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‘Sin tax’ reforms: facts, hard evidence

/ 08:57 PM March 13, 2012

The position taken by Gov. Chavit Singson favoring the Aquino administration’s “sin tax” reforms—as reported by Gil Cabacungan (“It’s Chavit Singson against the rest of the solid North on sin tax issue,” Inquirer, 3/9/12), and Jocelyn Uy (“Chavit now backs sin tax reform,” Inquirer, 3/6/12)—is backed by a sober analysis of the Philippine tobacco industry.

Indeed, in our research into the BIR withdrawals data, we in Action for Economic Reforms (AER) have verified that the share of Philip Morris Fortune Tobacco Corp. (PMFTC) in the nation’s cigarette market in 2010 was 97.15 percent. The Philippine tobacco industry is a virtual monopoly; this reality is conveniently ignored when dissenters warn us that reforming our excise tax system will deal our local cigarette industry a deathblow.

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The PMFTC monopoly has posed numerous hazards for government revenues and public health—but it is with tobacco farmers that the injury to our basic sectors has been most obvious. Based on interviews AER conducted with La Union farmers, the selling price of raw tobacco plunged from P95 per kilo to P73 per kilo after the consolidation of PMFTC in 2010. This 23-percent decrease has placed the livelihood of tobacco growers in jeopardy.

Indeed, the sin tax reform law will strike a blow—but against the preferential tax regime coddling this country’s tobacco monopoly. By leveling this skewed playing field, we will actually be ensuring better incomes and bargaining power for our farmers with the purchasing industry players.

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Finally, lest there remain any doubts whether these farmers can shift out of tobacco if they desire to, a study by UPLB professor Dr. Rafael Espino reveals that most tobacco-growing areas are already suitable for more lucrative crops such as tomatoes, bitter gourd and peppers. Over the past two decades, the total land area devoted to tobacco cultivation has plummeted from 63,200 to 29,707 hectares. This shows that many farmers have already been undertaking this adjustment process.

Governor Singson can rest assured that he had the weight of hard evidence on his side when he cast his lot for our administration’s sin tax bill and for our tobacco farmers. It’s time that the rest of our lawmakers followed suit on this.

—JO-ANN LATUJA,

senior economist,

Action for Economic Reforms,

132 West Avenue, Quezon City

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TAGS: Chavit Singson, letters, sin taxes, tobacco industry
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