The Department of Finance (DOF) presented to industry stakeholders a win-win solution to address climate change with its proposal to impose an excise tax on single-use plastic bags (SUPs).
The proposed measure seeks to curb the high volume of mismanaged plastics in the country and serves as the Philippines’ contribution to the global movement of reducing pollution and adopting more sustainable practices while raising revenues to spur economic growth.
“When a good has some negative externalities, meaning the consumption or use of a product causes some social cost, we try to regulate that through taxation. In the case of single-use plastic, the social cost is mismanaged waste, which is related to climate change,” DOF Fiscal Policy and Monitoring Group (FPMG) Officer-in-Charge Undersecretary Karlo Fermin S. Adriano explained to stakeholders in a briefing on March 6, 2024.
He addressed stakeholder concerns on fairness and emphasized that the measure does not single out the plastic industry since the government has already been implementing this strategy on goods such as tobacco, alcohol, and automobiles to curb consumption and mitigate social costs.
The DOF proposes a weight-based rate for easier and fairer tax administration wherein a PHP 100 per kilogram excise tax on SUP bags will be imposed with a 4% annual indexation beginning the third year of implementation.
Compared to other countries, the Philippines has one of the cheapest tax rates per bag at PHP 0.40 —a stark contrast from the United Kingdom’s PHP 326 per bag; Ireland’s PHP 12; Virginia, USA’s PHP 3; and Denmark’s PHP 1.
The proposal covers SUP bags that are not recyclable, such as “ice”, “labo”, or ”sando” bag (with or without handles).
Under the DOF’s proposal, the price of labo bags per piece will slightly increase from PHP 0.47 cents to PHP 0.82, while sando bags will be priced at PHP 0.51 to PHP 0.91 each.
The PHP 31.52-billion estimated revenues to be generated from 2025 to 2028 shall be earmarked for the Department of Environment and Natural Resources (DENR)’s solid waste management program in municipalities.
According to the World Bank, the Philippines is the third largest contributor of mismanaged plastic entering the ocean each year with 750,000 metric tonnes.
Plastics are found to emit greenhouse gasses (GHG) throughout their lifecycle–from production to end of life.
Therefore, the country’s vulnerability to climate change puts it at risk of losing 13.6% of its economic output by 2040 if not addressed.
“It is the government’s duty to raise awareness on the impact of non-recyclable plastics and the irreversible effects of climate change. I believe this is where strong policy intervention is needed,” Finance Secretary Ralph G. Recto said.
“This is a low-hanging fruit that has been on the table for more than a decade. I am confident that our legislators will support this measure,” he added.
The stakeholder briefing was participated by representatives from the Philippine Alliance for Recycling and Materials Sustainability (PARMS); Philippine Business for Social Progress (PBSP); Climate Reality Project Philippines, EcoWaste Coalition; Mother Earth Foundation; Philippine Business for Environmental Stewardship; Union Local Authorities of the Philippines (ULAP); Department of Environment and Natural Resources (DENR); and Philippine Plastics Industry Association (PPIA).
