Govt pressed to increase health taxes amid deficit

THE Marcos Jr. administration is pressed to raise health taxes aimed at financing healthcare and human capital development amid mounting debt and a widening fiscal deficit. 

Lobby group Action for Economic Reforms (AER) is calling on the administration to adopt sound revenue-generating measures that are “bold yet urgent,” considering the country’s “serious fiscal problem.”

Taxing alcohol and sweetened beverages could help fund development goals, generate significant government revenues and promote better health outcomes, according to the nongovernment organization of economists. 

The group issued the call a day before President Ferdinand R. Marcos Jr. issues his fourth State of the Nation Address (Sona) on July 28.

“This is President Marcos’ opportunity to restore public trust at a time that his political support has waned in the last half of his term,” the AER said. 

However, Finance Secretary Ralph G. Recto maintained his department neither is keen nor plans to tax alcohol and sweetened beverages. 

Recto said earlier that he is not inclined to consumption-based taxes, despite previous proposals to put in place such a measure along with taxing junk foods. 

In June 2023, the Department of Finance (DOF)—then led by Benjamin E. Diokno—and the Department of Health proposed a tax on sweetened beverages, which will increase the current rate to P12 per liter regardless of the sweetener used. 

The measure would generate an additional P76 billion in revenues for the government during the first year of its implementation, according to Diokno.

Still, the DOF remained firm in its “no new taxes” stance, given the government’s “robust” fiscal position. 

The lobby group AER thinks otherwise.

“The Philippines faces mounting fiscal pressure due to an increasingly constrained budget, growing public expenditure needs, stagnating tax revenues, and increasing public debt,” it said.

Revenue efforts of the government have “fallen short” over the past few years, which resulted in an elevated fiscal deficit, the group’s statement read. 

The country’s budget deficit widened to P765.5 billion in the first half of the year, after government expenditures reached P3.025 trillion and outpaced revenue collections at P2.260 trillion.(See: https://businessmirror.com.ph/2025/07/25/fiscal-gap-breaches-limit-at-%e2%82%b1765-5-billion-in-h1). 

Meanwhile, the government’s outstanding debt reached a new record-high of P16.752 trillion as of end-April, an 11.56-percent increase from P15.017 trillion in the same period last year. 

The AER cited the government’s “rising” debt service bill, which went up by 73.72 percent to P280.898 billion, exerting “additional pressure on the country’s limited fiscal space.” 

These fiscal pressures have a constraining effect on critical investments, particularly in human capital development programs such as quality healthcare, according to the AER. 

Raising health taxes, such as those on alcohol and sweetened beverages, would be beneficial for the government, as this could help rebuild fiscal space by increasing tax revenues to fund existing health and nutrition programs, AER said.

“At the same time, raising health taxes discourages consumption of products that contribute to non-communicable diseases [NCDs] like cardiovascular disease, diabetes, and cancer—the country’s leading causes of death,” read the AER’s statement.

- Reine Juvierre S. Alberto (BusinessMirror)