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Yenna Thesis Final Version 2
Yenna Thesis Final Version 2
INTRODUCTION
Smoking causes adverse effects to nearly every organ in the body, diminishing overall
health. It is directly responsible for many cancers and a number of diseases. With this, it has
become one of the major causes of death worldwide. Smoking related diseases such as cancer,
stroke, lung and heart diseases cause death to one out of 10 adults globally and to 10 Filipinos
every hour. Smoking also causes increased absenteeism from work and increased health care
utilization and cost, affecting not only individuals but groups as a whole.
According to the Global Adult Tobacco Survey (GATS), the Philippines has 15.9 million
tobacco users—the country having the highest tobacco smoking prevalence among women in the
Western Pacific region. Out of those Filipino adult tobacco users, 18.7% are daily smokers, with
males consuming 11 cigarettes per day and females consuming 9 cigarettes per day on the
average. This high consumption rate is attributed to the very low pricing on cigarettes in our
country.
Cigarette products have put millions of lives at risk. This compelled the government to
develop and constitute measures that aim to discourage the public from consuming cigarettes,
The government imposed the Sin Tax Reform Act of 2012 with the aim to restructure the
existing taxes imposed on alcohol and tobacco products. Levies on these products are seen as a
potential revenue source that will help fund the projects of the administration. Likewise, higher
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taxes—and consequently higher costs—are seen to restrain the consumption of "sin" products,
whose adverse effects are mostly borne by the poorer segments of society.
In 2017, the Philippine government introduced Republic Act No. 10963, otherwise
known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act. This tax reform law
imposes higher levy on alcoholic beverages and tobacco products and is expected to raise
P162.75 billion this year, with excise tax on cigarettes reaching P111.59 billion. Both amounts
higher compared with the original target of P151.17 billion and P97.13 billion, respectively, set
under the 2018 Budget of Expenditures and Sources of Financing (BESF) program. From the
original tax rate of P31.2 per pack, excise tax on cigarettes is now at P32.5.
In the Philippines, Cebu is one of the most developed and populated provinces. It is the
country’s second largest urban region, after Metro Manila. With Cebu City as the main center of
commerce, trade and industry, it has become the main urban center of both the province and the
larger Visayas region. According to the 2015 Census of Population (POPCEN 2015), among the
barangays comprising Cebu City, Barangay Guadalupe is the most populous with a population
For these reasons, the present study is pursued with the main purpose of determining the
efficacy of the law mandating for an increase in excise tax in the reduction of cigarette
consumption. This study aims to determine the influence of the increased excise tax in the
buying decision of the consuming public. If no significant influence exists, then the results of the
present undertaking aim to aid in the current flow of legislations in introducing other measures to
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THE PROBLEM
This study aims to determine if the Philippine government achieved its objective of
reducing cigarette consumption. Specifically, the research aims to answer the following
problems:
1. What is the sales volume of cigarettes sold by the Sari-sari stores at V. Rama Avenue,
2. What is the sales volume of cigarettes sold by the Sari-sari stores at V. Rama Avenue,
Assumption/Limitation
consumption.
2. The researchers limit the conduct of their study in V. Rama Avenue, Barangay
Statement of Hypothesis
There is no significant difference between the sales volume of cigarettes sold by the Sari-
sari stores at V. Rama Avenue, Barangay Guadalupe, Cebu City before and after the
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PHILIPPINE GOVERNMENT. This study will inform the Philippine Government as
to public’s consumption of cigarettes and on how to generate and allocate sufficient revenues for
the expansion of health insurance coverage and through investments in health facilities and other
COMMUNITIES. This study will benefit communities with similar issues by providing
a suggestion that might lead to a solution for its specific problems. The study could open
opportunities for such communities and could give them an idea for what seems to be not
INDIVIDUALS. This study will benefit individuals who are interested in acquiring
additional knowledge and inputs on how to reduce usage of harmful products that can most
likely cause severe health problems, discourage individuals to indulge themselves in other vices,
and provide them with a concept or guide on how to make an effort to lead an active, health-
opening for further studies and/or as a guide to widen their knowledge in specific area of study
or issue.
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DEFINITION OF TERMS
Cigarette. Refers to any roll or tubular construction, which contains tobacco or its derivatives
Descriptive research. A study designed to depict the participants in an accurate way. A survey
is a descriptive research.
Sales volume. The quantity or number of goods sold or services sold in the normal operations of
Sari-Sari Store. A small retail outlet that can be found in almost all neighborhoods, sometimes
even in every street corner in the Philippines. Most sari-sari stores are privately owned shops and
are operated inside the store owner’s house. Commodities are displayed in a large screen-covered
Sin tax. A tax on items considered undesirable or harmful, such as alcohol or tobacco.
Respondents. This refers to the registered sari-sari store owners selling cigarettes at V. Rama
TRAIN Law. Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration
and Inclusion (TRAIN) Act, will provide hefty income tax cuts for majority of Filipino taxpayers
while raising additional funds to help support the government’s accelerated spending on its
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T-test. An analysis framework used to determine the difference between two sample means from
two normally distributed populations with unknown variances. A t-test is an analysis of two
populations means through the use of statistical examination; a t-test with two samples is
commonly used with small sample sizes, testing the difference between the samples when
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CHAPTER II
THEORETICAL BACKGROUND
This chapter highlights the review of related literature concerning about smoking,
cigarettes and its consumption, Sin Tax Law before and after the implementation of the Tax
Reform for Acceleration and Inclusion (TRAIN) Law, and Barangay Guadalupe, Cebu City--
SMOKING
Cigarette smoking is one of the most common forms of recreational drug use. Smoking is a
practice in which a substance is burned and the resulting smoke breathed in to be tasted and
Smoking also refers to the inhalation and exhalation of fumes from burning tobacco in
cigars, cigarettes and pipes. Historically, smoking as a practice, was followed by natives of the
Western Hemisphere, in religious rituals and for medicinal purposes. It has a history starting
from the late 1500s. Explorers of the New World saw it fit to introduce tobacco into Europe, in-
spite of the opposition from the then rulers. But the novelty and thrill factor won over many a
new user. Towards the end of the nineteenth century, cigarettes were higher in demand than the
cigars and pipes, which had been popular amongst smokers until then.
Tobacco smoke contains nicotine – a poisonous alkaloid – and other harmful substances like
carbon monoxide, acrolein, ammonia, prussic acid and a number of aldehydes and tars. Cigarette
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smoke contains over 4,000 chemicals, including 43 known cancer-causing (carcinogenic)
Health reports giving definitive proof that cigarette smoking is a serious health hazard have
been submitted from time to time by the Surgeon General’s Advisory Committee on Health,
appointed by the U.S. Public Health Service. Findings include that a smoker has a significantly
greater chance of contracting lung cancer than a nonsmoker, depending on factors such as
number of cigarettes smoked daily, number of years the subject smoked and the time in the
Smoking is responsible for 71 percent of lung cancer deaths in the world. Consequently,
lung cancer is the leading form of cancer in the Philippines. DOH statistics reveal that 10
Filipinos die every hour because of smoking. According to the Department of Health (DOH), the
Philippines has an estimated 17.3 million tobacco consumers, the most number of smokers in
Southeast Asia. Filipinos on average consume 1, 073 cigarette sticks annually, while the smokers
in the region consume less than a thousand sticks yearly. This high consumption rate is seen as a
result, among others, of the very low cigarette prices in our country.
CIGARETTES
The term cigarette, as commonly used, refers to a tobacco cigarette but is sometimes used
a cigar by its usually smaller size, use of processed leaf, and paper wrapping, which is typically
white. Cigar wrappers are typically composed of tobacco leaf or paper dipped in tobacco extract.
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Cigarette refers to any roll or tubular construction, which contains tobacco or its
Smoking rates have generally declined in the developed world, but continue to rise
in developing nations. Cigarettes carry serious health risks, which are more prevalent than with
other tobacco products, and nicotine is highly addictive. About half of cigarette smokers die of
tobacco-related disease and lose on average 14 years of life. Cigarette use by pregnant women
has also been shown to cause birth defects, including low birth weight, fatal abnormalities, and
premature birth. Second-hand smoke from cigarettes causes many of the same health problems as
smoking, including cancer, which has led to legislation and policy that has prohibited smoking in
many workplaces and public areas. Cigarette smoke contains over 7,000 chemical compounds,
including arsenic, formaldehyde, cyanide, lead, nicotine, carbon monoxide, acrolein, and other
poisonous substances. Over 50 of these are carcinogenic. Additionally, cigarettes are a frequent
source of mortality-associated fires in private homes, which prompted both the European
Union and the United States to ban cigarettes that are not fire-standard compliant from 2011
Cigarette sales are a significant source of tax revenue in many localities. This fact has
historically been an impediment for health groups seeking to discourage cigarette smoking, since
governments seek to maximize tax revenues. Furthermore, some countries have made cigarettes
a state monopoly, which has the same effect on the attitude of government officials outside the
health field. Higher prices for cigarettes discourage smoking. Every 10% increase in the price of
cigarettes reduced youth smoking by about 7% and overall cigarette consumption by about 4%.
Thus, increased cigarette taxes are proposed as a means to reduce smoking. States charge sizable
settlement payments to tobacco companies, and the federal government levies user fees to fund
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FDA regulatory measures over tobacco. While these charges are not cigarette-specific, tobacco
companies are ultimately forced to pass on those costs to their consumers. Lastly, most
jurisdictions apply sales tax to the full retail price of cigarettes. The World Health Organization
(WHO) recommends that globally cigarettes be taxed at a rate of three-quarters of cigarettes sale
price as a way of deterring cancer and other negative health outcomes. (Rabinoff et al., 2007)
The Philippines is one of the largest consumers of tobacco in the Western Pacific Region
with over 19 million smokers. Nearly 30% of Filipinos consume some type of tobacco product
— 47.7% of men smoke while 9% of women smoke. Youth tobacco use is a significant problem
in the Philippines; nearly 23% of 13–15 year olds use tobacco products. High rates of tobacco
use contribute to a significant number of early deaths and high healthcare costs. In the
Philippines, tobacco use is estimated to kill approximately 87,600 people each year — about 240
every day. The economic costs of smoking in the Philippines were over 7% of GDP in 2003. As
much as 44.6 billion pesos (US$ 858 million) was spent to treat the four major diseases caused
by tobacco use while the morbidity and mortality caused by tobacco use resulted in lost
productivity of nearly 270 billion pesos (US$ 5.2 billion). The Current Tobacco Tax Structure in
the Philippines is Complex. The Philippines levies an excise tax and a value added tax on
tobacco products. The excise tax system has multiple tiers, with some brands bearing a tax that is
less than one-tenth of the tax per pack levied on other brands. The “price classification freeze”
applied in 1996 mandates that the tax applied to most brands is based on their net retail price in
The Philippines has long been a major tobacco growing country, beginning with the
introduction of the tobacco plant by Spanish colonists in the 16th century. As a result, tobacco
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has a significant place in the country’s history, economy, and politics. Most tobacco farming is
concentrated in 5 provinces. Over 60% of the tobacco grown in the Philippines is Virginia
tobacco, with burley tobacco the next most common (24.2%). The Philippines is a net exporter of
tobacco leaf, with half or more of tobacco production exported in recent years. In 2010, the two
largest cigarette manufacturers in the country, Fortune Tobacco Corporation (FTC) and Philip
Morris Philippines Manufacturing Incorporated (PMI) formed a joint venture, creating a near
monopoly on cigarette manufacturing. British American Tobacco left the Philippine cigarette
market in 2009, but a variety of other local and international tobacco companies continue to have
a presence in the Philippines, including Japan Tobacco International (JTI), Mighty Corp, La
Suerte Cigar & Cigarette Factory, and Imperial Tobacco. This section briefly describes the
supply side of the tobacco leaf and tobacco product markets in the Philippines, highlighting
In addition to the substantial public health casefor tobacco control, a strong economic
rationale exists for government intervention to reduce tobacco use. (Quimbo et al., 2012)
The notion of consumer sovereignty — the principle that an individual makes the best
choices for himself or herself – depends on two key assumptions: that an individual fully
understands the costs and benefits of these decisions and that an individual bear all of the costs
and receives all of the benefits of his or her decisions. Tobacco use clearly violates both of these
consumers have imperfect information about the health and other consequences of tobacco use.
Many users do not fully understand the health hazards associated with tobacco use, and those
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who do have a general understanding of the risks do not adequately internalize these risks. This
is particularly true in the Philippines, where many smokers are less than fully aware of the health
consequences of smoking. For example, while 92.7% of Filipino smokers believe smoking
causes lung cancer, only 75.7% were aware that smoking causes heart attacks and 69.2% were
aware that smoking causes strokes. This imperfect information is complicated by the fact that
most tobacco users initiate use as youths. As noted above, millions of Filipino youth begin using
tobacco by age 15, with many starting at younger ages. More than half of Filipino youth are
exposed to tobacco smoke at home and nearly two-thirds are exposed in public places. Similarly,
more than half of adult Filipinos are exposed to tobacco smoke at home and on public
transportation, while more than one third of Filipino workers are exposed in the workplace.
Additionally, there are financial externalities that result from publicly financed health care to
treat diseases caused by tobacco use. Filipinos are covered by the government through the
PhilHealth program. A more recent strand of literature has emphasized a different type of market
A variety of tobacco control policies and programs can be used to address the failures
inherent in the markets for tobacco products. The WHO’s Framework Convention on Tobacco
Control (FCTC), the world’s first public health treaty, calls for governments to adopt
comprehensive policies to curb tobacco use. The public transportation, more than one-quarter of
adults’ report being exposed in government buildings, and 36.9% report being exposed in the
workplace (including 13.9% exposed in workplaces that prohibit smoking in enclosed areas).
R.A. 9211 mandated health warning labels on tobacco product packaging, calling for rotating
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text warnings in English or Filipino that take up 30% of the front of the pack. The warnings
provide general statements about the health consequences of tobacco use, stating that: “cigarette
smoking is dangerous to your health”; “cigarettes are addictive”; “tobacco can harm your
children”; and “smoking kills.” Efforts to adopt legislation that would strengthen the warnings by
requiring larger, rotating graphic warnings have been unsuccessful. This led the Department of
Health to adopt an administrative order in 2010 requiring graphic warning labels in order to
comply with the WHO FCTC (The World Health Organization Framework Convention on
Tobacco Control). This administrative order was immediately challenged by the tobacco industry
and graphic warnings labels are currently on hold. The general nature of the existing text
warnings, along with the frequent purchases of single cigarettes, likely contribute to the less than
full understanding about the specific risks from tobacco use among Filipino smokers described
above. Other public education efforts, including mass-media campaigns to inform smokers of the
risks from smoking, are spotty at best and have limited reach among the least educated and
R.A. 9211 also banned most tobacco product advertising, including on television and
radio, in print, and outdoors, as well as tobacco company sponsorship of events, as of 1 July
2008. However, point-of-sale advertising is allowed, as are promotions and sampling to Filipinos
over 18 years of age. Despite the somewhat comprehensive ban, the vast majority of Filipinos
reported being exposed to tobacco company advertising in 2009, with 71.2% reporting exposure
to any cigarette advertising. The exemption of the point Philippines signed the FCTC on 23
September, 2003, and ratified the treaty less than two years later, on 6 June, 2005. As with many
low and middle-income countries that have signed and ratified the treaty, tobacco control
policies in the Philippines fall short of those called for by the FCTC. (Quimbo et al., 2012)
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However, these policies have become increasingly comprehensive since the early 1980s
and the country’s ratification of the FCTC suggests that this trend will continue in coming years.
The Economics of Tobacco and Tobacco Taxation in the Philippines of-sale from the
advertising ban accounts for much of this, with 53.7% of individuals surveyed reporting noticing
advertising in stores. Similarly, the exemption for promotions to those over 18 is also important,
with 29.1% reporting noticing cigarette promotions. The sale of tobacco products to persons
under 18 years of age was also prohibited by R.A. 9211. However, minors have little trouble
purchasing cigarettes, with nearly half (49.3%) of 13-15 year olds reporting buying cigarettes in
stores and 59.6% of those who buy cigarettes in stores not being refused sale because of their
age. The numerous small tobacco product vendors, particularly the sari-sari stores and street
vendors, make effective enforcement of the prohibition on sales to minors nearly impossible.
The Philippines has a national tobacco control strategy and, in 2010, created a National
Tobacco Control Coordinating Office, based in the Department of Health’s National Centre for
Health Promotion. Resources, however, are limited. Cessation programs are available, but tend
to have limited reach and there are no national cessation practice guidelines or models. There is
including nicotine patches and varenicline, and these medications are not on the essential drug
list. Evidence from high-income countries and a growing number of low and middle-income
countries demonstrates that strong tobacco control policies will lead to significant reductions in
tobacco use, while relatively weak policies will have a limited impact at best. To date, the
restrictions on smoking in public places and workplaces, weakly enforced ban on sales to minors,
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limited efforts to raise awareness about the consequences of tobacco use and minimal resources
dedicated to tobacco control appear to have had little effect on tobacco use, with smoking
prevalence changing little over time, even as policies have become somewhat more
comprehensive. Stronger and more comprehensive policies would complement higher taxes in
reversing the upward trends in tobacco use in the Philippines. (Quimbo et al., 2012)
NATURE OF CIGARETTES
Consumers’ goods are those final goods which directly satisfy the wants of consumers.
Such goods are bread, milk, pen, clothes, furniture, etc. Consumers’ goods are further sub-
divided into single-use consumers’ goods and durable use consumers’ goods. These are goods
which are used up in a single act of consumption. Such goods are foodstuffs, cigarettes, matches,
fuel, etc. They are the articles of direct consumption because they satisfy human want directly.
Cigarette is considered as single use consumer goods as they are consumed immediately
which can have a negative impact on the consumer – but these damaging effects may be
unknown or ignored by the consumer. Demerit goods also usually have negative externalities –
where consumption causes a harmful effect on a third party. The classification of demerit goods
is a normative judgement. In defining demerit goods, we may assume that people are irrational
and make poor choices – often consuming goods which are harmful, degrading or damaging in
the long-term. This may be due to poor information or poor decision making. In other words,
people may underestimate the private costs and over-estimate the private benefits. (Pettinger,
2016)
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EFFECTS OF QUITTING SMOKING
Quitting smoking means breaking the cycle of addiction and essentially rewiring the brain to
stop craving nicotine.To be successful, smokers that want to quit need to have a plan in place to
beat cravings and triggers.The benefits of quitting smoking begin in as little as 1 hour after the
last cigarette.The sooner a smoker quits, the faster they will reduce their risk of cancer, heart and
Smoking is a harmful habit that can lead to severe health complications and death. When a
person quits smoking, the body will start to naturally heal and regain the vitality of a non-smoker
over time.
Some effects, such as lowered blood pressure, are seen almost immediately. Other effects,
such as risks of developing lung cancer, heart disease, and lung disease, take years to drop down
However, each year of not smoking decreases risks and improves overall health, making
quitting smoking an excellent choice for anyone who started the habit. (Fletcher, 2017)
Quitting smoking now greatly reduces your risk for numerous diseases, cancers, COPD, and
reproductive complications. When quitting smoking, there are numerous physical and emotional
SIN TAXES
A sin tax is a state-sponsored tax that is added to products or services that are seen as
vices, such as alcohol, tobacco and gambling. These types of taxes are levied by government,
intending to discourage individuals from partaking in such activities without making the use of
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the products illegal. (Evan, 2010). Also, these taxes provide an easy way for the government
Unlike other taxes, however, sin tax is often enacted with the additional aim of reducing
or eliminating the public’s consumption of a particular product. The sin tax accomplishes this
purpose, as higher costs through taxation encourage consumers to spend less on harmful
products.
House Bill 5727, or the Sin Tax Bill, aims to restructure the existing taxes imposed on
alcohol and tobacco goods. Duties on these products are a potential revenue source that will help
fund the Universal Health Care Program of the administration in simplifying the current excise
tax system on alcohol and tobacco products and fixing long standing structural weaknesses, and
by addressing public health issues relating to alcohol and tobacco consumption. (Department of
Finance, 2018)
consumption of “sin” products, whose adverse effects are mostly borne by the poorer segments
of society.
The Philippines’ sin tax reform—a significant simplification and increase in tobacco and
alcohol excise taxes, and the earmarking of revenue increases to fund universal health care—
exemplifies how the nation seized a rare opportunity to make a decisive and tangible difference
Before the passage of Republic Act 10351, or the Sin Tax Reform Act of 2012,
restructuring excise taxation of tobacco and alcohol in the Philippines was a protracted crusade
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against powerful vested interests that had long benefited from the old system’s inefficiencies.
Previous efforts languished in the hands of those opposed to change, and the merits of reform
The Department of Finance and the Department of Health stood side by side in pushing
for and defending the sin tax reform as a public health measure that promised fiscal returns.
Development institutions including the World Bank Group and the World Health Organization
provided us with analytical support and international experience to bolster the technical bases of
our proposal. Civil society groups—the “white armies” of the medical community, economic
reform activists, and tobacco control and health advocates—mobilized to publicize information
on the sin tax reform. These actions, both spontaneously and proactively coordinated, were so
sustained that even parties who felt that sin tax reform was not in their short-term interest were
brought into the dialogue and became convinced that the reform will serve the greater good.
Under the Sin Tax Reform Act, the excise tax on cigarettes will plateau in 2017 following
four years of progressive increases. Cigarettes will then be taxed at a single unitary rate with
annual increases of 4 percent. Although this ensures an automatic upward adjustment in the
excise tax, it may not be sufficient to keep pace with the increasing real incomes of Filipinos,
on Tobacco Control included as a target in the Sustainable Development Goals (SDGs) for 2030,
the government and development partners will be eager to learn the lessons of the sin tax reform
in the Philippines. Improving health and well-being are very much at the heart of the post-2015
development agenda, and excise taxes, starting with tobacco, can be a way for all countries, at
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SIN TAX LAW OVERVIEW
The 2012 Philippines Sin Tax Law (STL) brought about long-overdue reforms to tobacco
and alcohol taxation to promote better health, improve financial sustainability, and good
governance. The STL greatly simplified and increased excise taxes, especially on cigarettes. In
2012, cigarettes were widely sold at ₱1 apiece or even less—an amount equivalent to a couple of
U.S. cents. Falling real taxes and growing incomes in the Philippines meant that tobacco and
alcohol products were widely accessible and affordable. The prevailing excise regime had
resulted in a significant decline in revenues, from 0.9 percent of gross domestic product (GDP)
in 1997 to under 0.5 percent of GDP in 2012. This is equivalent to “losses” of over $2.5 billion
per year in 2012 terms. The excise regime granted special low grandfathered rates to certain
cigarette producers, suffered from a lack of inflation indexing, and fostered an increasingly
monopolistic market. The multiple excise tiers—which varied by price—created the temptation
The STL raised and simplified tobacco and alcohol excises, increasing government
revenues and reducing smoking. After only one year of implementation, excise tax collections
from tobacco and alcohol products shot up to approximately ₱103.4 billion ($2.44 billion), an
increase of more than 86 percent from the previous year’s collections of ₱55.7 billion ($1.25
billion). In 2015, total sin tax collections reached ₱141.8 billion (over 1 percent of GDP), with
tobacco accounting for ₱100 billion. Retail prices for cigarettes increased significantly because
of the reform, prompting consumers to cut down and even stop smoking, with early data
The reform scaled up health care financing, nearly doubling the Department of Health’s
(DOH) budget in its first year of implementation and financing the extension of fully subsidized
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health insurance to the poorest 40 percent of the population. From 2013 to 2014, the number of
poor and near-poor families enrolled in the National Health Insurance Program increased from
5.2 million to 14.7 million. This grew to 15.3 million by end-2015, almost tripling the coverage
of the poor and near-poor. Sin tax revenues were also subsequently used to subsidize the
insurance coverage of senior citizens, further expanding access to care among the vulnerable. By
2016, the DOH budget was triple its 2012 level (in nominal terms), reaching ₱122.6 billion.
Although the initial impact of the STL was felt immediately, it is a multiyear transition to
a new tax regime, and its full implementation stretches to 2017 and beyond. By 2017, all
cigarettes will be subject to a single unitary excise tax of ₱30 ($0.70) per pack after a
quadrupling of the lowest excise tax tier of ₱12 in 2013 from ₱2.72 in 2012. After 2017 the
excise tax will be increased automatically by 4 percent per year. Higher cigarette prices should
improve population health by curbing smoking. The STL retained revenue earmarking for
tobacco-growing regions (almost equal to 15 percent of tobacco revenues), with a major increase
The law simplified and increased excise taxes on cigarettes. It did away with complex tax
tiers and rates that catered to a narrow set of special interests. It helped set a floor price for all
brands of cigarettes, raising the minimum tax more than fourfold (341 percent) from 2012 levels
of only ₱2.72 ($0.06) per pack of 20. It also moved from a multitiered ad valorem system to a
specific structure with only two tiers, converging to a unitary rate over four years. This did away
with the administrative difficulties of classifying cigarettes by declared value and allowed the
Bureau of Internal Revenue (BIR) to focus on more easily observed volumes. To counter risks of
tax evasion and smuggling, the BIR also introduced a holographic tax security stamp in 2014.
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Simplicity and transparency served good governance and tax administration. It is expected that
by 2016, floor prices for an individual cigarette will increase further to ₱2 ($0.04). Spirits and
beer taxes were also simplified, but the increases were less than for cigarettes.
The STL contributed to attaining universal health coverage. This was done through the
expansion of health insurance coverage and through investments in health facilities and other
are reserved for the government’s health program. Of this, 80 percent is allocated to universal
health care and, specifically, the National Health Insurance Program, health-related Millennium
Development Goals, and health awareness programs. The remaining 20 percent goes to the
DOH’s Medical Assistance Program, which deposits funds at hospitals to cover the medical bills
of patients who cannot afford to pay, and the DOH’s Health Facilities Enhancement Program
(HFEP), which funds additional infrastructure investments in underserved areas. The National
Health Insurance Program share is transferred from the DOH to the Philippines Health Insurance
effectively providing free health insurance to the poorest 40 percent of the population (currently
using the National Household Targeting Survey for Poverty Reduction, a targeting list originally
designed for the government’s conditional cash transfer program. This ends the practice of
leaving the targeting of the poor to the discretion of local government units and replaces it with a
anchoring the strategic choices made in finalizing the bill. These included (1) significant
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streamlining of the excise tax structure (that is, converging to a unitary rate for cigarettes); (2)
setting a minimum floor tax for cigarettes to discourage smoking; (3) ensuring a level playing
field for producers; (4) generating sufficient revenues to scale up universal health care, notably
for the bottom 40 percent of the population; and (5) ensuring that the reform as a whole was pro-
poor. Expenditure decisions focused on earmarking specifications (that is, for what and how
“hard”), and whether the STL would generate sufficient revenues to finance universal health care
The first three years of implementation of the STL have been a success. Of particular
note is that (1) prices of the cheapest brands of cigarettes have increased by more than 50
percent, (2) total revenues have increased, (3) holographic tax stamps are now on over 95 percent
of packs, (4) the BIR has taken legal action to address concerns of tax evasion in the sector, and
(5) smoking prevalence has fallen. On the expenditure side, the DOH’s health budget has tripled
in three years and the poorest 40 percent of the population, as well as senior citizens, receive free
According to the Department of Health (DOH), the Philippines has an estimated 17.3
million tobacco consumers, the most number of smokers in Southeast Asia. Filipinos on average
consume 1, 073 cigarette sticks annually, while the smokers in the region consume less than a
thousand sticks yearly. This high consumption rate is seen as a result, among others, of the very
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According to the DOH, a 10 percent increase in tobacco taxes will reduce the number of
smokers by two million by 2016. A significant decline in the number of smokers will likewise
The Department of Finance (DOF) has determined the following flaws in the current system of
The current system is still under the Price Classification Freeze, wherein old brands are
The system follows a multi-tiered tax structure that is prone to the downshifting of
smokers to cheaper cigarette brands (which does not discourage smoking). For example,
based on 1994-2010 statistics provided by the Bureau of Internal Revenue (BIR), it was
observed that consumers had downshifted from medium-priced cigarettes (more than
30% consumption in 1994 to less than 20% in 2010) to low-priced cigarettes (less than
The lack of price indexation results to declining tax burdens, as tax is eroded by inflation.
In effect, the 2004 effective burden tax price has decreased in 2010 ranging from a 1
percent to 9 percent decrease in tax burden (based on BIR 4th quarter survey).
Maintain the specific form of excise taxation (e.g., per piece, per pack, per proof liter) to
discourage consumption, have more revenues that are predictable and easier to
administer, and devoid of incentives for manufacturers and importers with under-invoice
products;
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A shift from a multi-tiered tax structure to a single tax structure: (1) For cigarettes, a two-
rate structure of P14 and P30 per pack for the 1st two years, and a uniform rate of P30 per
Revenues from sin taxes are to augment the funds of the Aquino administration’s
Additional revenues to be brought about by the proposed sin tax reform are being viewed as
one of the main sources for UHC national government financing. P92.7 billion will account for
the national government covering for a 100 percent subsidy for the premium of 5.2 million or the
bottom 20 percent of the poorest families. P55.3 billion will account for a 50 percent subsidy for
the next 5.6 million of poorest families (the other half will be funded by the local government)
and P76.8 billion will account for investment subsidies in the health sector.
Republic Act No. 10351, more commonly known as the sin tax law, which aimed to curb
the incidence of smoking in the country, by making cigarettes more expensive through higher
taxes on cigarette manufacturers. Yet, the law has not prevented people from smoking, because
cigarettes remain affordable and are likely to become more so in the future.
24
A deeper look into the law explains this seeming contradiction and reveals the policy
areas that need improvement, if the sin tax law is to be truly effective. R.A. No. 10351 targets the
relatively poorer segments of the population, who smoke more than the middle or upper classes.
explained Valerie Gilbert Ulep, research specialist at the Philippine Institute for Development
Studies (PIDS). “You have higher prevalence of smoking among the poor.”
The differences are noted in a report on smoking published by the World Health
Organization in 2008, which found that poor households with members who smoked spent more
than eleven times for tobacco products than for health, and nine times more than for education.
“Tobacco is inextricably linked with poverty,” the report said. “Evidence from around the world
has shown that tobacco consumption is higher among the poorest households,” the report noted,
adding that expenditures on tobacco products “divert scarce resources that poor families might
A World Bank study notes that there are more barriers for the poor to cease smoking,
such as “lower awareness and concern about health risks.” A study by the US National Center
for Biotechnical Information cites exposure to stress, noting that smokers who live in stressful
environments, like those from lower incomes, “view smoking as a comfort enabling them to
cope." The same study also notes that the poor smoke more because of targeted marketing by
tobacco companies, especially to those with lower socio-economic backgrounds “who are less
There is broad consensus in these and other studies that the poor are more affected by
changes in the prices of goods than the rich. And so, if cigarette prices go up, those with less
25
The problem, however, is that while the current sin tax law has raised cigarette prices, the
increase is not high enough. “I did a projection of tobacco prices in the future. Taking into
account the economic growth and inflation rate, tobacco prices will still go down,” Ulep said.
The Philippine economy, measured by its gross domestic product (GDP), has grown in
the last few years. Thus, the GDP per person, or simply the total GDP divided by the total
population, has also increased. While an increasing GDP per person does not always mean every
Filipino has become well off, it does suggest that incomes, on the average, have been increasing.
“When you have a growing economy, household income also increases so your
disposable income is also higher,” said Ulep. And this presents a challenge for the effectiveness
of the sin tax law, because the increase in the prices of tobacco products is eroded by the increase
in income, defeating the purpose of the sin tax law. (Soriano et al., 2017)
According to a white paper by WHO Philippines (2009), current tax structures have
mandated a steadily increasing tax on tobacco products since 1997, and yet smoking prevalence
Taxation should curb tobacco use, studies and models around the world have proven. In
Raising taxes on tobacco products has long been encouraged by the World Bank, World
Health Organization, and tobacco control experts, as a proven tobacco control measure. The
WHO Framework Convention on Tobacco Control (FCTC), a global treaty to which the
Philippines is party, says that raising the price of tobacco through higher taxation is the single
most effective way to reduce consumption and encourage tobacco users to quit. Article 6 of the
26
FCTC in particular says that higher taxes deter tobacco use among the young and the poor, and
Studies all over the world suggest that a 10 percent increase in tobacco taxes can bring
increase should also directly benefit governments through increased revenues, which can in turn
be used for tobacco control and other important health and social programs. It is therefore
recommended by the FCTC and the World Bank that all governments increase tobacco taxes to
In the Philippines, however, something seems amiss. Current tax structures have
mandated a steadily increasing tax on tobacco products since 1997, and yet smoking prevalence
among Filipinos has continued to rise over the last decade. What’s gone wrong? Why is the tax
program on tobacco not having the effect of reducing tobacco use in the country? The problem
does not lie with the link between taxation and tobacco use, which has been proven time and
again in documented models worldwide. What needs reexamination in Philippine tobacco control
efforts are the laws and tax structures themselves. The theory is sound, but the application
appears to have been compromised, such that the prevailing system has been rendered ineffective
with respect to bringing down tobacco consumption. For starters, even with programmed
adjustments in tobacco taxes, the current tax rates on Philippine tobacco are nowhere near the
levels recommended by the World Bank. The reason we are off track and off target, apparently,
is that the crafting and implementation of tobacco taxes in the country have been influenced too
heavily by industry interests, and what the Philippines therefore has is not necessarily what the
World Bank, WHO, and global experts on tobacco control have been meaning to encourage.
Indeed, there is new evidence to suggest that the existing tax laws applying to the tobacco
27
industry may actually be aggravating and complicating the national tobacco control effort. On
the other hand, the same new comprehensive study that suggests weaknesses in the current tax
laws on tobacco, also provides compelling arguments that sound, scientific adjustments in the
laws may yet turn the odds back in favor of public health objectives. The Philippines may yet fix
the tax structures on tobacco products, and achieve the kind of results the world is seeing in
tobacco control.
As tobacco-control tools, the laws and tax structures on the Philippine tobacco industry
need fixing. They are failing to reduce tobacco consumption, and worse, they are creating other
problems. To be precise, an in-depth analysis of the current tax structures on tobacco suggest that
they are:
that control 99 percent of Philippine market. This oligopoly is in turn exploiting and
undermining public policy through lobbies, political pressure, and outright corruption.
encouraging smokers to merely switch brands, rather than quit smoking. Indeed, there is
evidence that the flawed tax structures are actually encouraging more tobacco use.
distorting the real market prices of tobacco products, undervaluing the same so as to
lower actual tax contributions, and thus depriving government of lost potential revenue.
confusing the focus and objectives of tobacco taxation itself. The current tax systems
distract from what ostensibly is the ultimate value behind tobacco taxation, which is,
28
As already suggested above, tobacco tax structures in the Philippines appear to have been
designed and implemented with the interests of an oligopoly highest in mind. A second value
recognizes the potential contributions of the tobacco industry to national coffers by way of taxes,
and then the supposed value of the industry to the national economy as a whole. Public health
interests, sadly, appears low among the intended benefits of the tax structures.
There are three major cigarette manufacturers in the Philippines: Fortune Tobacco
Corporation (FTC), Philip Morris International (PMI), and La Suerte. These three companies
have a combined market share of 99 percent. FTC dominates the industry with a 61 percent share
of the market, and produces four of the top five brands, including the top two leaders, Champion
and Fortune International. PMI comes in as a far second. With nearly the entire market
controlled by an oligopoly, the three manufacturers easily control the market prices of cigarettes,
In truth, however, tobacco taxes are structured in such a way as to not really discourage
smoking. At best, they affect brand loyalty among current smokers, and at worst, they merely
In 2003, taxes as a share of gross retail prices were about 11-43 percent (depending on
the cigarette type); with the stipulated tax increases in 2005, the tax share increased to 21-49
percent. If we adjust for market-determined NRPs, excise taxes would actually only be about 19
to 36 percent of the price that smokers actually pay. Whichever way one looks at it, tobacco tax
in the country is considerably lower than the 65 percent share recommended by the World Bank.
It is important to abandon this current tax setup, and to come up with an alternative
taxation scheme. Government must consider a substantial and fixed tax raise for all tobacco
products, meeting the minimum 65 percent rate recommended by the World Bank, and applying
29
this across all categories, while allowing for inflation and market forces to determine actual retail
prices. When such adjustments are made, simulations show much more significant impacts of
the country after Congress failed to pass a higher tobacco tax as part of a key tax reform bill.
Congress approved on Wednesday Package 1 of the Tax Reform for Acceleration and
Inclusion (TRAIN) which lowers income taxes, while raising excise taxes on a number of items.
However, despite lobbying from health advocates and lawmakers, the TRAIN bill merely
incorporated a meager P2.50 ($ 0.05) excise tax on tobacco. This means a pack of cigarettes
which now costs P30 ($0.60), will cost P32.50 from January until June 2018, then P35 until
December 2019, P37.50 until 2021, then P40 until 2023, with an increase in tax of four percent
"The very small tax increase is both alarming and unsatisfactory because it is totally
inadequate to further discourage youth from smoking and to generate revenues to finance the
Tobacco Tax Program Manager of the Southeast Asia Tobacco Control Alliance (SATCA) in
Bangkok.
The alliance called on President Rodrigo Duterte to veto the tobacco excise tax before he
signs the TRAIN bill into law. The tobacco excise tax is in "package 1" of the tax reform bill,
which is expected to take effect January 2018 and generate P130 billion in revenues.
30
Up to 10 percent tobacco tax proposed
During Senate deliberations on the bill, there were moves to more than double tobacco
taxes to 10 percent annually. This should result in additional P50 billion ($1 billion) in revenues
and at the same time force more than 1.5 million smokers to kick the habit, said Senator
Another anti-smoking lobby group, Health Justice Philippines, proposed "at least" a 60
percent hike in tobacco tax by 2018, with a subsequent rise of nine percent annually.
"To our legislators, please think of the 200,000 more Filipinos who will fall prey to
smoking every year if we fail to increase the tobacco tax by at least 60 percent in 2018, and by at
least nine percent yearly thereafter. There is no more time to waste. Lives are on the line," said
Republic Act 10351 or the Sin Tax Reform Law of 2012 raised tobacco tax by four
percent per year. At the outset, the law was seen as a significant deterrent to smoking, and it
reduced smoking among the youth and the poor. It also generated revenues, part of which went
But economists have said the four percent tax is not enough to discourage tobacco
"To sustain the reduction in tobacco use, cigarette tax should be increased immediately
from its current rate of 30 pesos per pack to at least 60 pesos per pack," said Ratanachena. The
regional coalition also cited the same figure as Health Justice, stating that "every year of delay
has been estimated to result in 200,000 more smokers, who will be at high risk of smoking-
31
Increasing tobacco tax generates big revenues
In the Philippines, 240 people die every day from smoking-related diseases, said Health
Justice.
The group cited Bureau of Internal Revenue statistics that showed tobacco excise tax
collection in 2016 amounted to P163.5 billion, even as smoking set the economy back by P204
billion in 2015 due to illnesses from smoking, and lost productivity due to absences.
Increasing tobacco taxes regularly is one of the most practical and cost-effective ways to
reduce tobacco use and save lives, health advocates and the World Health Organization (WHO)
have said. The Philippines is one of 181 states that has committed to the global tobacco control
Prior to the passage of the tax reform bill, tobacco growers and farmers lobbied
lawmakers not to increase the tobacco excise tax which they considered "exorbitant." The
National Tobacco Administration cited the fall in tobacco production to 52 million kilograms
(kg) in 2015 from 68 million kg in 2013. It also said that 9,232 tobacco farmers left the trade in
The higher excise tax rates slapped on “sin” products such as cigarettes at the start of the
year pushed inflation faster in February to possibly hit a fresh over three-year high of 4.1
“Food and non-food commodities alike see their respective rate of price increase
relatively unchanged while those of sin products may have likely accelerated. The latter may be
explained partly by price increase due to sin tax hikes and partly by the appropriate price
adjustments of Mighty Corp. following its paying the right amount of taxes,” DOF
32
A headline inflation of 4.1 percent year-on-year will be the fastest since the 4.3 percent
Under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion
(TRAIN) Act, the unitary excise tax slapped on cigarettes rose to P32.50 per pack effective Jan.
The TRAIN Law also mandated a further increase in the cigarette excise tax rates to P35
per pack from July 1, 2018 to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020 to Dec. 31, 2021;
Finance Undersecretary Karl Kendrick T. Chua earlier said that the 4-percent average
rate of increase in prices of basic goods last January was due to “better compliance in tobacco
tax.”
“Tobacco inflation was 17.4 percent in January when the expected increase is only 8
percent due to the scheduled tobacco tax increase. Since profiteering is unlikely, the remaining
reason is that Mighty under Japan Tobacco is now paying the right tax, and thus is charging
collection up by around P1.5-2 billion. In fact, if Mighty continued to evade tax and therefore
cigarette prices remain low, overall inflation would have gone down to around 3.75 percent,”
according to Chua.
For Beltran, “while the 4.1-percent forecast may seem to have breached the higher end of
the inflation target range, it is largely on account of the price increase of sin products.”
33
“These are non-essential and are even harmful, products which we want the general
public to steer clear away from on health reasons. Of the 4.1-percent forecast, 0.4 percentage
The BangkoSentral ng Pilipinas expects headline inflation to average 4.3 percent this
year and breach the 2-4 percent target range due to the impact on consumer prices of the first tax
reform package as well as expected global oil price hikes. (de Vera, 2018)
Kotler & Keller (2012) stated that price is the one element of the marketing mix that
produces revenue; the other elements produce costs. They also stated that purchase decisions are
based on how consumers perceive prices and what they consider the current actual price to be.
priority.
individuals and the method they employ to choose, utilize, and set out products and services to
fulfill their wants and the effect that these methods have on the consumer and the society as a
whole. Consumer behavior refers to all the thought, feelings and actions that an individual has or
takes before or while buying any product, service or idea. Buyer behavior is the concept which
answers what, why, how, when, and where an individual makes purchase. As a result, the
outcome of buyer behavior is the buyer’s decision. According to Kotler & Keller (2012)
consumer behavior is the study of how individuals, groups, and organizations select, buy, use,
and dispose of goods, services, ideas, or experiences to satisfy their needs and wants.
34
One of the common models of consumer decision making process has been offered by
Blackwell et al (2006); According to him, the five stages of consumer decision making process
Tulwin’s (2014) research analyzed important price–related issues that determine the
purchase decisions of consumers. The survey results prove, that each person requires price
incentives (increase or decrease) of different strength to choose another product than the one
First of all, more price sensitive buyers actually need lower price change to change their
purchase decision. Also, if the consumer has a strong preference towards one of the products, the
bigger reduction or increase is required to induce him/her to choose the less preferred option. No
regularity has been noticed between the initial price of the product and the percentage price
decrease/increase that motivates the consumers to verify their shopping basket. Moreover, people
are significantly more sensitive to price increase than to the analogous reduction, what should be
Basic personal characteristics, such as gender, age and career standing have a
considerable impact on consumer’s price sensitivity, which turned out to be stronger for men,
younger people, students and unemployed. At the same time, no big differences have been
observed in the survey in terms of nationality. Here there is much space for further research, to
see how price sensitivity differ between other, possibly more economically diversified nations.
In Al-Salamin and Al-Hassan’s (2016), in his research, concluded that there is a positive
relationship between prices and consumer buying behavior (suitable prices make consumers
35
more willing to purchase items). The research also showed that there is no statistically significant
difference between the responses of individuals “due to age, gender, marital status, qualification
and monthly salary” about the research's questions related to the three pricing strategies (Odd
pricing strategy, Bundle pricing strategy and Discount pricing strategy) except there is a
statistically difference between the responses of individuals “due to gender” about the odd
pricing strategy.
Based on the paper's conclusion, retailers and dealers are recommended to carefully study
consumers buying behavior which is one of the most successful ways to know consumers’
interests when making a purchase decision and to set suitable prices to their items as pricing has
a direct impact on a company's revenue and consequently to its success. It is recommended that
to segment consumer based on demographic characteristics and study carefully their needs and
willingness to buy products or services. Moreover, here is an important factor that affect
consumer buying behavior in positive way which is corporate social responsibility ( CSR ). If the
company socially responsible and announce that the part of this payment of selected products
will donate to non-profit organization or for event inside society, which will encourage consumer
depends on:
36
Rural versus urban area of residence
Higher prices influence the demand for tobacco products in two ways:
2. Higher tobacco prices reduce the consumption of tobacco products among those who use
SARI-SARI STORE
Philippines. Such stores form an important economic and social position in a Filipino
community. It is present in almost all neighborhoods, sometimes even on every street. Most sari-
sari stores are family-run shops and are operated from the owner’s house. Candies in recycled
jars, canned goods and cigarettes are often displayed while cooking oil, salt and sugar are stored
at the back of the shop. They also distribute prepaid mobile phone credits, (services). (Wisby,
2016)
Almost all sari-sari stores use retail techniques called takal (by measured volume) and
tingi (by piece), which refers to the division of goods into quantities smaller than is usually
37
available in the marketplace (e.g. cigarettes are sold by the stick, cooking oil by the cup, etc.)
(Malapit, 2007)
A sari-sari store is a micro-enterprise but that does not mean you do not need a business
registering a new business in the Philippines. This form is also needed when renewing your
expired Mayor’s Permit or Business License, changing a new business location and changing a
Micro business enterprises are considered as those small businesses that have total assets
of less than Php 3,000,000 excluding the land where the business is located. Businesses that
employ less than 10 workers can also be considered micro-businesses. There are also micro-
enterprises that are home-based and some are only carried out in a part time basis. Micro
businesses may also be registered in the Philippines as a Barangay Micro Business Enterprise
(BMBE) under Republic Act 9178 to enjoy privileges such as income tax exemption and priority
to government’s financial, technical, marketing, and knowledge support. If you are passionate to
enter into business, here’s a list of micro business ideas in the Philippines.
1. Sari-sari store
38
CEBU, PHILIPPINES
Cebu City is the oldest city in the Philippines which is also known as the Queen City of
the South. Found in the island are rich traces of the Philippine history left by mostly the
Spaniards. Among these historical sites are the Magellan’s Cross found in downtown Cebu (a
Christian cross planted by the Portuguese and Spanish explorers as ordered by Ferdinand
Magellan upon arriving in Cebu on April 1521) and the Colon Street (the oldest and the shortest
national road in the Philippines).Cebu is an island province in the Philippines and is better
known as the Queen City of the South because of its huge potential in terms of economy and
infrastructure.
Through the years, Cebu became more and more industrialized. The rise of big
companies, the trend of technology, and the innovation by the people make Cebu very
progressive. Cebu is now the home for many BPOs and small to very large companies that
Cebu City is a first class highly urbanized city in the island province of Cebu in Central
Visayas, Philippines. Though the seat of government and capital for the province, it is governed
independent and separate from it. According to the 2015 census, it has a population of 922,611,
making it the fifth most populated city in the nation and the most populous in the Visayas. Cebu
Based on the 2015 consensus, the largest in terms of population size is Guadalupe in
39
Conceptual Framework
The general concept of this study is to analyze whether the effective sin tax control
measures would consistently reduce consumption of cigarettes across all types and raise revenue
Noting the above figure regarding the current situation in V. Rama Avenue, Barangay
Guadalupe Cebu City, the researchers measure the sales volume as the basis for cigarette
consumption.
To determine the quantitative aspect of the data, the researchers gather information about
the monthly sales volume of cigarettes in Sari-sari stores. The data for such values are obtained
through the conduction of surveys to acquire the necessary data that they need in order to find
out the number of cigarettes consumed and differentiate the results before and after the
40
In addition, to determine the measure of cigarette consumption, the researchers also take
into account and consider necessary factors in the analysis of the information obtained. Such
Brand of cigarettes
41
CHAPTER III
METHODOLOGY
these parts specify the scope of the research in terms of location and key respondents, and what
instruments were used in data gathering, and the statistical tools that were used in analyzing the
gathered data. This chapter will guide the reader through the researcher’s completed
methodology.
Research Environment
This study specifically focused on the sales volume of the vendors located within
Barangay Guadalupe, Cebu City, in the southern district of the city, it has the biggest population
size among all 80 barangays. People from age groups 15 to 19 years and 20 to 24 years garnered
the highest percent or the total population in the city according to the 2007 Census of the
42
Research Respondents
The main respondents of this study are the owners of the registered sari-sari stores at V.
Rama Avenue, Barangay Guadalupe, Cebu City. The subjects of this study were the different
sales volume of cigarettes and the different brands of cigarettes sold by the respondents.
Research Instruments
The study made use of the following data from various sources: 1) List of Sari-sari stores
with issued business permit from the Barangay hall of Guadalupe, Cebu City; and 2) Data
gathered regarding the sales volume of Cigarettes sold per month before and under TRAIN Law.
Research Design
The researchers will choose a survey research design to gather data in order to answer
questions and inquiries relating to the study. A convenience sampling procedure will be used in
selecting the participants of the study. This technique is a process of selecting subjects or units
for examination and analysis that is based on accessibility, ease, speed, and low cost. Units are
not purposefully or strategically selected. The respondents are just within the proximity of the
researchers. This technique will also ensure a fairly equal representation of the variables of the
study.
Research Procedures
Gathering of Data
The gathering of data consisted of five (5) stages. The first phase is establishing
connection with Barangay Guadalupe to obtain the list of registered sari-sari stores within the
43
research environment. This is an important part of the process because researchers have to state
the significance of the study to the barangay to gain consent, inquire and gather sufficient
information.
The second stage is conducting the survey. The researchers decided that the appropriate
area to conduct the survey must be accessible and convenient due to time constraints. The main
road that the people commonly pass through when entering Barangay Guadalupe is the V. Rama
Avenue. The sari-sari stores situated at V. Rama Avenue in Barangay Guadalupe are the
respondents. The survey is done through handing out questionnaires in query of general
information of the sari-sari stores and questions which relates to supply and demand.
In the third stage, the researchers gathered the questionnaires collected from the survey.
Out of 21 registered sari-sari stores located at V. Rama Avenue, only 17 sari-sari stores
In the fourth stage, presentation of the data gathered. The data is presented through
In the fifth stage, effectively organizing all necessary data and information is done. This
process serves as a clearer path so that it would be easier for the researchers to form conclusion
T-test is used to determine the difference between two sample means from two normally
44
Data Analysis Tools
The T-test for Paired Two Sample for Means will be used to determine if there is a
significant difference between the sales volume of cigarettes sold by the Sari-sari stores at V.
Rama Avenue, Barangay Guadalupe, Cebu City before and after the implementation of TRAIN
Law:
∑𝐷
t= 2 2
√𝑛 ∑ 𝐷 −(∑ 𝐷)
𝑛−1
Where:
t = t-test value
∑ 𝐷 = the sum of the difference from the sales volume before and after the
Statistical significance is calculated by comparing the tabulated t-value with the t-value.
If the t-value is larger than the tabulated t-value, reject the null hypothesis and if the t-value is
lesser that the tabulated t-value, accept the null hypothesis.Also, statistical significance can be
calculated usinga p-value. If the p-value is less than the significance level set (0.05), the null
hypothesis is rejected, and if the p-value is greater than 0.05, accept the null hypothesis.
45
CHAPTER IV
Presented in this chapter are the results and interpretations of the data gathered in the
study. In the analysis regarding the effects of higher sin taxes imposed on cigarettes to sari-sari
stores at V. Rama Avenue, Barangay Guadalupe, Cebu City, the researchers formulated a survey
questionnaire in gathering data from the respondents. The researchers acquired a list of the
registered sari-sari stores in Barangay Guadalupe, Cebu City. As of April 2018, fifty-five (55)
sari-sari stores were currently registered in the barangay. By applying the convenience sampling
technique in choosing the respondents, the researchers selected V. Rama Avenue as its sampled
cluster where the analysis of the study was conducted. There are only twenty-one (21) out of
fifty-five (55) registered sari sari-stores situated in V. Rama Avenue, Guadalupe Cebu City.
Table 4.1 contains the names and survey responses of the sari-sari store owners in V.
Rama Avenue, Barangay Guadalupe Cebu City. Only 17 (81% of the total population) were
selected to be the respondents of the study, as presented in Figure 4.1. The study is concentrated
to the affected sampled cluster which are those registered for the year 2018 or in the event that
the sari-sari store is registered last year but such registration is not yet renewed this month were
still chosen as long as they are doing business in V. Rama Avenue in the urban barangay of
Guadalupe City. Those who refused to be interviewed and those who do not sell cigarettes are no
14% Declined
5%
Do Not Sell Cigarettes
81% Responded
46
Table 4.1: Registered Sari-Sari stores in V.Rama Avenue, Barangay Guadalupe, Cebu City
47
Table 4.2: Sales volume based on the total number of packs sold on all cigarette brands
2017 2018
Ernesto Lopez Sari Sari Store 525 400
Esrellita Q. Ator East Coast Variety Store 70 80
Fritz L. Vergara Sari Sari Store 1005 1215
Gina G. Matutinao Sunray Sari Sari Store 225 195
Widder General
Jocelyn C. Liegel Merchandising 330 210
Jose Redongo Sari Sari Store 35 15
Luzinda M.
Carmelotes Sari Sari Store 220 220
Praxedes Sala Ceding Store 765 590
Romeo O. Jatico Romeo Sari Sari Store 310 215
Victoris V. Bayot Vicky And Raymond Store 270 265
Virginia Gabutan Sari Sari Store 170 255
Lilybeth Y. Sapid Sari Sari Store 210 140
Donaphiel Rama Sari Sari Store 560 265
Jacqueline B. Yap Jacko Store 140 160
Junnettejumalon Doydoy Store 135 180
Rebecca C. Calipay Bryden Sari Sari Store 195 270
Rizshel S.
Cadungog Citybakers Sari Sari Store 95 80
TOTAL 5260 4755
Table 4.6 shows the total number of cigarette packs sold by each sari-sari stores on
December 2017 and May 2018. Before the implementation of the TRAIN Law, the total sales
volume of cigarettes sold is 5260 packs. Under the implementation of the TRAIN Law, the total
number of packs sold is 4755. There has been a decline of 505 packs of cigarettes, due to the
TRAIN Law.
48
Table 4.3: Statistical hypothesis testing using t-Test: Paired Two Sample for Means
Computed Tabulated
Period n x̅ SD P-Value
t-value t-value
December 2017 17 309.4118 254.1299
1.0752 2.120 0.2982
May 2018 17 279.7059 265.6926
As shown in table 4.3, the computed t-value of 1.0752 is lesser than the tabulated t-value,
and the p-value is greater than 0.05, this means that the null hypothesis is ACCEPTED. In other
words, there is no significant difference between the sales volume of cigarettes sold by the Sari-
sari stores at V. Rama Avenue., Barangay Guadalupe, Cebu City before and after the
49
CHAPTER V
Summary
The purpose of this study is: 1) to know the effects of higher sin taxes imposed on
cigarettes (under the Tax Reform for Acceleration and Inclusion (TRAIN) Law) to the
determine whether the Philippine government has achieved its objective of reducing cigarette
A descriptive method has been used by the researchers to gather data. The data from the
survey questionnaires had been gathered from the seventeen (17) sari-sari stores (respondents) in
V. Rama Avenue, Barangay Guadalupe, Cebu City. The survey was conducted at the said
First, the researchers found an accessible area to conduct the research activity. Due to
time constraints, V. Rama Avenue, Barangay Guadalupe, Cebu City was the location chosen by
the researchers. Second, an inquiry to the barangay hall of Barangay Guadalupe was done in
order to obtain the list of registered sari-sari stores in the said barangay. After that, a survey was
The researchers then gathered information from the chosen respondents as to the sales
volume of cigarettes sold for the years 2017 (before the implementation of TRAIN Law) and
2018 (after the implementation of TRAIN Law) through survey questionnaires. They have
formulated questions to further support the study: 1) as to what brands of cigarettes the
respondents usually sell, 2) as to the shift of cigarette prices, due to the implementation of the
50
TRAIN Law, 3) most preferred cigarette brands of consumers, and 4) number of cigarettes packs
After conducting the survey, discussions were made and all the findings have been
summarized and discussed in table 4.2 and 4.3. As shown, there has been a decrease in the sales
volume of cigarettes sold by sari-sari stores. The reasons for such changes are mainly caused by
the increase in selling price due to the implementation of TRAIN Law and the consumption
Conclusion
Based on the results of the data gathered, the researchers conclude that the effects of
higher sin taxes under the implementation of the Tax Reform for Acceleration and Inclusion
(TRAIN) Law does not greatly affect the number of cigarettes sold by the sari-sari stores.
After the survey and the procedures done by the researchers, results have shown that
although there is a decrease in the sales volume of cigarettes sold in V. Rama Avenue, Barangay
Guadalupe, Cebu City, such decrease is not significant, as computed using the T-test: Paired
Thus, the null hypothesis is accepted and due to these reasons, the Philippine government
did not meet its goals in reducing cigarette consumption in such location.
Recommendations
As shown in the findings from the data, the following are hereby proposed: (1) Surveys
should be conducted to collect information on cigarette consumption in stores like Metro Retail
Stores, Ayala Malls, SM Retails or cigarette manufacturers if possible because they provide
51
collective and more reliable data compared to sari-sari stores. (2) The legislators and the local
government units can carry out plans and programs that will further regulate the cigarette
consumption of the public (3) Combine price increases with a comprehensive cigarette
prevention and control program for maximum effectiveness. The newly implemented Tax
Reform for Acceleration and Inclusion (TRAIN) Law is not effective as projected. Rather, it only
encourages consumption of cheaper cigarette brands. Cigarette control cannot only rely on
taxation. Even the best thought-out and well implemented taxation system cannot completely
52
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Modules
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APPENDIX A
RESEARCH INSTRUMENTS
A. Survey Questionnaire
B.
58
C. List of Registered Sari-Sari Stores in Barangay Guadalupe, Cebu City
59
APPENDIX B
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
60
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
Full Time Scholar, VICSAL Scholarship Foundation
2015-Present
Member, Junior Philippines Institute of Accountants
2015-Present
Asst. Executive Press Relations Officer, University of San Carlos - Juniors Philippines
Institute of Accountants
2018-Present
Executive Secretary, USC JPIA Artist Circle
2017-2018
TRAININGS/SEMINARS/WORKSHOP
JPIA Pasundayag 1 Accountancy Convention (SM Cebu)
st
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CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
62
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
63
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
ST. JOSEPH’SACADEMY
S.B. Cabahug, Mandaue City, 6014 Cebu
2006-2010
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
64
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
65
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
66
CURRICULUM VITAE
PERSONAL INFORMATION
EDUCATIONAL BACKGROUND
AFFILIATIONS/MEMBERSHIP IN ORGANIZATION
TRAININGS/SEMINARS/WORKSHOP
67