Malaya - Sin tax foes won’t quit: Marcos raises specter of tobacco products smuggling

13 November 2012

By JP Lopez | Malaya

Marcos raises specter of tobacco products smuggling

malaya_business_insightSEN. Ferdinand Marcos Jr. yesterday vowed to raise the issue of unabated smuggling of foreign tobacco products once a high tax is imposed on local tobacco.

“I will raise the issue on smuggling, among other equally important concerns, in the ongoing interpellation and I vow not to stop until I am satisfied and assured that this is answered and addressed properly and convincingly,” Marcos said.

Marcos warned that smugglers will have a heyday dumping the local market with smuggled tobacco products and raking in huge profits without paying a single centavo to government.

“While we are debating heavily on the health and revenue issues surrounding this bill, I believe that we have to also discuss the smuggling issue with the same vigor and passion. In the first place, smuggling is likewise a revenue issue,” Marcos said.

Sen. Franklin Drilon, chair of the Senate ways and means committee, is defending on the floor his substitute sin tax measure which aims to generate P45 billion in incremental revenues yearly.

At the continuation of the interpellation, Sen. Miriam Defensor Santiago called on her fellow senators to raise sin taxes to decrease government spending on healthcare costs from tobacco-related diseases.

Santiago said the Philippines must raise sin taxes and reduce smoking prevalence, to be consistent with its commitments under the Framework Convention on Tobacco Control.

“It is too late for industry leaders to raise their objections now,” Santiago said. “They should have raised their objections in 2005, when the Philippines was about to ratify the FCTC.”

According to Santiago, Drilon’s substitute bill will have almost the same health impact relative to her bill by 2016 as the tax system moves to a unitary tax rate of P32 per pack.

However, Santiago claimed that her bill will have a greater health impact on the first year of implementation with 75,000 to 90,000 lives saved versus 66,000 to 79,000 lives saved by Drilon’s substitute bill.

Labor leaders expressed alarm over the excessively high excise tax rates proposed by Drilon on tobacco products, saying the plan would lead to massive job losses in the cigarette manufacturing sector.

The National Federation of Labor Unions said its worst fears were confirmed when Sen. Ralph Recto explained during the plenary deliberations on the excise tax bill, the wide-ranging negative impact of Drilon’s tax measure on the tobacco industry.

Rodelito Atienza, president of PMFTC Labor Union, said even big firms would have to downsize operations and reduce the number of workers to survive the high tax regime under Drilon’s measure.

Atienza noted that Recto himself noticed that Drilon’s proposal heavily favors imported cigarettes by way of minimal tax increases, which he said could further threaten the survival of the local tobacco industry.