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Sin tax sins Written by Herman Tiu Laurel

Tuesday, July 24, 2012

Sin tax sins

The Filipino people are besieged on so many fronts by forces of oligarchy, global and domestic, with the aim of impoverishing the nation. We who are aware have watched this process creep and then now gallop like the Four Horsemen of the Apocalypse: globalization, deregulation, privatization and lastly, trade liberalization or the removal of affirmative action for our domestic economy.

The past months we have seen Filipino poultry and livestock producers rise in protest of dumping of such commodities from the US and China. Our rice production has reeled from importations and smuggling. Where we used to produce our own from shoes to patis the country is now deluged with imports. Don’t tell me that it’s because Filipinos don’t know how to be productive; as the legend goes, when we are OFWs we become known to be the hardest working.

What is it inside the boundaries of this country that dampen, if not suppress, the energy and productivity of our nation? It’s really not difficult to see when the country’s legislators and Executive officials sit by while the highest power cost in Asia continues and basic water needs of the people are becoming beyond their means — all for benefiting a few oligarchs.

Industriousness and frugality are simply met with continuing disincentives from government legislators and executives. In recent weeks another example of this is seen in what the Lower House of Congress approved — the new sin taxes, particularly on the tobacco sector. The sin tax proponents in government, the health sector, business, media and academe are not leveling with the people: they argue that higher taxes will discourage the habit of smoking, that the new taxes will raise more revenues, and there will no economic dislocation. But what they are not telling the public are the following basic facts.

Before the bill reaches the Senate let us review the most important factor, the tax tiering proposed:
Current cigarette excise rates on the local low priced cigarette brands are at P2.72 per pack, mid priced at P7.56 per pack, high priced at P12 per pack, while mainly imported foreign “premium” brands are at P 28.30 per pack.

Under the proposed new Sin Tax HB 5727, the low priced cigarette tax will increase from 2.72 to 12.00 on year 1 (341-percent  increase), and P22 on year 2 (700-percent increase) ; for the mid and high priced, their respective rates of 7.56 and 12.00 will rise to P28.30 on year 1 (135-percent increase) and P30 on year 2 (150-percent increase), going to the rate of premium imported brand tax bracket (P28.30) on year 1 (135-percent increase) and P30 on year 2 (150-percent increase) — equalizing with the rate of premium brands tax bracket (P28.30) in year 1 and on.

The DoF, the main proponent of the new sin tax, knows there is practically no revenue and volume at the premium imported brand tier. The main sources of revenue are high, mid and low tiers which contribute 55 percent, 12 percent and 33 percent  of excise revenues. Why does the DoF insist on raising the level of tax to premium tier where there is no revenue?

The new sin tax proposal threatens to finish off the local tobacco growing and local cigarette production sectors. The major beneficiary of the new sin tax would clearly be the foreign premium brands, in particular this is the British American Tobacco Corp. (BAT), which has been the one making a case for the new sin tax rates. BAT tries to counter the local tobacco farmers and cigarette producers’ objections by promising to invest $200 million in exchange for the new sin taxes being enacted into law. But will it still need to invest that if its imports have the same high tax rate as local brands already? That’s one for the Marines doubtful, as a report from the International Consortium of Investigative Journalists (ICIJ) which can be found on the Internet:
“Washington, Feb. 2, 2000 — In its search to maintain and enlarge cigarette markets and corporate revenue, BAT — the world’s second largest tobacco multinational and parent company of Brown & Williamson — exploited a sophisticated network of smuggling routes throughout Asia. A review of more than 11,000 corporate documents, conducted over a six-month period by the ICIJ at the Center for Public Integrity, shows that, as with corporate operations in Latin America, BAT managers and executives used a series of euphemisms in corporate correspondence to discuss smuggling operations that helped them gain a greater share of smokers and profits.”

The DoF’s  health benefits argument, dutifully supported by the DoH and some well intentioned but naïve health practitioners ignorant of the economic ramifications, is contradicted by its welcome to BAT’s offer of $200-million investment. If the goal is to reduce smoking why invite more investment in the field? BAT is counting on Filipino smokers to continue smoking even with high taxes, and it premium brand will win out.

The hope that the tobacco farmers and cigarette producers will not be dislocated is contradicted by the DoF delighting in BAT’s promise to bring in $200-million investment. While I expect a lot of disinformation from Malacañang (which reportedly got a $ 4-million campaign contribution from the BAT in the last election) and from the US controlled SGV pet Purisima leading the DoF, I thought I could expect more from some journalists reporting and opining on this and find comprehensive reporting — but many of them omit presenting the absolutely anti-Filipino and pro-BAT tobacco and cigarette in the new sin tax, HB 5727 tax-tiering scheme that is at its sinful heart.

(Watch Destiny Cable GNN’s HTL edition of Talk News TV, Saturdays, 8:15 to 9 p.m., with replay at 11:15 p.m. and Sunday; visit http://newkatipunero.blogspot.com)

(May pahintulot ng muling paglimbag mula kay Ka Mentong)

SourceThe Daily Tribune

URL: http://www.tribuneonline.org/index.php/commentary/item/1884-sin-tax-sins


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