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One wins, one loses

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One wins, one loses

/ 12:22 AM January 26, 2017

Think of this. It takes months, even years, for a bill to make it through the House of Representatives. It took the House more than 10 years to pass the Department of ICT and RH bills. The much-needed FOI bill is still pending after more than 20 years. Last December, House Bill No. 4144 passed through all three readings in an incredible two weeks. Only two committee meetings were held to address it.

So it must have been of utmost national importance. Maybe more important than the emergency/special powers we sufferers of traffic pray for. Or the proposed reduction of our taxes that the Duterte administration has promised us.

But no, it was nothing like that. It was a bill not only not on President Duterte’s priority list but also not on any list at all. In fact, not only is it not government priority, the Department of Finance even strongly opposes it. It just seeks to stop the carefully-thought-out law, Republic Act No. 10351, designed to reduce or even stop smoking, and to raise revenues for government health programs and to support tobacco farmers. It seems the House members saw this as so urgent as to give it a priority never given before.

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So what is the change the House so urgently wants? It’s to stop the shift to a single, high-deterrent tax that came into effect on Jan. 1, and to introduce a 2-tier system. Less tax for cheaper cigarettes (presumably, to help the poor die faster) and a higher one for the more expensive kind. Those arguing for a 2-tier tax system for cigarettes are working on a wrong premise. They think it is unfair to charge the poor as much as the rich because it is unfair to the poor. Indeed it is, if you want people to smoke. I don’t, and no health expert does. Cigarettes are bad for you.

The National Tobacco Administration (NTA) says it wants a 2-tier tax system so people will smoke low-quality, cheaper local tobacco leaf.  But the tobacco growers are opposing it, saying increased taxes will hurt them.  I thought one of the goals of the “sin tax” was to allocate funds to help some farmers switch to another crop. Coconut or corn would be a good choice. They could make good money while keeping Filipinos healthy. What a nice combination.

In any case, Filipino tobacco farmers needn’t suffer if people smoke less. According to NTA data, in 2014 total tobacco leaf production amounted to 68 million kilograms, of which 56 percent or 38 million kg were made up of exported unmanufactured leaf tobacco. It shouldn’t take too much effort to increase that, by improving the quality of their crop, to compensate for any loss in the domestic sales they are so worried about.

So why was it proposed? Well, there are only two major players in the cigarette business: PMFTC, which makes brands in both cheap and expensive forms, and Mighty, which makes only the cheaper ones.

What happens when there’s a 2-tier system is that many smokers downshift to cheaper, less taxed brands that one company relies on for its business.  And like everything else in this world, you get what you pay for.  Meanwhile, forget the harm done by smoking and its impact on the poor, or the farmers who will presumably suffer by the tax hikes proposed in this bill. So is the intent of two tiers to hasten the death of the poor?  That seems to be the curious argument.

A 2-tier system results in PMFTC losing sales, and Mighty gaining them. The nonsense that House members are foisting on us—the tax is regressive and Filipino farmers will suffer—is just that: nonsense. Yes, of course, it’s regressive; it’s designed to be. To encourage poorer people not to waste their limited funds on smoking but instead look after their health. This is not an economic issue revolving around the tax being regressive if single tier; it’s a health issue—what best preserves people’s good health. Not smoking, or at least smoking less, must be the focus, and the aim.

A single tier will help do that, and two tiers won’t. You don’t want economics experts discussing this; you want health experts.

One would expect the Senate, as a more independent, thoughtful body, will not agree to this strange railroading.

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E-mail: wallace_likeitis@wbf.ph. Read my previous columns: www.wallacebusinessforum.com.

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