Lawmakers from Anakpawis and Bayan Muna said the sin tax bill Congress approved on third reading last June 6, 2012 will not benefit local tobacco producers. “In the name of providing more funds for the universal health coverage program, the Department of Finance wants to pass a regressive tax measure that will further burden local tobacco farmers and consumers alike,” the lawmakers said.
House Bill 5727 intends to put up a two-tier excise tax system for tobacco. In the proposed system, cigarette packs with a net retail price of P11.50 ($0.27) or less will have an excise tax of P12.00 ($0.28) for the first year, and P 22.00 ($0.52) for the second year. These are equivalent to an increase of 341 percent and 709 percent respectively.
On the other hand, cigarette packs that sell more than P11.50 ($0.27) at retail will have an excise tax of P28.30 ($0.67) for the first year, and P30.00 ($0.71) for the second year. These are equal to an increase of 940 percent and 1,003 percent respectively.
Proponents of the sin tax bill in the Department of Finance said that if passed, the measure will lead to the generation of incremental revenue amounting to P31 billion ($738 million). Aquino said he recently signed the bill’s certification as urgent.
Earlier in May, President Aquino himself said the sin tax bill is a priority measure of his administration. He said the revenues it will generate will benefit all tobacco-growing areas, and go toward funding health-related and income-generation activities for tobacco farmers.
According to the president – a known smoker – the current tax system discourages new players from joining the tobacco industry. With the passage of a new tobacco tax law, he pointed out that new players can enter the fray and provide healthy competition, raising the price of tobacco sold by farmers.
Anakpawis Rep. Rafael Mariano, however, said the Aquino government’s main concern with the sin tax is to raise more revenues and not about health-related issues brought about by cigarette and alcohol consumption.
This was a direct hit against the claims of lobbyists for the bill that the tobacco sin tax bill is a measure to push for healthier habits and lifestyles among Filipinos.
Bayan Muna Rep. Neri Colmenares, in the meantime, pointed out that tobacco farmers have yet to take advantage of the tobacco excise tax collection as mandated by Republic Act 7171, supposedly aimed at developing the tobacco industry.
“The government has not provided a comprehensive program for the support services, subsidy and assistance to tobacco farmers. Tobacco farmers will not benefit from the increase of retail prices of cigarettes increase due to sin tax. The sin tax, like the value added tax (VAT) and other regressive taxes, will not have a trickle down effect on the public,” he said.
The two lawmakers further warned that the tobacco tax hike will exacerbate the country’s current unemployment problem.
“It is everyone’s right to have gainful employment. With this tax measure, not only the tobacco industry will be affected but also the sectors and industries which depend on it,” Mariano said. “Is it reasonable to use the bill as platform for putting people out of work?”
Colmenares also expressed apprehension that the high tax imposition on tobacco products would lead to an influx of illegal or smuggled cigarettes into the country, like the experience of other countries such as Singapore, Malaysia, and United Kingdom.
According to studies, when the government increased tobacco excise tax by 135 percent, the volume of illegal cigarettes seized by Singapore Customs increased from eight million cigarettes in 2000 to 106 million in 2006 or a significant 1225 percent increase. Malaysia also experienced the rampant smuggling from 2004 to 2009 where the illicit trade reached 38 percent, while United Kingdom recorded a revenue loss estimated at £45 billion after imposing taxes three to seven percent higher than the inflation.
Earlier, Bayan Muna Rep.Teddy Casiño, together with Gabriela Representatives Luzviminda Ilagan and Emmie de Jesus, attacked the amended House Bill 5727 describing it as regressive, anti-poor, and anti-Filipino.
The partylist representatives added that a tobacco tax hike will not only burden consumers but also workers. They cited recent employment statistics from the National Statistics Office (NSO) stating that as of April 2012, workers in the agriculture sector comprised the second largest group, consisting one-third (33.0 percent ) of the total employed. While15.6 percent of the total employed are in the industry sector, with the manufacturing sub-sector contributing the largest share in this sector (8.4 percent of the total employed).
The unemployment rate in 2011 was seven percent, which is equivalent to 2.8 million Filipinos.
“What will happen to the unemployment rate once smuggling kicks into high gear in the country? Production of local-produce will go down due to a shift in consumption to cheaper smuggled items and this logically will translate to fewer jobs,” they said.
They added that not only tobacco farmers will be affected once the tobacco tax hike is implemented and that there are other sectors relying on this industry, as well as the retailers, wholesalers, and traders.