Senate tackles sin tax bill; DOF says no layoffs

ABS-CBN News

Posted at Aug 16 2012 05:55 PM | Updated as of Aug 17 2012 01:56 AM

MANILA, Philippines - Over a hundred employees and supporters of local cigarette manufacturers trooped to the Senate this morning, to protest the pending law that will impose higher taxes. 

Complete with placards and shouting "excise tax, ibasura!", the protestors said if the excise tax is implemented, they will lose the competitiveness of their products and may eventually lose their jobs.

They want the current excise tax regime to be retained.

"Wala kaming pagtutol sa buwis pero dapat tama ang pagkuha ng buwis. Pwedeng lumaki ang presyo ng aming produkto, magiging pareho sa presyo ng imported cigarettes...babagsak ang local brand," said Danny Bataller, Philip Morris Fortune Tobacco Corp. plant executive officer.

But the Department of Finance (DOF) assured that the proposed increase in "sin taxes" would not result in massive layoffs in the tobacco manufacturing sector.

Finance Secretary Cesar V. Purisima said the government is more concerned about the effects of cigarette smoking on poor families that do not have the means to deal with the health consequences.

"The secretary of health was very clear in his position that smoking has a direct correlation to six major illnesses and there are other deaths that have result from this, and the total cost to the economy, social, and direct cost to the government is high," Purisima said.

He estimated that the government is spending around P177 billion a year for smoking related illnesses, much less than what the government collects from excise taxes amounting to only P26 billion.

DOF data showed that an average Filipino smoker consumes 1,073 sticks every year, the highest among Southeast Asian nations. Next are Indonesian smokers who consume 974 sticks a year.

The previous increases in excise tax on tobacco and alcohol products have not resulted in massive layoffs, Purisima said.

Data from leading tobacco company PMFTC Incorporated showed that there are 2.9 million people who are directly and indirectly employed in the local tobacco industry.

"As shown in Thailand experience where they've increased their cigarette prices by over 400 percent, the reduction in cigarette consumption is very small, so we don't see a major reduction in employees," Purisima said.

"If you've been to tobacco factories, there are highly automated. I don't think the increase would mean a reduction in people," he added.

Also, Senator Miriam Defensor-Santiago has filed a separate bill seeking reforms in the collection of excise tax on tobacco and alcohol products, allocating revenues for the universal health care system and initiating a livelihood program for tobacco farmers.

Under her bill, the government will allocate 15% from the excise tax on tobacco products to a program that will help tobacco farmers shift to alternative crops other than tobacco and other alternative livelihood.

Santiago wants adjustment measures for the prevention of job losses and assistance to displaced workers.

Purisima said that Santiago's bill is something that they have to consider.

"We have allocated 15% in the increase in revenues for this purpose, including for farmers. In fact for farmers, ever since the merger in the tobacco industry, the price per kilo has actually gone down," Purisima said..

Purisima said tobacco farmers will not be misplaced or their income would be reduced once a higher excise tax rate is adopted.

"From 2005 to now, cigarette prices have gone up as high as 99% and they have not lost their jobs. In fact they (cigarette companies) have increase the profitability of their company," he said.