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Insights and Analysis

For Universal Healthcare, the Philippines Tries “Sin Taxes”

March 4, 2020

By Jestine Mendoza

Quality healthcare is a universal right, yet in the Philippines, citizens often cannot afford even regular checkups, and it is not uncommon for Filipinos to seek help from relatives and friends when confronted by large medical bills. At the heart of the problem is inadequate public investment. According to the World Bank, public expenditures on healthcare in the Philippines were just 4.4 percent of GDP in 2016—measurably lower than its ASEAN neighbors Myanmar (5.1 percent), Vietnam (5.7 percent), and Cambodia (6.1 percent) and significantly lower than developed countries like Canada (10.5 percent).

These low public expenditures have led to poor conditions in Philippine public hospitals, while expensive drugs and medical procedures keep many treatments out of reach for most people.

Doctors and nurses are in short supply, especially in public hospitals and rural areas, as they leave for higher paying jobs overseas or in the private sector. National Department of Health statistics show approximately three doctors for every 10,000 patients in the Philippines, an impossible caseload even for the best of doctors, and a lot of stress for caregivers and the sick. In addition, most are concentrated in urban areas like Metro Manila, leaving other parts of the country without access to adequate care.

Finally, data shows that Filipinos are more likely to visit specialists than primary-care providers, a decision that is more costly to patients and to the system.

Improving public investment in healthcare is a start, but how?

Coalitions for Change (CfC), a partnership between the Australian Embassy in Manila and The Asia Foundation, has worked on three major laws to increase resources for healthcare. These are (1) the Universal Health Care Act (UHC), which expands healthcare coverage by automatically enrolling all Filipinos in the National Health Insurance Program and requires a more robust system of primary-care providers; (2) the Tobacco Tax Law 2019; and (3) Republic Act 11467, which raised excise taxes on alcohol and e-cigarettes. These new “sin taxes” provide essential funds for UHC implementation. It is also hoped that they will make unhealthy habits less attractive, resulting in health benefits overall.

The Universal Health Care Act: Origins and Key Provisions 

Over the past 30 years, several administrations have tried and failed to reform the Philippine healthcare system. To achieve the reforms that had previous advocates, CfC partnered with Action for Economic Reforms (AER), a Philippine NGO with extensive experience in tax and fiscal policy, which worked closely with legislators, executive agencies (the Department of Health and the Department of Finance), healthcare professionals, and other key stakeholders.

Community groups and health advocates call for the swift approval of alcohol and e-cigarette taxes (photo: Bawas Bisyo / Youth for Sin Tax Movement)

The road to the UHC actually began in 2012, with Republic Act 10351, the so-called “sin tax law,” which restructured taxes on alcohol and tobacco products. AER assembled a coalition of healthcare reformers to campaign for the law’s passage and to ensure that the revenues from the new sin taxes would go to healthcare. 

From 2012 to 2014, AER worked on the law’s effective implementation. In 2015, while studying the costs of expanding the Primary Care Benefit offered by the Philippine Health Insurance Corporation, AER spearheaded the Primary Care Coalition, a group of civil society organizations, medical professionals, and other stakeholders that would be a decisive resource in the fight for the UHC that began in 2017.

After a long legislative process in the Philippine Congress, the UHC was finally signed into law by President Rodrigo Duterte in February 2019. AER also contributed to the drafting of the law’s implementing rules and regulations, which were issued in October 2019. 

Establishing the Relationship between Sin Taxes and the UHC 

The 2012 sin tax law generated enough new revenue to triple the Department of Health’s budget, demonstrating that sin taxes could underwrite public healthcare. Advocates of the sin taxes say they also help reduce smoking rates, which have continued to fall in the Philippines from 25 percent of the population in 2013 to 23 percent in 2015 and 21 percent in 2018.

Based on their own research, the AER team decided to push for still higher excise taxes on tobacco and alcohol. Even with the 2012 sin taxes, cigarettes in the Philippines were still among the cheapest in the world, and smoking rates remained high. Alcohol consumption was also very high. A 2018 study found that 60 percent of adult Filipinos were binge drinkers.

A Series of Tax Proposals on “Sin Products” 

So, the team focused on alcohol, tobacco, and a new product, tobacco alternatives like e-cigarettes. In June 2019, after a complex journey through the legislative process, the Tobacco Tax Law 2019 was adopted by the 17th Congress. The new law raised the cigarette tax per pack to PHP 45.00 (USD 0.88) in 2020, with an annual increase of PHP 5.00 until it reaches PHP 60.00 per pack (USD 1.30) in 2023, and a 5 percent annual increase thereafter. 

The beginning of the 18th Congress in July 2019 opened the door to another round of tax proposals. AER and its coalition continued to work with their legislative champions, Representative Joey Salceda and Senator Pia Cayetano, to push for higher taxes on alcohol and tobacco alternatives. As a result, Republic Act 11467, raising taxes on alcohol and e-cigarettes, was signed into law in January 2020.

Doctors for Raising the Tobacco Tax (photo: Bawas Bisyo / Youth for Sin Tax Movement)

The government estimates that the UHC will require PHP 257 billion (USD 5 billion) in its first year of implementation. Funds from the Tobacco Tax Law 2019 are projected at around PHP 16 billion (USD 0.3 billion), while the excise taxes on alcohol and tobacco alternatives are expected to generate around PHP 25 billion (USD 0.5 billion).

Changing the Landscape of Philippine Healthcare

In the eight years since the 2012 sin tax law, the Universal Health Care Act and the two excise tax bills have changed the landscape of Philippine healthcare. Thanks to the UHC, ordinary Filipinos now have access to much-needed primary care, and rising revenues from the excise tax measures will continue to provide a solid foundation for essential healthcare services. The adoption of these laws is a triumph, not just for healthcare advocates and proponents in government but for the Filipino people, and a significant feat for a developing country that has struggled to reform its healthcare system for decades.

Jestine Mendoza is a program officer in The Asia Foundation’s Economic Reform and Development Entrepreneurship Program in the Philippines. She can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation.

Related locations: Philippines
Related topics: Coalitions for Change

1 Comment

  1. Very well-written! Subsequently and on the other side of the sin tax application, it would be interesting to do a research on whether or not it has been able to bring down the number of people engaging themselves in the use of sin products. That would somehow complete the picture of how the implementation of the sin tax law has been able to “hit two birds with one stone”, if indeed it did.

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