Manifestation of Senator Ferdinand “Bongbong” R. Marcos, Jr. before the ratification vote on the Sin Tax Bill

12 December 2012

Mr. President:

I vote against the ratification of the Conference Committee Report on HB 5727 and SB 3299 for many very important reasons.

I am confident that during the periods of interpellation I made it clear that many of the assumptions used in the calculations of the DoF regarding this measure were clearly mistaken.

The effect on the tobacco industry by these new tax impositions was wildly underestimated. Our assessment that this measure would essentially destroy the tobacco industry was dismissed outright with the wave of a hand as alarmist.

However, even the DoF estimate of a reduction of approximately 43% of production, which I consider low, would still be ruinous to the industry. And that is only in the first year. But we were not given any further hearing.

I then showed that the calculations made as to the additional revenues were incorrect on the pure arithmetical level and once again, on the assumptions made.

The insistence by the DoF of using their clearly flawed numbers showed a completely unrealistic tax collection as a result of this measure. And yet, again these arguments were ignored and not examined but we merely continued as if those arguments were not made.

I also clearly showed that the contention that the Philippines, as compared to our neighbors, had a very low price of cigarettes was wrong. Using data gleaned from official government sources, it could clearly be seen that we in fact fall very squarely in the middle when the comparison on affordability of cigarettes with our neighboring countries is made. Yet, the proponents continued to argue their position, which the empirical data had so clearly undermined.

Then, strangely, any discussion on the effect these increased taxes would have on illicit trade, on smuggling, was assiduously avoided, as if it was no an important consideration.

I demonstrated, again using empirical data taken from official government sources, the negative experience of countries similarly situated when whey sharply raised their taxes on tobacco and alcohol. The data made obvious that every imposition of a sharp tax increase immediately increased the incidence of smuggling to dangerous levels with the accompanying criminal behaviors that implies. The implications are enormous for the country and yet nothing in the bill was shown to have taken these countries’ experiences into account.

Again, the discussion on the increase of smuggling was conveniently swept under the rug and it can be seen in the consolidated version of the bill that little or nothing has been done to address this impending problem.

The only comment that this was merely a tax administration problem is to ignore a real threat and to insist on being blind to what the deleterious effects this will have on the country.

The collated data to smuggling that I showed was the actual effect on smoking incidence when a country sharply raises its taxes. The data shows that smoking incidence hardly moved after the imposition of high taxes. Smokers merely moved to cheaper smuggled cigarettes but in fact did not stop smoking. The best the proponents could do was to weakly argue that the data was wrong though no data or proof was shown as a basis for that view.

Finally, this attitude of discounting what were clearly important and valid points continued in the bicameral conference. The only discussion that we had was on the House version of the bill. When members of the bicameral committee asked for different economic models that would still bring the revenue collection desired, these were not allowed. Our technical group could have very easily generated those numbers but the discussions were rushed and no alternatives were in fact shown.

Thus, the members were not shown any different options except those proposed in the House version. Therefore, we did not assess the different possible options to achieve the same revenues, but instead, were put in a position where essentially, we were told: “Take it or leave it!”

This, Mr. President, is not the best way to arrive at any optimum choice most advantageous to the purpose of the measure in question.

Effectively, then Mr. President, all this bill will do, is destroy the tobacco industry and large parts of the alcohol industry, without collecting the projected revenues; will increase smuggling and in the end, will not reduce the use of tobacco or alcohol.

For these numerous and alarming reasons, I vote against the ratification of the consolidated version as reported of HB 5727 and SB 3299.

Thank you, Mr. President.