Looking for another win in sin tax administration
BIZLINKS - Rey Gamboa (The Philippine Star) - May 20, 2014 - 12:00am

The government is keenly anticipating fresh discussions that will tighten the noose on laws that affect tobacco use in the Philippines. This time, the battleground will be on just how much space should be given to picture-based warnings on the face of tobacco packaging.

By way of background information, the Department of Health estimates that 87,000 Filipinos will die yearly because of cigarette smoking. This translates to 10 Filipinos dying every hour from cigarette-smoking related illnesses such as diabetes, hypertension, obesity, and high cholesterol.

Worse, the study points out that one out of two Filipinos who smoke will die earlier than the average life expectancy. Furthermore, cigarette smoking translates to about P188 billion in terms of health care expenses and productivity losses every year.

Studies have also indicated that there are now over 17 million Filipinos who still smoke, accounting for the production and sales of over four billion packs of cigarettes in our country annually. This translates to a consumption of 10.7 sticks of cigarettes per day on the average for every smoker.

Thus, the Philippines now ranks as one of the countries in the Western Pacific region with a high smoking incidence, where 31 percent or approximately 25 million individuals have smoked in the past or are currently smoking.

In a 2009 study of the Philippine Global Adult Tobacco Survey (GATS), more than 17 million of the population aged 15 years and above are currently still tobacco smokers.

Revenue objectives achieved, shifting objectives to health

With the full support of President Aquino, the passage of the sin tax reform law in the ending days of 2012 signalled the shift of governance regulation measures from being purely economic “revenue-enhancing” to one that prioritized the health of the nation.

Amidst protests by the private sector that the proposed reform measure increasing taxes on sin products, i.e., tobacco, liquor and spirits, would most probably dampen revenue collections and consequently negate any revenue enhancing objective, lawmakers led by Senator Frank Drilon in the Senate and Rep. Isidro Ungab of the Ways and Means at the House, went ahead and passed the reform bill which was eventually signed into law by P-Noy.

Thus, when the first year figures came out, those who boldly voted to pass the reforms in the sin tax law were elated by the substantive increase in revenue collection from the new sin taxes even if it was still too early to see any noticeable trend in reduced cigarette or alcohol demand.

The 2013 report showed an incremental revenue increase from sin products of 51.5 percent, with 42.14 percent coming from tobacco, and the remaining from alcohol, or an annual actual collection of P51.44 billion against the projected revenue earning of P33.96 billion.

For the economy, this represented an actual incremental revenue rise of 0.45 percent, with 0.36 percent coming from tobacco and the remaining from liquor and spirits.

Full force to achieving health objectives

With early farming data on domestic tobacco of all varieties still pointing to a production output increase of 11.18 percent for the first six months, from 47.48 thousand metric tons in the same period in 2012, to 52.79 thousand metric tons in 2013, the government will be pushing hard for more noticeable warnings against tobacco smoking.

This is to ensure that in the coming years, actual smoking statistics will be significantly reduced by the higher tax rates. At the same time, the increased tax collections will contribute to shoring up public health spending for illnesses related to use of sin products.

Several versions proposing picture-based warnings on cigarette packs have been filed in Congress ranging from 30- to 85-percent of the principal display surface of the packages.

Picture-based warnings are seen as more effective in dissuading existing and prospective smokers from continuing or starting, respectively, the habit. At the moment, there is still no law in the Philippines that calls for such picture-based warnings on cigarette packs for retailing.

However, since the Philippines is a signatory to the World Health Organization Framework Convention on Tobacco Control which requires the passage of a law requiring graphic health warnings on cigarette packs, Congress has started the process to legislate these much needed graphic warnings.

The usual oppositors

According to the grapevine, and to be expected, there are already early protests from the unholy alliance of Philip Morris and Fortune Tobacco, still the biggest player in the country controlling more than 70 percent of the industry.

It has first and foremost tried to delay the implementation of picture warnings by questioning a 2010 order by the Department of Health to put graphic health warnings on cigarette packs. The court subsequently issued a temporary restraining order issued against the DOH directive.

This time, faced with a more formidable government body, the Philip Morris-Fortune Tobacco monopoly is batting for an 18-month delay in the implementation of a possible law. And it is also arguing for the minimum face area of 30 percent for any illustrations on the front of the packages.

Senate President Franklin Drilon, one of the staunchest supporters of tougher laws against smoking, is currently consolidating the many bills that have been introduced. He has vowed to see a formidable law passed within the next two years, or before the next presidential elections.

Currently, eight out of 10 member states of the ASEAN require pictorial health warnings with varying face area percentage. Brunei requires 75 percent; Thailand at 55 percent; Malaysia, Vietnam, and Singapore at 50 percent; Indonesia at 40 percent; and Cambodia and Laos at 30 percent.

Among the biggest health warning face area percentages imposed are those of Uruguay and Sri Lanka with 80 percent, and Australia at 90 pecent at the back and 75 percent in front (Plain Packaging Act).

According to Southeast Asia Tobacco Control Alliance, of all the countries that have pictorial warnings, not a single country has reported that their tobacco farmers lost jobs.

Let’s have those graphic warnings sooner than later for the sake of millions of Filipinos of current and future generations. 

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.


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