Sin taxes are defined as state-sponsored excise taxes added to products or services that are seen as vices, such as alcohol, tobacco and gambling. Revenue from excise duty imposed on cigarettes, tobacco products and alcohol imported, manufactured and sold in Malaysia have increased steadily over the past half-decade.
There has been no move yet to earmark the revenue collected for the purpose of health, specifically and directly funding non-communicable disease (NCD) prevention, control and treatment.
Earmarking has long been a tool to advance and sustain a national health priority. Many countries, including those in South East Asia, earmark sin taxes for public health purposes, usually for health promotion. In Ghana and the Philippines, earmarking for health has made it possible to launch or expand a national health insurance program. South Africa used this to mobilize an effective domestic response to the HIV epidemic.
At least 80 countries earmark for health. More than 30 utilise tobacco tax for this purpose.
There is consensus about the strong potential role of earmarked taxes on tobacco and alcohol in financing health programmes. Not only does it generate more resources to health promotion and disease prevention programmes, it also deters demand for tobacco and alcohol leading to possible improvements in health outcomes. The World Health Organisation recommends earmarking for health programmes.
In the context of Malaysia, the intention is not to argue for more new taxes but rather earmarking existing revenue from the collection of sin taxes already imposed on cigarettes, tobacco products and alcohol. The current practice of imposing excise duties on these products is intended to reduce consumption and increase government revenue through indirect taxation. It is not directly earmarked and linked to healthcare funding.
Therefore as a pilot programme, this paper recommends imposing an earmark of 5 percent be be applied to the collected sin tax revenue. An estimated RM 290 million can potentially be earmarked for health. For this initial phase, the utilisation of these funds would go towards strengthening NCD health promotion and treatment, specifically of diabetes and cancer. They should act as additional or supplementary funding, necessary to support upscaling of innovative programmes or fund crucial lifesaving medicines and treatment.