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MANILA, Philippines – Advocates for reforms in tobacco taxation have a surprise new ally: Ilocos Sur Governor Luis 'Chavit' Singson, who has projected himself as a champion of tobacco farmers. Singson now says he supports the sin tax bill as it could level the playing field among big and small tobacco players in the country.
In a press conference on Monday, Singson, who owns a tobacco plantation in Ilocos Sur, said he decided to support the sin tax bill when cigarette maker Philip Morris Phils. Manufacturing Inc. (PMPMI) and local cigarette firm Fortune Tobacco merged last year, creating a virtual cigarette monopoly in the Philippines.
"If we don't jack up taxes, the more they can control the prices of tobacco leaves because of their virtual monopoly. But if taxes are raised and made uniform, the playing field will be level. Right now it isn't, so they're the only ones benefiting,” Chavit said in Filipino during a press conference at the Department of Health in Manila on Monday.
Bureau of Internal Revenue (BIR) chief Kim Henares saidsin-tax reforms would not only boost revenues and generate funds for public health care but also help tobacco farmers by leveling the tobacco "monopoly" and by increasing the number of raw tobacco buyers. Health advocates, for their part, have long held that a more progressive tobacco tax regime should have the double benefit of raising government revenues while also lessening smoking incidence among Filipinos; the young as well as the poor, with limited purchasing powers, would find the habit less affordable.
On top of the 15-percent share in the existing tax that they are receiving, farmers could meanwhile receive an additional P4.5 billion in excise taxes annually in the tobacco excise-tax system reform.
"One of the features of the sin tax law is to level the playing field," Henares said. "This is [meant] to protect the farmers. Based on the 1996 prices, ang buwis na pinapataw kung ano ho price niya noong 1996, so kung ikaw bagong player, may bago kang produktong ipapasok, ang tax mo based on today’s price. Kung hindi ho makumpetensiya mga bagong kumpanya, kung ikaw ay tobacco farmer, kung ano idikta kong presyo, yun lang ho makukuha ko. Whereas kung sa palengke, mag bi-bid ho kayo, pwede tumaas presyo." (Taxes were computed based on prices in 1996. But if you're a new player in the Philippine tobacco industry, any new product you introduce will be taxed based on today's prices. If the new companies can't compete, the tobacco farmers find their prices are dictated upon them [by the dominant players.] In a more competitive market, there's bidding, and prices can rise.)
Higher prices for tobacco should then redound to higher prices for tobacco products. The World Bank and the World Health Organization have both affirmed the raising of tobacco taxes as a best practice in reducing tobacco use without having to sacrifice government revenue.
Health Secretary Enrique Ona said that aside from the P4.5-billion additional support for tobacco farmers, P56.2 billion would be going to Universal Health Care Coverage as a result of the measure.
They projected that the government would earn P60.7-billion revenues for Year One, once the bill is passed.
Ona said the bulk of the projected revenue from the measure will be channeled to finance the administration's campaign for universal health coverage in PhilHealth and to enhance the health care system by upgrading State health facilities.
He emphasized that the government is spending P400 billion yearly on smoking-related expenditures for treatment, rehabilitation, chronic care of those afflicted with diseases caused by smoking; on top of the loss of income and loss of productivity of these people.
Tobacco-related illnesses include lung cancer, strokes, coronary artery disease, and chronic obstructive pulmonary disease.
Republic Act 7171, or “An Act to Promote the Development of the Farmers in the Virginia Tobacco-Producing Provinces,” was enacted in 1992 through the efforts of Singson.
Based on the law, Singson said that provinces like Ilocos Sur, La Union, Ilocos Norte, and Abra will get 15 percent of the taxes on Virginia type A cigarettes collected by the national government.
Singson plans to discuss this bill with the farmers in Ilocos Sur and make them understand that they will benefit from the Sin Tax reform bill.
He also appealed to the leadership in Congress and lawmakers to "cross party lines" to support the Sin Tax bill.
"I told them to study seriously the ongoing debate because I am worried and I don’t want a monopoly," he said.
Besides Singson, who is chairman of the League of Provinces of the Philippines, LPP president and Governor Alfonso "Boy" Umali joined mounting calls for the passage of House Bill 5727 or the Sin Tax Reform Law. The bill is authored by Cavite Rep. Joseph Abaya, which seeks to increase taxes on tobacco and alcohol products.
"The League of Provinces of the Philippines supports this landmark legislative measure which will generate revenues to finance PPP, prevent smoking-related expenditures, and save young and poor countrymen from lifestyle diseases," Umali said.
LPP is an organization the represents all provincial governors in the country.
Ona commended the governors for going out of their way to support the bill which he reiterated is primarily a health measure meant to increase the prices of tobacco and alcohol products to discourage the public, particularly young people, from smoking.
Data from the US show that the youth are more responsive to increased cigarette prices than adults, with a 10-percent increase in the price of cigarettes estimated to reduce youth smoking by almost seven percent.
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