Raising the tax on tobacco

Caroline J. Howard, ABS-CBN News Channel

Posted at Aug 12 2010 11:08 AM | Updated as of Aug 17 2010 05:37 AM

MANILA, Philippines - The Department of Health (DOH) is pushing for a 400% increase in the tax on cigarettes. The tax hike would bring up the price of a cigarette stick from P2 to P7, and a pack from P30 to P120.

The DOH said the move would help reduce the number of smokers in the country, deter the youth who comprise 20% of the smoking population while allowing government to raise revenue to bring down the budget deficit.

DOH research shows that 4 out of 10 Filipino adults smoke, while over 20% of Filipino smokers are between 15 to 20 years old.

Funding health care

The Framework Convention on Tobacco Control Alliance Philippines is lobbying for a tax hike on cigarettes.

On ANC's "The Rundown" on Wednesday (August 11), the group's executive director Dr. Maricar Limpin said a bill raising tobacco taxes would help raise funds for providing universal health care to five million indigent families.

She added they plan to file a bill soon, saying they just need to talk to some people involved in the advocacy.

"There's a big disequilibrium between the cost of cigarettes and the cost of health care so government spends more on diseases caused by tobacco. Studies show the expenditure on health care has reached P270 billion compared to the revenue government is getting which is only P27 billion. This is a big discrepancy and if we allow this to continue that is like pushing our people to death and debilitating diseases," Limpin said, adding that there is growing support for the proposed measure.

Support in Congress

"The health groups are very supportive of the recommendation of DOH to increase taxes on cigarettes because we believe this is one of the most effective measures by which we can reduce tobacco consumption and consequently reduce the diseases caused by tobacco use," she explained.

Limpin, however, said they expect strong opposition to the proposed measure.

"That's the biggest challenge we are facing, the strong lobbying of the tobacco industry. As far as we're concerned the benefits this appeal is going to have on majority of the Filipino people should be considered beyond the interest of the tobacco industry," she said.

But Antique Governor Exequiel Javier believes proposals for a higher tobacco tax would not go far.

The former Congressman and chair of the House Ways and Means Committee added tobacco farmers and their supporters are sure to block the bill, which they fear could spell the death of the tobacco industry.

"I think they'll have a hard time pushing this in Congress," Javier said. "Raising tobacco taxes by 400% will affect tobacco farmers in the Ilocos region."

Limpin, however, contended that there is no strong evidence that imposing higher taxes on tobacco could substantially affect tobacco consumption or production.

"It's not going to dramatically cause the death of the industry; there's no evidence for that. When it comes to tobacco manufacturing, it's not just local consumption that we are dependent on. We are exporting tobacco to other countries so there's no way tobacco farmers are going to immediately run out of source of livelihood," she said.

Limpin added that recent discussions with the National Tobacco Administration regarding finding alternative livelihood for tobacco farmers who could be displaced in the Ilocos region, raised the prospect of hog-raising which is seen to generate P3 million a month.

Search for a middle ground

Javier, meantime, said reducing the consumption of sin products, while at same time increasing revenue through higher taxes, is an impossible proposition.

Instead, he urged legislators to find a middle ground on the tax rate which would still allow the tobacco industry to thrive.

"The policy of government is ambivalent. They want to discourage the consumption of sin products and yet they want to raise revenue. That's the problem. A compromise solution would be they should arrive at a rate that will give revenue to government and at the same time make the industries viable," he concluded. --ANC