HOPING to minimize the impact of the “sin tax” measure, the tobacco industry will have to resort to “import substitution” and step up local production of tobacco while cutting back on imports.
Edgardo Zaragoza, head of the National Tobacco Administration (NTA), said the attached agency of the Department of Agriculture is scheduled to meet with manufacturers of cigarette and tobacco products on Wednesday next week to discuss measures on how to deal with the “sin tax bill” once it is signed into law by President Aquino.
The senators approved on Monday the sin tax bill on the third and final reading after agreeing on a 60:40 burden-sharing ratio between tobacco and alcohol taxes.
By next year, the new measure is expected to raise an additional P33.96 billion in taxes, on top of present collections from tobacco and alcohol products.
“The sin tax law wouldn’t affect the industry perhaps until next year. But we have to see how the market will respond in the succeeding years,” Zaragoza told the Inquirer.
He said the NTA is coordinating with cigarette manufacturers about the important qualities of imported tobacco products should they replace it with locally produced one.
To keep the tobacco farmers employed, the industry must rely on export demand if the local consumption of cigarettes would decline in the next few years.
According to the NTA, of the total production of tobacco in 2011, 52 percent of it was exported while the rest are consumed within the country.
“Assuming we maintain or increase the level of exports, there’s a good chance the industry wouldn’t suffer losses (from the sin tax bill). We have to do import substitution,” he said.
Agriculture Secretary Proceso Alcala expressed confidence that the bill would not affect tobacco farmers in the country.
“I’ll bet the number of tobacco farmers in the country would stay the same. If ever there would be a decline in local consumption, there’s always a big demand outside the country,” he said.
“As long as the income is there, they (farmers) will continue planting,” Alcala added.