DoF wants to maximize tax take on tobacco

The Department of Finance insists on maximizing the excise tax on cigarettes.

In a statement, the DoF said that a substantial increase in the tax rate is needed to ensure the attainment of revenue and health objectives of the government.

“We cannot maintain the status quo of marginal increase in tobacco taxes. Tax increase has to be significant to deter our youth from starting to smoke,” Finance Undersecretary Jeremias Paul Jr. said in the statement.

The DoF cited studies on other countries showing rise in government revenues and decline in the number of smokers following a steep rise in cigarette taxes.

It disputed views from some cigarette makers that an increase in taxes would not cut the number of smokers but would just push them to buy smuggled and cheap cigarettes.

But the increase in the tax rate must be significant, the DoF said.

“Experience of other countries show that increased taxes on tobacco leads to higher government revenues while reducing tobacco consumption,” Paul said.

The DoF cited surveys conducted by the US-based Tobacco Free Center.

Based on the survey, the government agency said every 10-percent increase in excise tax on cigarettes in South Africa has been associated with an approximate 6-percent rise in revenues even with a decline in tobacco consumption.

The DoF is pushing for a steep rise in cigarette taxes. Congress is considering proposals of a 150- to 708-percent hike in cigarette taxes.

But tobacco farmers around the country have expressed dismay over Malacañang’s claim that imposing excessively high taxes on cigarettes would not adversely affect them.

In a statement issued on Wednesday, the 20,000-strong Philippine Tobacco Growers Association (PTGA) said that Palace officials appear to be “uninformed, if not unconcerned” about their plight.

The PTGA said Palace officials should listen to the valid concerns that the farmers’ group had raised before the Senate over the plan of the Department of Finance to increase cigarette excise taxes by as much as 1,000 percent, instead of dismissing its fears over the proposal with “general, unsupported statements.” PTGA represents tobacco growers from the provinces of Pangasinan, La Union, Ilocos Sur, Ilocos Norte, Abra, Isabela, Cagayan and Occidental Mindoro.

“It’s easy to say that extremely high taxes will not have a negative effect on us tobacco farmers, but such statements have no basis,” said PTGA president Saturnino Distor.

Distor was referring to a recent statement by Secretary Ricky Carandang of the Presidential Communications Development and Strategic Planning Office, who was quoted as saying that “the bill will not have a negative impact on our farmers.”

Apart from hundreds of thousands of tobacco farmers, Distor said local government units dependent on tobacco as a major source of revenues would also suffer under the DoF tax proposal.

Distor also disputed finance officials’ claim that tobacco growers would continue to survive even with the high tax rates owing to the growing demand for local tobacco in the foreign market.

Distor pointed out that not all farmers cultivate and sell export-quality tobacco.