The true cost of alcohol and tobacco goes far beyond what’s on the price tag. A P55 can of beer or a P150 pack of cigarettes seems inexpensive, but society pays the real price — lives lost to disease, a strained healthcare system, and economic losses from workers who die too soon or are too sick to work.
Because these hidden costs aren’t reflected in their prices, consumption remains high, leading to even greater harm to public health and the economy.
The Global Burden of Disease Study by the Institute for Health Metrics and Evaluation reported that about 115,647 deaths in the Philippines were attributable to alcohol or tobacco in 2021.
But deaths are only one part of the burden. Millions of Filipinos live with diseases and disabilities caused by alcohol and tobacco, reducing their quality of life and economic potential. Alcohol and tobacco cost the country a combined 3,989,873 lost healthy life years in 2021. Lost productivity due to illness and early deaths reduces economic output, harming businesses and workers alike. We estimate that the indirect cost of alcohol and tobacco to the country was P703.5 billion in 2021.
When we account for the direct cost of health expenses to treat associated diseases, we estimate that the total cost to our country of alcohol and tobacco consumption is roughly PHP 1.055 trillion annually — this is larger than the 2025 budgets for the Department of Education and Department of Health combined. These are costs that society pays, imposed even on those who do not consume alcohol or use tobacco.
Tax them
It therefore makes sense to tax these products as a means to recoup some of the social costs and as a way to reduce consumption. Redirecting tax revenues to healthcare and prevention programs can help mitigate the damage caused by the tobacco and alcohol industries. Yet despite the staggering economic toll, excise taxes recovered P266.6 billion in 2021, just a quarter of the total damage inflicted by alcohol and tobacco.
Big alcohol and tobacco do not pay for the costs of consuming their products. Governments and households absorb medical expenses from the treatment of diseases like cancer, liver disease, and respiratory illnesses caused by alcohol and tobacco. In addition, households and the whole economy must face the indirect costs caused by lost productivity, jeopardizing the economic development of the country.
Even those who don’t drink or smoke will bear these losses. One doesn’t need to drink a single drop of alcohol to be a victim of an alcohol-induced road crash or domestic and community violence. Secondhand smoke causes cancer even for the non-smoking children and relatives of people who smoke.
Meanwhile, both industries are able to avoid paying for the full cost of their products while maximizing their profits. Despite overwhelming evidence of harm, these industries pursue aggressive marketing campaigns, often specifically targeting the young and vulnerable.
There is a stark economic imbalance: Multinational tobacco and alcohol industries keep the profits, while taxpayers and workers in the Philippines bear the consequences of consuming their products. Seven of the largest alcohol and tobacco companies in the country were among the top 0.2 percent of the highest profit-generating enterprises, collectively garnering over P506 billion in revenue and P72.2 billion in net profit in 2022.
Reforms needed
To correct this imbalance, we need strong reforms that ensure industries pay their fair share. Increasing taxes on alcohol and tobacco is not just about collecting more revenue — it is a necessary corrective measure to align prices with the true cost these products cause our society. Higher retail prices will discourage excessive consumption while generating funds to mitigate alcohol- and tobacco-related harms.
Public health must take precedence over corporate wealth.
The alcohol and tobacco industry must pay higher taxes and shoulder more of the burden for the harm their products inflict on society. It’s time to demand policies that put people’s well-being above industry profits. – Rappler.com
AJ Montesa is fiscal policy team lead at Action for Economic Reforms, a think tank founded in 1996 that conducts policy analysis and advocacy on macroeconomic reforms.