CASE STUDY 2

Php155 Billion Projected from “Sin Taxes”

1. Is the proposed sin tax progressive or regressive? Who will be burdened most? Why? Explain.
2. Will there be substitution between brands? Why?

1. Sin taxes proposed is progressive. Based on the case study it says that they expect to earn for
additional revenue so, the higher the sin tax the higher the government will expect to be
received if consumer will still buy even in a high price. The term progressive refers to the way
the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less
than the person's marginal tax rate. Progressive taxes are imposed in an attempt to reduce the
tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly
to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, such
as a sales tax, where the poor pay a larger proportion of their income compared to the rich.

2. Yes! it is possible of substitution between brands for different brand have different prices. For
consumer of cigarettes and alcoholic drinks it will be really be sad but it’s good for it will help
their health. The main purposes of imposing sin taxes are to reduce the consumption of harmful
goods and to increase government revenue. The consumption reduction is achieved by making
the goods less affordable to consumers. So, if the sin tax is higher its good cause it will help poor
people, for the rich will pay higher tax compare to poor because rich people have the ability to
pay high taxes.