAL 50 100%

As shown on the table above, 68% of the respondents spend nothing for cigarettes, 14%

spends 21 PHP or more, 2% spends 16-20 PHP, 4% spends 6-10 PHP and 11-15 PHP, and 8%

spends 1-5 PHP.

 Table 8: Reaction on the Increase Tax Proposal

Response Frequency Percentage

It’s okay with me. 8 16%
I’ll stop because it is 3 6%
way too expensive.
I’ll just lessen my 5 10%
consumption.
I don’t smoke, so I 34 68%
don’t really care.
TOTAL 50 100%

Out of the total respondents, 16% reacted on the Increase Tax Proposal that “it’s okay

with me”, 6% reacted “I’ll stop smoking because it’s way too expensive.”, 10% said that “I’ll

just lessen my consumption”, and 68% said that “I don’t smoke, so I don’t really care”.

Table 9: Proposal for increase tax of Tobacco

Response Frequency Percentage

Yes 26 52%
No 24 48%
Total 50 100%

Out of 50 respondents, 52% agreed for the increase tax on tobacco products and

48% are not agreed for this proposal of the government.

 Table 10: Effects to Economy

Response Frequency Percentage

Lessen pollution and 32 64%
smokers.
Decrease in number of 33 66%
people developing
smoking-related
diseases.
Decrease in mortality. 27 54%

Increase government 19 38%

revenue.
Smokers will just 15 30%
switch to lower price
brands.
Smokers have to budget 9 18%
their consumption.
Government will 19 38%
probably just corrupt
the money.
Increase cigarette theft 11 22%
and smuggling.
Counterfeiting 9 18%
cigarettes ( FAKE ).
Unemployment 30 60%
increase.

Out of total respondents, 64% answered “ Lessen pollution and smokers “, 66% answered
“Decrease in number of people developing smoking-related diseases”, 54% answered “Decrease
in mortality”, 38% answered “Increase government revenue.”, 30% answered “Smokers will
just switch to lower price brands.”, 18% answered “Smokers have to budget their
consumption.”, 38% answered “Government will probably just corrupt the money.”, 22%
answered “Increase cigarette theft and smuggling.”, 18% answered “Counterfeiting cigarettes
( FAKE ).”, and 60% answered “Unemployment increase.”. Majority believed that the
increase of tobacco tax has an effect of Lessen pollution, smokers and Decrease in number of
people developing smoking-related diseases but unemployment will continue to increase.
 Chapter 5

Conclusion

Based from the survey we’ve gathered, most of the respondents who smoke don’t mind

the increase of tax in tobacco products such as cigarette, as long as they still get to smoke. The

majority of the respondents think that the government will pursue the proposal of 400% increase

tax on tobacco products as soon as it is legalized. Most of them think that the continuous tax

increase will lessen the pollution, and the number of people developing smoke-related diseases

will decrease.

Therefore, when the tax in tobacco products increases, it will have a positive impact in

our economy because according to the Bureau of Internal Revenue, almost half of the taxes that

they have collected came from tobacco products. The taxes that were collected will then be

distributed to different sectors of our government, especially to the less fortunate area that needs

further financial assistance to improve their own community.

According to the records of the BIR, the volume of consumer decreases when there is an

increase tax on tobacco products. This is a negative effect for the manufacturers, and at the same

time, for our economy. This decrease on the volume of consumers will only last for the first 2

months because the consumers will have to adjust on the price increase.
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