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Socialized sin tax on tobacco?

By: Raul C. Pangalangan Philippine Daily Inquirer
4:11 am | Friday, March 9th, 2012 share11 2

Since way back in 2004, I have written in support of sin taxes on tobacco not simply as a policy advocate but as someone who grew up with asthma. Some issues strike you in your gut. Smoking strikes me in my lungs. I know how to value a full breath of clean air, the joy of breathing in and out without obstruction, something that others simply take for granted. The multi-tiered tax on tobacco is misleading. Proponents say that cheaper smokes must be taxed less. Thats the mantra of social justice, right? In the words of President Ramon Magsaysay: Those who have less in life should have more in law. They miss the point altogether. You socialize benefits for the poor. You dont socialize their access to poison. Sen. Miriam Defensor-Santiago would holler, What were you thinking? For a long time already, the Philippines has mulled how best to impose sin taxes on, among others, tobacco products. In effect, we raise the cost of tobacco in order to deter people from smoking. Its like using law for social engineering. It assumes that people are free to live as they please, completely at liberty to lengthen or shorten their lives, and the best the law can doshort of criminalizing an actis to encourage good and discourage bad acts. One way is through graphic or pictorial warnings on cigarette boxes. Another isand that is our topic hereincreasing the cost of cigarettes through higher taxes. There are now two bills in Congress. The first retains the multi-tiered system where more expensive brands are taxed higher, and cheaper brands are taxed lower. Called the Singson bill, having been filed by Rep. Eric Singson Jr. (second district, Ilocos Sur), it appears to enjoy the support of the local tobacco industry. The second is Malacaangs draft, authored by Rep. Joseph Emilio Aguinaldo Abaya (first district, Cavite) that will impose a single tax, regardless of price. The Singson bill seems attractive at first. After all, doesnt it simply make sense to adjust the tax rate to the cost of the product? But look at the facts. The multi-tiered system is already in place, and the result? Smokers merely downshift to cheaper brands. Sin taxes can aim at two goals: to deter a socially harmful activity and to raise revenue to replenish our governments coffers. Both ways, the multi-tiered system fails. It fails as a public health measure, because smokers continue to ruin their health, just more cheaply. It fails as a revenue measure because the record shows that with downshifting, smokers pay less taxes to government. Either way, we lose. Were both sicker and poorer. Worse, the weaknesses of the current system will persist. A multi-tiered system creates loopholes and complicates implementation. Understandably, the tobacco-producing provinces are worried for their farmers. That is a legitimate concern, and congressmen representing those provinces are perfectly entitled to do what it takes to protect the constituents who voted them into office. But preserving the tobacco industry at the expense of public health is not the way to do it.

The way to go is for government to go full blast in assisting tobacco farmers shift to new crops suitable to the soil and climate in, say, Ilocos Sur. Indeed some of these new crops offer even higher profit margins to the farmer. The Abaya bill already earmarks 15 percent of the revenue increment to support the shift to new livelihood programs for the tobacco farmers and workers who will be displaced. This is a win-win solution since tobacco is a sunset industry. Prices are going down worldwide, and consumption is going lower still, and these farmers will be displaced before they know it. The new sin tax will transform the inevitable into a godsend. Revenue-wise, under the unitary tax system in the new bill, taxes will be automatically increased to follow inflation. The revenue increment will also be dedicated to providing universal health care. In any discussion of the Philippine tobacco industry, the elephant in the room is the fact that one company today holds a 93-percent share of the total market. Philip Morris and Fortune Tobacco merged in 2010, and since then they have bought their tobacco more cheaply from the farmers, from P95 per kilo premerger, to P73 today. The proposed unitary system will level the playing field, increase market competition, and help the Filipino tobacco farmer get a better deal for his produce. Addictive substances toy with our will, but the tobacco lobby toys with our minds, too. The Constitution requires that we adopt a progressive system of taxation. But when it comes to sin taxes, let us not fool ourselves into thinking that collecting lower sin taxes from the poor is progressive. If the goal is to protect them from the addictions of tobacco, the formula works differently. In fact, if we follow the global pattern, the wealthier classes are smoking less, and the smokers fall more on the poorer end of the social divide. If we follow the logic of the critics of the Abaya bill, soon any tax on cigarettes will inevitably be regressive.

House OKs sin tax measure, 4 other key bills

by RG Cruz, ABS-CBN News

Posted at 06/06/2012 9:59 PM | Updated as of 06/07/2012 10:22 AM

http://www.abs-cbnnews.com/business/06/06/12/house-oks-sin-tax-measure-4other-key-bills
MANILA, Philippines - The House of Representatives beat the deadline to approve its version of the sin tax bill before adjourning its 2nd regular session, sine die, Wednesday night. Voting 210-21 with 5 abstentions, the plenary approved the measure on 3rd reading just moments after it approved the measure on 2nd reading. The chamber terminated the period of interpellation Tuesday night and adopted committee amendments Wednesday afternoon. It rejected individual amendments by critics of the measure. Critics of the measure called it regressive, with Rep. Rodolfo Albano saying it violates the Constitution. Bayan Muna rep. Teddy Casio criticized governments promotion of the bill as a health measure to discourage smoking, saying that President Aquino should stop smoking if the government is serious about discouraging people from smoking. Under the proposed bill, 15% of the projected revenues will go to tobacco farmers while 85% will be earmarked for universal healthcare in all provinces nationwide. The sin tax bill will be sent to the Senate for its consideration. The 1987 constitution says all tax measures should start at the House. The government expects around P31 billion to P33 billion in revenues from the measure. Those who voted against the measure called it regressive. Other bills the House approved on Wednesday include: the bicameral report on the amendments to the anti-money laundering law, Data Privacy Act, Terrorism Financing Suppression Act, and, an amendment to the Climate Change Act creating a survival fund. Earlier, House Minority Leader Danilo Suarez scored the Lower House for its performance as a legislature. Only six out of the thirteen bills originally certified as 'Urgent' by the administration during the second LEDAC [Legislative Executive Development Advisory Council] meeting, have been approved so far by the House and sent up to the Senate. The 'Sin Tax' bill which is also certified as urgent is still pending at the plenary for its second reading. To this date, only 73 bills of national scope have been passed. Unfortunately, this is what happens when both

chambers are tied up in an impeachment trial that used up so much time and resources for the sake of one mans vendetta against another," Suarez said.

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