This is in response to the article “Pimentel: No tobacco tax hike if it will hurt businesses” (Inquirer.net, 5/25/19).
The report quoted Sen. Aquilino “Koko” Pimentel III as saying the tobacco industry must not be taxed to death, and that he disagreed with increasing tobacco taxes if it would endanger the viability of businesses.
Action for Economic Reforms (AER) conducted a research on the tobacco industry, and one of the main conclusions that we gathered was that increasing the tax on cigarettes did not lead to a decrease either in production or income.
If we look at five-year average figures, tobacco production volume increased after the passage of Republic Act No. 10351 or the Sin Tax Law of 2012. During the period of 2013-2017, the average volume of production was 55,769 metric tons. This is 15,000 metric tons higher than the average volume of tobacco production in 2008-2012, which was only 40,479.
Tobacco-growing regions have received billions of pesos as subsidy for their production courtesy of the tobacco tax revenue earmarking from RA 7171, RA 8240 and RA 10351. Their subsidies combined amounted to almost P18 billion in 2017, while their tobacco production was only P3.8 billion. This means they received subsidies that are almost five times their value of production. Furthermore, tobacco exports are growing despite the increased taxes, according to data from the Philippine Statistics Authority.
Lastly, net income has been increasing for all tobacco companies. According to Business World’s report of the Top 1,000 corporations, the net income of PMFTC Inc. a joint-venture company between Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp., was around P1.4 billion in 2015. Two years later, their net income was approximately P8.4 billion. This marked a six fold increase in a matter of two years.
The tobacco industry has also resulted in great economic burden and social costs for the country. According to a study by Dr. Antonio Dans of the National Academy of Science and Technology and Jo-Ann Diosana of AER, the economic burden of tobacco-related diseases in 2015 amounted to P210 billion, while the earmarking for health was only P125.8 billion in 2017. Clearly, the amount allocated for health is not enough to cover the cost of smoking to the country.
According to a survey done by Pulse Asia before the elections, seven out of 10 Filipinos will support candidates who push for higher tobacco taxes, while three out of four Filipinos believe that the tax on tobacco products must be increased. It is not the industry we must protect, but rather the lives of our fellow Filipinos, many of whom voted for Pimentel in this year’s midterm elections. We must always put the welfare of the people above business interests.
We hope Senator Pimentel is not misled by the data the tobacco industry has given him. As one of its priority measures, the President has also certified increasing tobacco taxes as an urgent measure. We appeal to our legislators to heed the call of their constituents, and prioritize the passage of this popular measure before the end of this Congress.
ARJAY MERCADO, researcher, Action for Economic Reforms, action.ph@gmail.com