Tax lobby doveyBy Conrado R. Banal III
Philippine Daily Inquirer
Just between us girls, certain interest groups succeeded in misleading our leader Benigno Simeon (aka BS) on the pending “sin tax” bill in Congress.
As we all know, a lobby group has been pushing for changes in the excise tax on tobacco and liquor, spelled out in RA 9334, which was only passed in 2005, or less than seven years ago, providing for increases in the tax every two years.
For the tax on cigarettes, which was really just the target of our beloved congressmen, the law specified four different rates based on retail prices. The tax increases as the retail prices go up. The tax thus is lowest on cheap cigarettes and harshest on luxury brands.
The proposed bill, in its final form—meaning, after several revisions would increase prices of cheap cigarette brands by more than 700 percent. The foreign brands, the luxury brands, would only have a tax increase of 6 percent.
Now, if Congress would pass the proposed changes in the “sin tax,” the Aquino (Part II) administration projected an increase in revenue from cigarette sales at P30 billion a year.
That, let us say, was a possible figure. Surely, the big jump in the price of cheap cigarettes would definitely cut down sales of local brands. To avoid the high tax rates, some groups would also resort to smuggling, in the process killing the local companies. Let us say that, by some unexplainable turn of events, the assumption was correct that cigarette tax collection from the locals would go up by P30 billion a year.
Given such a scenario, which economic class do you think would bear the brunt of the increase—the rich or the poor? Hint: the tax increase for cheap cigarettes would be 700 percent.
Let us remember that, in the past several years under the cute administration of Gloriaetta, a foreign cigarette company called British American Tobacco, or BAT, had been lobbying for the changes in the “six tax.”
The proposed bill, by fixing an increase in tax on foreign brands at only 6 percent, would get for BAT from the Aquino (Part II) administration, what BAT could not obtain from the cute administration of Gloriaetta.
To think that just a few days ago, Malacañang even announced that the administration already certified the proposed bill as “urgent.” Reason: the “sin tax” system must be overhauled because of the existence of a “monopoly” in the tobacco industry.
Mysteriously, the Aquino (Part II) administration did not say why, if its real aim was to kill the alleged “monopoly” in the tobacco industry, the proposed changes in the tax covered the liquor industry, including the staple of the guys down here in my barangay, which is beer of course.
Moreover, the administration forgot to explain the mystery that has been baffling the business community for the past couple of decades. And that is, how come the “sin tax” law has been the target of proposed amendments at the start of every new Congress—always, as if on cue.
Anyway, Malacañang noted the need for a complete overhaul—again—because farmers supposedly were at the mercy of the “monopoly” in the tobacco industry, blaming the merger of two large cigarette companies, noting that prices of raw tobacco have dropped since the merger.
(By the way, for the sake of the BS boys at the Palace, “monopoly” was just a cute catchy term. The technical term for a single buyer in a market is actually “monopsony.”)
While the administration did not name the supposed “monopoly,” it would not take rocket science to figure out that the Palace was referring to Philip Morris and Fortune Tobacco, which merged in 2010.
It is true that the prices of raw tobacco already dropped from their peak in 2009. And there ended the accuracy of what passed for “analysis” that the boys of BS used to justify their suspicious hurry to overhaul the sin tax law—that the prices peaked in 2009.
Based on official data, the price of Virginia tobacco peaked at P74 per kilo in 2009, before the merger of Philip Morris and Fortune. It so happened, and perhaps this was hidden to our leader BS, there was a worldwide shortage of raw tobacco in 2009. Worse, the international price of oil also went amuck in 2009, pushing up the costs of all farm inputs. These costs were surely reflected in the price of tobacco that year.
Things began to normalize in 2010 as Philip Morris and Fortune merged. Still, the price of Virginia leaf remained at about P69 per kilo in 2010, then it rose to more than P70 per kilo in 2011. Those were still higher than prices of most other crops.
Also, the prices were way over the so-called floor set by a government-organized tripartite body, which was P56 per kilo in 2010 and P61 per kilo in 2011.
Again, a government-organized body (in which farmers are represented) set the minimum price for raw tobacco. How could the supposed “monopoly,” as claimed by the BS boys, rape the tobacco farmers with low buying prices?
Let us not even consider that the Philip Morris-Fortune merger did not create a monopsony in the raw tobacco market. This was an outright lie.
Today, there are at least eight buyers of raw tobacco such as Universal Leaf Philippines (ULPI), the biggest tobacco processing company in the country, contracting some 28,000 farmers for some 19,000 hectares of tobacco plantation.
The others are Trans Manila, ConLeaf, La Suerte Cigar and Cigarette, Japan Tobacco International, Anglo-American and Mighty Corp.
We are talking here about some three million people—the families of tobacco farmers—who are dependent on the tobacco industry for their livelihood.
Let me see if I get this right: To favor a foreign company that has been lobbying for changes in the “sin tax” law under the cute administration of Gloriaetta, the Aquino (Part II) administration now must use wrong, if not intentionally distorted, information to justify itself?
No wonder, in business they are now saying that the so-called straight and narrow path has a row of toll-collection booths at the end.