The most common way by which cigarettes in the country are sold is “tingi” or retail. Unlike in other locales where cigarettes are most commonly sold by the pack, in the Philippines most cigarettes are sold by the stick, through wandering vendors targeting drivers and passengers of stalled vehicles, sidewalk vendors on the lookout for passersby yearning for a smoke, or through sari-sari or neighborhood variety stores.
This means that smoking, in this country, is still predominantly a poor person’s vice. Which is why, perhaps, those behind the passage of the Sin Tax Law, which imposes higher tax rates for alcohol and tobacco products, lobbied for it by saying it was partly a health and social amelioration measure. Increased taxes on “sin products,” it was said, would not only dampen demand for cigarettes and alcohol (because of higher costs), it would also protect potential drinkers and smokers from the health hazards of such vices. Certainly, this adds a social-justice tinge to the law. It protects, at least on paper, the health of those who are found to be the majority of customers of these products, and who can least afford the attendant health costs.
Recently, the House of Representatives passed on second reading a law retaining the two-tier tax system which would impose higher taxes on the so-called “premium brands” of cigarettes made from imported tobacco, while giving local brands, which use a mix of imported and local tobacco, a lower tax rate.
Supported by most of the “Northern Alliance,” a group of representatives from Northern Luzon where much of local tobacco is grown, the two-tier tax measure adds another dimension to the social-justice argument.
By imposing lower taxes on brands using local tobacco, as opposed to leveling uniform (or unitary) taxes on all tobacco products, the new system would, it is said, allow tobacco farmers to continue plying their trade. Tobacco growing, it is claimed, is under threat of extinction here once imported brands using “premium” tobacco would begin flooding the market.
Tobacco farmers certainly know the risk to their livelihoods. In a report, the National Federation of Farmers Associations and Cooperatives (Naftac) expressed its support for the two-tier tax classification system. “A unitary tax system will benefit only the premium brands,” say farmer-leaders Saturnino Distor and Franklin Dumpit. “They will just import higher quality tobacco leaves [which] means that we, the local farmers, who also produce low-grade tobacco will suffer the most.”
Farmers source their farming inputs and equipment from funds borrowed from different sources, Distor points out. At harvest time, they commonly pay back their loans by using profits earned from harvested high-grade tobacco, while using profits used from the sale of low-grade tobacco for their own needs. “Once the unitary tax system takes effect,” says Distor, farmers stand to lose up to 35 percent of their sales from low-grade tobacco, which is enough to drive them out of the tobacco-growing business entirely.
But there is another social-justice issue at stake here. The premium imported brands are patronized by a market that is “price-insensitive.” This means that affluent and image-conscious smokers are able to bear any price increase so long as they can continue to enjoy their smokes.
The main market of local brands is the less affluent smoker, so to raise the taxes imposed on these local cigarettes equal to the so-called prestige brands would, in a sense be discriminating against the poor.
Of course, health arguments would seem to carry the day. Would it not be good for government, some say, to cut down demand for cigarettes among the poor sectors by making cigarettes more expensive for them? But then why allow more affluent smokers to continue killing themselves through smoking? Don’t they deserve as much protection as the poor?
Advocates of social-justice measures should make sure that these laws don’t end up imposing more injustice on those whom they set out to protect.