Manila fights to save tobacco tax
increase By Cher S Jimenez
MANILA - Philippine President Benigno
Aquino's tax reform program has met resistance
from the country's politically powerful tobacco
lobby, a policy struggle that has pitted the
executive and legislative branches. While other
countries in the region have imposed higher taxes
on tobacco products, current levies on cigarettes
in the Philippines are still based on 1996 retail
prices.
Aquino's executive office has
argued for a unitary 60 billion pesos (US$1.5
billion) tax system, or "sin tax", for both
alcohol and tobacco products per annum. The
government has said it hopes to raise enough
revenues to meet two key policy objectives: 1) to
raise enough revenues to finance a universal
healthcare program and 2) to curb high levels of
smoking among both adults and youth.
Some
85% of the proposed revenue under Aquino's proposal
would be earmarked for
healthcare costs, while 15% would aim to help
tobacco farmers displaced by any tax-motivated
slump in local consumption. Tobacco farmers would
also be given funds to pursue alternative
livelihoods under the proposal.
The House
of Representatives, home to a strong pro-tobacco
voting bloc, passed a watered-down version the
proposed bill in June. The House's amendments
effectively halved the government's 60 billion
peso collection target for tobacco products. Those
proposed tax revenues will fall further if Senator
Ralph Recto, whose committee has vetted the
proposed tax measure, has his way.
Recto
came under fire last month after suggesting to cut
the proposed levy on tobacco products even further
to 15 billion pesos in the first year with annual
upward adjustments. His report, which proposed a
three-tier tax system on low-, medium-, and
high-priced cigarette products, critics said was
strikingly similar to a proposal advocated by
Philip Morris Fortune Tobacco Corp (PMFTC).
PMFTC, formed in a 2010 merger between US
tobacco giant Philip Morris and local tobacco firm
Fortune Tobacco, now controls more than 90% of the
Philippines US$1.7 billion tobacco market. Philip
Morris's $300 million manufacturing plant, it's
biggest and most expensive in Asia, is in Recto's
home province of Batangas.
Recto suggested
that the three-tier system include a six-peso levy
for low-priced tobacco products, 10 pesos for
medium-priced products, and 14 pesos for
high-priced items. PMFTC's proposal called for
six, 12 and 14 pesos for the respective low- to
high-price categories.
Soon after Recto
released his report, a government official claimed
that the tobacco lobby was the reason why the
country had failed to increase tobacco taxes for
16 years. Bureau of Internal Revenue top official
Kim Hinares, whose staff helped to prepare the
committee report, was quoted as saying that her
office felt "betrayed" by Recto's proposal. The
public health community, meanwhile, has warned of
a catastrophic cancer epidemic if tobacco taxes
are not raised soon and substantially.
Amid the barrage of criticism, Recto
stepped down from his position as chairman of the
Senate's Ways and Means Committee.
"I am
the national punching bag of the week," said Recto
during his privilege speech where he announced his
resignation late last month. "I am not hurt if my
critics condemn me, but I will be lying if I say
that I am not affected by the unfounded criticisms
of my friends in the executive [office]."
Senator Franklin Drilon, the committee's
vice-chairman and an ally of health advocates, has
taken over Recto's top committee position. He will
face a number of obstacles as Recto and other
alleged allies of the tobacco industry will
reportedly bid to delay the legislative process.
The senate resumed deliberations on November 5 and
will debate the tax measure, though Senate
President Juan Ponce Enrile has expressed doubts
it will be passed during this session.
Prolific puffers With an
estimated 17.3 million Filipinos puffing an
average of 1,073 cigarettes every year, the
Philippines has the second-highest percentage of
smokers in Southeast Asia, trailing only
Indonesia, according to Health Secretary Enrique
Ona. The country also has the highest percentages
of youth smokers in the region, with 28.3% of boys
and 17.5% of girls aged between 13-15 consuming
tobacco, according to the World Health
Organization.
The Department of Health
(DOH) and civil society groups believe that those
high smoking rates are directly correlated to
exceptionally low cigarette prices and taxes.
Cigaretteprices.net, a website maintained by
smoking enthusiasts, recently identified the
Philippines as having the second lowest-priced
tobacco products in the world, trailing only
Zimbabwe.
Health Undersecretary Ted
Herbosa has said that the public health burden of
smoking-related illnesses outweighs widely the 26
billion pesos collected annually in tobacco taxes.
The DOH estimates the top four killers of
Filipinos - lung cancer, heart attack, stroke, and
chronic obstructive pulmonary disease, all
smoking-related - cost the country a staggering
188 billion pesos per year.
"It will not
be surprising to see an epidemic of lung cancer
among our productive members in the workforce
within the next 10 to 15 years," Herbosa recently
said. "This will also cost the Philippines
billions of pesos for health care, chemotherapy
and palliative care. A major lung cancer epidemic
could deplete our resources for universal health
care, so we need to focus on prevention."
He has argued Aquino's proposed unitary
"sin tax" is equivalent to an "anti-cancer tax"
and would safe 240 lives every day as higher
priced cigarettes would curtail adult smokers and
youth from taking up the habit. Civil society
groups, meanwhile, have taken to social networking
sites such as Facebook, Twitter, and YouTube to
champion the bill's public health upsides.
The tobacco industry in the Philippines,
dubbed by the University of Sydney as having the
"strongest lobby in Asia", is already fighting
back. Last month, the International Tobacco
Growers Association (ITGA), an alleged front group
for the local tobacco industry, held a meeting in
Manila that claimed higher tobacco taxes would
"kill" the industry and result in loss of
"thousands" of jobs and livelihoods.
The
website of the National Tobacco Authority, a
government office, estimates the current number of
tobacco farmers at 43,960 and about 300, 000
members of their families as dependent on the
tobacco industry. The figure represents a tiny
share of the country's estimated 40 million
workforce.
In an email to Asia Times
Online, PMFTC said that while it agrees sin taxes
should be raised, the increase should not be as
high as the 708% proposed in the executive
office's original proposal. "No other country in
Asia has implemented increases to such a degree,"
said PMFTC, adding that "an excessive tax hike"
would result in thousands of job losses and
illicit trade activities. (The company declined to
comment on its alleged lobbying of solons.)
Anti-tobacco pressure groups see the
situation differently. The Southeast Asia Tobacco
Control Alliance (SEATCA) recently said that a
700% increase in sin taxes would still result in
low cigarette prices considering tax rates of
tobacco products have been frozen for the last 16
years. SEATCA characterizes the tobacco industry's
doomsday predictions of tax hike-related job
losses as mostly "lies".
"We are deeply
concerned about events in the Philippines and how
the tobacco industries blatantly try to meddle in
government legislative processes with the attempts
to water down tax laws," SEATCA said in a recent
public statement.
Civil society groups led
by the Framework Convention on Tobacco Control
Alliance Philippines (FCAP) recently wrote to the
Commission on Elections to protest the candidacy
of an alleged tobacco industry front group that
aims to run in the 2013 midterm congress election.
The Agrarian Development Association (ADA)
includes in its list of nominees individuals who
are strongly identified with the tobacco industry,
the civil society groups said.
They
include Ilocos Sur Congressman Eric Singson Jr,
his father and former congressman Eric Singson Sr,
Rodolofo Salanga, president of the Philippine
Tobacco Institute and Blake Clinton Dy, an
official of the Anglo-American Tobacco Corp.
Ilocos province is the country's prime source of
tobacco products and a bloc of its legislators in
both houses of congress has strongly opposed the
proposed sin tax.
FCAP executive director
Maricar Limpin has argued that ADA, nominally a
poor farmers' organization, should be banned from
joining the election because its nominees
obviously do not hail from a marginalized sector
of society, a requirement for running in the party
list poll. "This is not just a clear
misrepresentation of the agrarian sector but a
direct assault on our electoral process," said
Limpin.
Cher S Jimenez is a
Filipino journalist formerly based in Hong Kong.
She wrote for the Business Mirror in Manila, Gulf
News Manila Bureau, The Associated Press and GMA7
online. She was a Yuchengco media fellow at the
University of San Francisco where she conducted
research on undocumented Filipino migrants in
2007.
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