MIXED SIGNALS?
The government is dead set to discourage cigarette smoking and liquor drinking for health reasons. But the more intensive effort is against smoking.
It started by prohibiting advertising the merits of cigarettes. Billboards no long proclaim the “virtue” of smoking. Packs of cigarettes warn smokers of the dangers of smoking, if not by printing the physical horrors of getting various diseases such as mouth cancers, etc.
And then enclosed spaces began to have signs and notices prohibiting smoking in the premises. Eventually entire buildings became hostile areas for smokers. It is now declared that smoking is a “sin” although not in its theological sense.
Smoking is not as yet considered a crime, unless the smoke comes from a prohibited leaf, the marijuana. (Marijuana, however, has some medicinal value.)
Even as these activities are being pronounced by the government, the manufacture of cigarettes continues to be tolerated. The reality is that smoking tobacco can never be totally eradicated. There will always be smokers. In the same manner the “sin” of drinking booze can never be eradicated. The historical example of Prohibition in the United States showed the futility of criminalizing drinking. (In the Muslim countries, drinking liquor is punishable by public lashing during Fridays.)
If governments cannot eradicate a vice, they impose taxes to somehow make the vice pay for being tolerated. The heavy taxation is the “productive” venture in terms of extracting money from the vice. Instead of criminalizing smoking, where every violator is arrested and incarcerated, the violator is made to pay beforehand his penalty in the form of taxes imposed on the cigarette he smokes. (However, we cannot equate “tax” with “penalty” because there are other taxed items that are not prohibited but necessary.)
In the Philippines the tax laws on cigarettes somehow recognized that our social classes have differing capacities to be able to afford the sin commodity. For the poor, cigarettes that are classed Low are taxed at P2.72 per pack, including those packed in thirties. The Medium-priced brands are taxed at P7.56 per pack. The High-priced brands are taxed at P12.00 per pack and the Premium class at P28.30 per pack. Most of the classes are packed in twenties, although lately, perhaps to make it affordable to consumers, the cigarettes are packed in tens. The tax system mentioned ends this year, 2012. Thus there are bills in the House of Representatives proposing new tax rates, one of which is HB 5727. The new proposed law also prohibits machine packed cigarettes to be more than twenty.
However, there is the significant provision to remove the classifications among cigarettes. The entire gamut of cigarette types will be merged into one class and taxed under one rate – at P30 per pack. This concept is being pushed by the Department of Finance for ease in revenue collection as well as to increase in collection expected to reach P60 billion for both cigarettes and liquor. The Department of Health does not object to the concept even as it is for total eradication of smoking because the revenues to be collected as sin taxes are to be shared to deal with the health problems. As well, although the new tax system will truly reduce the production of cigarettes, it is not a fool-proof solution to reduce smoking. Consumption will still continue. Consumers who cannot afford the prohibitive prices will look for other means to satisfy their cravings.
Although all local cigarette manufacturers object to the new proposal, the British American Tobacco is pushing for the House bill’s approval. This company left in 2009 but hopes to reenter the field if HB 5727 is passed. It claims that the unitary tax proposal will “level the battlefield” in the Philippines which is presently being almost monopolized by the merged Philip Morris and Fortune Tobacco companies. The other small cigarette companies, namely La Suerte, the Associated Anglo American, and Mighty are engaged in the production of the lower types of brands in the market. They will be the most disadvantaged producers under the system.
If the House bill on the unitary tax is approved BAT promises to invest in the country, set up plants in some provinces and give employment. It pooh-poohs the possibility of Bocalizing the country where smuggling of cigarettes will again be one of the serious peace and order problems to be faced by the government. The contention of BAT is -- why will smugglers bring in their goods in the country since the prices of cigarettes here are supposed to be the lowest in the region? Perhaps this is true, but this situation is under the present tax system. With the new rates of taxing all types with only one rate the Low (which is increased by more than 1,000 percent) and Medium types of cigarettes become unaffordable to most of consumers. These consumers will patronize the smuggled types that are “tax-free” and of low cost. It is doubtful if the Bureau of Customs can effectively counter the smuggling issue. As of now, smuggling already exists in the Southern Philippines although still in a small scale.
The question remains: what does the government intend to pursue?
Does it want to eliminate or seriously limit the use of tobacco by Filipinos for health reasons? Surely, the measure is expected to reduce the manufacture of certain brands of cigarettes, but not the consumption by smokers.
Or does it want to eliminate monopolies by encouraging foreign investors engaged in cigarette manufacture?
If investments in cigarette manufacture are allowed and encouraged, then the government’s purpose is different – it would prefer to kill local businesses and tolerate the influx of imports. By the way, the British American Tobacco organization has a sullied reputation in dealing with governments and competition. We ought not to add to our problems by taking them in once again. It is easier to deal with a monopoly that is engaged in an unwanted but difficult industry to eradicate than allow a free market competition in the country.
It started by prohibiting advertising the merits of cigarettes. Billboards no long proclaim the “virtue” of smoking. Packs of cigarettes warn smokers of the dangers of smoking, if not by printing the physical horrors of getting various diseases such as mouth cancers, etc.
And then enclosed spaces began to have signs and notices prohibiting smoking in the premises. Eventually entire buildings became hostile areas for smokers. It is now declared that smoking is a “sin” although not in its theological sense.
Smoking is not as yet considered a crime, unless the smoke comes from a prohibited leaf, the marijuana. (Marijuana, however, has some medicinal value.)
Even as these activities are being pronounced by the government, the manufacture of cigarettes continues to be tolerated. The reality is that smoking tobacco can never be totally eradicated. There will always be smokers. In the same manner the “sin” of drinking booze can never be eradicated. The historical example of Prohibition in the United States showed the futility of criminalizing drinking. (In the Muslim countries, drinking liquor is punishable by public lashing during Fridays.)
If governments cannot eradicate a vice, they impose taxes to somehow make the vice pay for being tolerated. The heavy taxation is the “productive” venture in terms of extracting money from the vice. Instead of criminalizing smoking, where every violator is arrested and incarcerated, the violator is made to pay beforehand his penalty in the form of taxes imposed on the cigarette he smokes. (However, we cannot equate “tax” with “penalty” because there are other taxed items that are not prohibited but necessary.)
In the Philippines the tax laws on cigarettes somehow recognized that our social classes have differing capacities to be able to afford the sin commodity. For the poor, cigarettes that are classed Low are taxed at P2.72 per pack, including those packed in thirties. The Medium-priced brands are taxed at P7.56 per pack. The High-priced brands are taxed at P12.00 per pack and the Premium class at P28.30 per pack. Most of the classes are packed in twenties, although lately, perhaps to make it affordable to consumers, the cigarettes are packed in tens. The tax system mentioned ends this year, 2012. Thus there are bills in the House of Representatives proposing new tax rates, one of which is HB 5727. The new proposed law also prohibits machine packed cigarettes to be more than twenty.
However, there is the significant provision to remove the classifications among cigarettes. The entire gamut of cigarette types will be merged into one class and taxed under one rate – at P30 per pack. This concept is being pushed by the Department of Finance for ease in revenue collection as well as to increase in collection expected to reach P60 billion for both cigarettes and liquor. The Department of Health does not object to the concept even as it is for total eradication of smoking because the revenues to be collected as sin taxes are to be shared to deal with the health problems. As well, although the new tax system will truly reduce the production of cigarettes, it is not a fool-proof solution to reduce smoking. Consumption will still continue. Consumers who cannot afford the prohibitive prices will look for other means to satisfy their cravings.
Although all local cigarette manufacturers object to the new proposal, the British American Tobacco is pushing for the House bill’s approval. This company left in 2009 but hopes to reenter the field if HB 5727 is passed. It claims that the unitary tax proposal will “level the battlefield” in the Philippines which is presently being almost monopolized by the merged Philip Morris and Fortune Tobacco companies. The other small cigarette companies, namely La Suerte, the Associated Anglo American, and Mighty are engaged in the production of the lower types of brands in the market. They will be the most disadvantaged producers under the system.
If the House bill on the unitary tax is approved BAT promises to invest in the country, set up plants in some provinces and give employment. It pooh-poohs the possibility of Bocalizing the country where smuggling of cigarettes will again be one of the serious peace and order problems to be faced by the government. The contention of BAT is -- why will smugglers bring in their goods in the country since the prices of cigarettes here are supposed to be the lowest in the region? Perhaps this is true, but this situation is under the present tax system. With the new rates of taxing all types with only one rate the Low (which is increased by more than 1,000 percent) and Medium types of cigarettes become unaffordable to most of consumers. These consumers will patronize the smuggled types that are “tax-free” and of low cost. It is doubtful if the Bureau of Customs can effectively counter the smuggling issue. As of now, smuggling already exists in the Southern Philippines although still in a small scale.
The question remains: what does the government intend to pursue?
Does it want to eliminate or seriously limit the use of tobacco by Filipinos for health reasons? Surely, the measure is expected to reduce the manufacture of certain brands of cigarettes, but not the consumption by smokers.
Or does it want to eliminate monopolies by encouraging foreign investors engaged in cigarette manufacture?
If investments in cigarette manufacture are allowed and encouraged, then the government’s purpose is different – it would prefer to kill local businesses and tolerate the influx of imports. By the way, the British American Tobacco organization has a sullied reputation in dealing with governments and competition. We ought not to add to our problems by taking them in once again. It is easier to deal with a monopoly that is engaged in an unwanted but difficult industry to eradicate than allow a free market competition in the country.
posted by myvja at
1:20 AM
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