A tax of the clowns
Even before Congress could adjourn last month, the House of Representatives hurriedly passed the bill for a new version of the “sin tax,” and then they made sure that thousands of Filipino tobacco farmers would be at its losing end.
The so-called sin tax of course refers to the excise tax on alcohol and tobacco products. The new bill (HB 5727) heavily favors foreign brands of cigarettes, the premium luxury brands. It then punishes low-priced local brands. From what I gathered, the House bill that passed third and final reading in record time, targets a hefty tax increase on cheap cigarettes by more than 700 percent. Again—that is a 700-percent increase! For mostly local brands!
In the past 20 years, our beloved lawmakers always filed bills to change the sin tax system at the start of every Congress—consistently like clockwork, before any other legislative business whatsoever. Word thus goes around that some sin tax lobbyists remain good to our lawmakers, plus certain members of the Cabinet in this and in previous administrations.
This time, the new sin tax bill even enjoyed the blessing of our leader, Benigno Simeon (aka BS), who certified it as an urgent priority bill, and the prodding upon BS came from the Department of Finance. No wonder, the sponsor of HB 5727 was Rep. Isidro Ungab (Davao City), chair of the ways and means committee, who belongs to the ruling party dominated by allies of BS. It was not a surprise that some clowns in the House could railroad the new sin tax bill, even including certain features long sought by foreign cigarette companies that have been trying to force their way into the Philippines.
By the way, official figures showed that government revenues from cigarette taxes amounted to P25 billion last year, with those from alcohol amounting to P23 billion, but based on projections made by the DOF, the new sin tax would bring up collections from cigarettes to P27 billion, and guess how much the collection from alcohol would be—only P4.5 billion.
With the new sin tax favoring “drinking” over “smoking,” the Aquino (Part II) administration perhaps wants us to die of liver cirrhosis instead of lung cancer, and if we should die of lung cancer, we should better get it from imported cigarettes—not local. Without much ado, HB 5727 simply exempts the imported brands—i.e. the high priced cigarettes—from any tax increase in 2013, and requires on them a measly P2-per-pack tax in 2014. All other brands—i.e. the cheap cigarettes—as I said, are to be pummeled with increases of 700 percent, putting local manufacturers at a disadvantage, and yet they are buyers of close to 60 percent of the total tobacco produce of our farmers.
Now, Rep. Mitos Magsaysay (Zambales) argued passionately against the bill because it openly favored new entrants in the business. Yet those foreign companies have not invested a single centavo in the tobacco farm sector. As Magsaysay pointed out, the bill penalizes the existing companies—big or small—that through the years have helped develop the local tobacco industry.
Apparently, Magsaysay was referring to British American Tobacco, or BAT, as the “new entrant.” Reports have already named BAT as one strong lobbyist for the new sin tax system under the cute administration of Gloriaetta. By the way, Magsaysay also named some foreign-funded NGOs in the anti-tobacco campaign in the country as the Action for Economic Reforms ($255,000 anti-tobacco grant), the Ads Advantage Community Services ($158,405), the National Center for Health Promotion ($369,877) and the Framework Convention on Tobacco Control Alliance Philippines ($454,565).
The campaign targets “smoking” as bad for the health. Our beloved congressmen thus tried to sell the idea that with prohibitive tax on cheap cigarettes, they really only wanted to discourage smoking in the country. Hmm. Why then does the new sin tax bill favor “drinking” with much lower tax on alcohol products? Also, why does it encourage “smoking” of imported foreign brands with low tax rates? Nobody in the Aquino (Part II) administration has yet dared to explain such inconsistency in its taxation policy. Nobody wanted to touch on the possibility that, indeed, the administration already succumbed to the lobby of a persistent foreign group.
In the past, it has been established that the increase in the price of cigarettes—on its own—would be a weak way to reduce, if not eliminate, smoking among Filipinos. Why? Smoking is a vice, and many people will seek alternatives to the high priced brands. The alternatives, in all likelihood, will be smuggled cigarettes, simply because the smugglers can go around the prohibitive sin tax. Based on the rate in the new bill, that is a discounted price of 700 percent.
Really, our beloved congressmen and the Palace boys must explain how they can expect to raise P33 billion from the sin tax, when it is clear that people—particularly the poor— will avoid local cigarettes that have become expensive due to high taxes. No cigarette sales, no government revenue! People will go for the brands made cheaper by smuggling, period. The boys and girls of our leader, BS, continue to deny that the new sin tax will only encourage smuggling, including BIR Commissioner Kim Henares and Customs Commissioner Ruffy Biazon.
It is not a surprise that the BOC boss also denied rampant smuggling of pork and other agriculture products, which the entire agriculture sector has complained as the worst in 20 years. What—the sector is only imagining things? As for Henares, she claims that concerns on rampant cigarette smuggling are unfounded, saying it is “the quality of governance that matters,” pointing out that the governments in Sweden, the United Kingdom and Singapore managed to contain the “illicit tobacco trade” to 2 percent of domestic sales in 1995. Really now! Reports abroad indicated that only some years ago, cigarette smuggling syndicates were under investigation in Hong Kong and Singapore, involving billions of dollars worth of the “illicit tobacco trade.” Just exactly who fed Henares such information, is hard to say. It is just that in previous hearings in Congress, certain lobbyists for changes in the sin tax also provided our lawmakers some fabricated facts and figures.
One of the big exposes on cigarette smuggling in Asia was done by the Hong Kong Independent Commission Against Corruption some years ago, involving a certain Tommy Chui as the star witness, who was a former executive of a big foreign cigarette company. Chui was to testify on a $1-billion smuggling operation of cigarettes to China and Taiwan, involving three executives of a foreign cigarette company. Unfortunately, the day before he was to testify before the Hong Kong commission, his body was found floating in the Singapore harbor, established by the police as a victim of abduction, ritual gangland torture and brutal murder.
Unfounded concerns, indeed!
