The National Federation of Tobacco Farmers’ Associations and Cooperatives Inc. (NAFTAC) also appealed to lawmakers to postpone the implementation of the proposed new excise tax scheme on tobacco and alcohol products due to its negative impact on their livelihood
In a letter, NAFTAC urged President Aquino to study carefully any proposal to increase excise tax on tobacco products as it constitutes new taxes.
NAFTAC chairman Ernesto Calindas said any increase in the current excise tax rate would affect the livelihood of some 2.7 million tobacco farmers and their families. NAFTAC is composed of farmer leaders in Northern Luzon and other tobacco-growing provinces.
“We are very concerned with the DOF proposal to have a unitary tax rate of P30 per pack of cigarette. This kind of tax adjustment would kill the tobacco industry which is our main source of livelihood since there will be a steep decline in the demand for local tobacco leaf,” Calindas added.
Instead of implementing a single rate system, the farmers want lawmakers to maintain the current four-tiered system under Republic Act 9334, which has proven to be a stable and significant source of revenue for the government.
Since the law’s enactment in 2005, the average annual government revenues for tobacco products amounted to P25 billion, benefiting tobacco-growing regions and tobacco farmers, the group said.
“A single tax rate will only benefit importers at the expense of the farmers and manufacturers since it will wipe out the less expensive cigarettes which utilize local tobacco, ” NAFTAC said.
The group added that under the current four-tiered system, home-grown tobacco enjoyed increasingly higher floor prices from 2005 to 2011.
Meanwhile, Calindas said his group is dismayed over the turnabout of Budget Secretary Florencio Abad in supporting the imposition of a unitary tax rate on alcohol and tobacco products despite concerns earlier voiced out by his agency on such a proposal.
“Abad made it clear to Congress just last Nov. 2010 to study carefully proposals to increase tax rates on alcohol and tobacco products as based on government’s study, increasing the rates will not necessarily result to higher tax collection,” Calindas said in Pilipino.
In a position paper submitted to the committee on ways and means of the House of Representatives, the Department of Budget and Management (DBM) said “the revenue impact of increasing the tax on alcohol and tobacco products as proposed has to be studied as to its possible counter-effects on volume, and more generally on the market or industry.”