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MANILA, Philippines - If you don’t get it from a former smoker and once the country’s chief economist, you’re missing the point.
That was the arrow sent across the bow by sin-tax reform advocates on Tuesday as former NEDA chief Solita Monsod advised senators to “do their Math” and not allow the tobacco industry to bloat figures in order to persuade them to reject the sin tax bill on tobacco products.
“I am disturbed why they are not doing their Math, especially for someone who claims to be an economist,” Monsod said at a forum in Quezon City, apparently referring to Sen. Ralph Recto, who heads the Senate’s Ways and Means Committee where the sin tax bill is being discussed.
JPE, Recto shoot down ‘unattainable revenue’
On Tuesday, at the other side of town, Recto joined Senate President Juan Ponce Enrile in saying they will “kill” the unrealistic and unattainable revenue targets on the Sin Tax bill pushed by the finance and revenue officials in the committee report to be submitted when sessions resume in October.
Recto had consistently said the senators support tax reforms, but want firmer assurance that the revenue assumptions trotted out by the Department of Finance are realistic.
Enrile said on Tuesday that the P60-billion revenue target by the finance and revenue officials pushing for excise tax hikes of up to 1,000 percent for alcohol and tobacco products is unattainable because exceedingly high tax rates come with unavoidable costs.
“Imposing high excise taxes on cigarettes and liquor will defeat the government’s twin goals of raising up to P60 billion in additional funds for health care and discouraging Filipinos from smoking and drinking,” Enrile said in a statement.
Higher prices driven by bigger taxes will discourage people from smoking, but the resulting cuts in consumption will spell lower revenue collections, no matter that the tax rates are higher, Enrile had said at the last hearing.
While he agrees with finance and health officials on the need to eradicate diseases from smoking and drinking, they should also bear in mind, he said, that “no matter what kind of tax we are imposing, you must always consider first its economic impact” to ensure that objectives are met and irreversible errors are avoided.
The Senate chief said shifting to a unitary system would only be effective if done gradually and not abruptly like what the DOF wants to do.
“It’s not an abrupt one-time, one-tier system. You have to gradually move this three-tiered or four-tiered system over a period of time until you come to a merging point so that you will not affect the market and your tax harvest so radically,” Enrile told finance officials during one of the hearings conducted by the Senate ways and means committee on the DOF proposal.
Recto said the committee report being drafted by the ways and means panel will have realistic, attainable and certain revenue targets.
However, Recto said there would be no median proposal in order to strike a compromise with finance and revenue officials.
Coming up with this “median” point, Enrile said, is necessary so that the Executive Branch won’t come running to Congress to ask for another tax measure once its P60-billion revenue goal is not met.
“What we are trying to find is the best level of tax burden that we can impose that will serve the objectives of everyone,” Enrile said.
Recto said the committee report will be enrolled for plenary debate when Congress resumes session on October 8, 2012, as the Legislature adjourns session this Friday, September 21, 2012. The brief break is meant to give way to candidates in the 2013 mid-election, who must file their Certificate of Candidacy before the October 5 deadline.
“We will file the committee report on October 8 or 9, when Congress resumes session. That is my time frame, and we will enroll it into the plenary for debates,’ Recto said.
Monsod: health burden outweighs revenue
Monsod, who confessed to being a smoker until 21 years ago and consumed three packs of cigarettes daily, said legislators should realize that increasing the sin tax for tobacco will not only benefit the economy but will also be good for the health and survival of Filipinos who die prematurely because of smoking-related diseases.
The former socioeconomic planning secretary said she started smoking at 15 years old because she thought it was “glamorous” then. She said she stopped after contracting an acute bronchitis which her doctor blamed on her smoking habit.
She said the annual health burden of P188 billion due to the top four killers of Filipinos – lung cancer, chronic obstructive pulmonary disease, heart attack, and stroke---far outweighs the P103.8 billion that the government generates from taxing tobacco products.
If approved, the sin tax in tobacco is expected to generate a total revenue of P128 billion by 2016 – of which 15 percent will go to tobacco farming and 85 percent to finance the government healthcare program.
“The sweet spot is if you get this (sin tax) through, if you get these benefits, you will save lives. Do you want to maximize the welfare of the people or do you want to maximize the profits of the tobacco industry? Who are you going to side with?” Monsod raised an open question to legislators during a press briefing Tuesday in Quezon City.
‘Exaggerated data’ from Big Tobacco
Monsod said the tobacco industry has been presenting “exaggerated” figures during the sin tax hearing which if carefully studied, would show inconsistencies.
She cited as an example the Philippine Tobacco Institute’s claim that the industry employs a total of 840,146 farmers. The Bureau of Agricultural Statistics (BAS) said the total land area used for tobacco farming is 32,235 hectares.
Monsod said if you divide the two, it will show that 26 farmers are tending each hectare of land.
The annual income per hectare, per the BAS, is P85,000. If you again divide that figure by the number of farmers tending a hectare, it will show that each farmer earns an annual P3,269.23.
“Napaka-ridiculous naman! That’s even worse than the Luisita farmers,” said the former economics chief, who is also known as a feisty speaker.
Monsod also took a swipe at Recto for doubting the study of Dr. Tony Dans of the University of the Philippines College of Medicine on the P188-billion health care cost for the top four killers of Filipinos. The study was published by the international medical journal The Lance.
“Tony Dans is more credible than the tobacco industry. Why don’t people see this konting arithmetic? I’m certainly more credible than Lucio Tan!” said Monsod.
‘P188-B cost just tip of iceberg’
Meanwhile, Dans said the P188 billion economic cost of the top four tobacco- killing diseases among Filipinos was just the tip of the iceberg. There are 35 other illnesses associated with puffing cigarettes. According to him, 300,000 Filipinos die annually because of non-communicable diseases. Half of these deaths are attributable to smoking.
Health advocates are pushing for a unitary 200-300 percent tax on all tobacco products—a move that is estimated to reduce smoking prevalence to six percent, or a total of 4 million less smokers during the first year alone. The sin tax also seeks to stop young Filipinos from smoking since the low prices of cigarettes now make them accessible for children to puff.
16 years in congressional mill
Congress has been failing to impose higher taxes on tobacco for the past 16 years, with the current tax still based on the 1996 retail price of cigarettes, allegedly because of strong lobbying by the tobacco industry.
Dans feels that the Senate is evenly divided among those who support the sin tax and those who will vote against it or want it watered down.
“What will sway this is a strong public support and if media reports on the side of the sin tax. There are vested interests in tobacco. It’s the interest of the few being pitted against the interest of the greater number of our people,” he said in an interview.
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