5 false economic claims on sin tax, according to Winnie Monsod
MANILA, Philippines - The tobacco industry players are perpetuating 5 lies about the impact of the proposed sin tax measure on the Philippine economy.
This was the message of economist and former Economic Planning Secretary Solita Collas-Monsod at a forum on Tuesday, September 18.
These lies are used to lobby against the passage of the legislative measure, she said at the Quezon City event organized by groups pushing for the passage of unitary sin tax measure.
In an obvious tirade against Senator Ralph Recto -- chairman of the Senate committee hearing the proposal -- Monsod lamented how "irresponsible statements" are allowed, including a claim that Recto made himself in one committee hearing in August.
"I'm very very disturbed by the irresponsible statements are made. For example: 'We might lose even the P75-billion if we increase the tax'? That is totally baseless," Monsod said.
Recto's statement was: “We need to be responsible because we might even end up losing the P75-billion revenues from sin taxes." He also said that the Department of Finance claims on the projected revenues that the government can collect after the Sin Tax measure is passed are too high.
"That to me is a bogeyman tactic. I do not appreciate it. I do not appreciate it even more from someone who claims to have an economics background," Monsod added.
Here are the top 5 false claims that the industry is supposedly spreading:
1. Tax increase will intensify smuggling
Presenting statistics in various Asian countries, Monsod showed that there's no relation between increase in excise tax on cigarettes and illicit trade.
Countries where cigarettes are most expensive -- Japan, New Zealand, Singapore, and Australia -- have the lowest incidence of illicit smuggling.
"There's no relationship," said Monsod.
2. Sin tax is inequitable
Critics of the Sin Tax measure argue that it's the poor that will bear the most proportion of the tax. Implenting a unitary sin tax, based on the original version of the legislative proposal, means the same tax will be imposed on cheap and high-end cigarette brands.
In the Philippines, the biggest proportion of smokers also come from the poor.
Monsod said it's not an issue. "We are not taxing a good. We are taxing a bad. The proportion of smokers is higher among the poor. Who buys the most? The poor. And they are the ones suffering [health-wise]. Do not use problem of inequity because precisely we want to stop the poor from smoking. They're spending so much buying cigarettes. They cannot afford the cost of medication," said Monsod.
3. Farmers, retailers to lose livelihood
Monsod questioned the statistics of the Philippine Tobacco Institute (PTI) that a total of 840,146 people are employed in tobacco farming. With 32,325 hectares of farmland, that would mean there are 26 tobacco farmers and helpers per hectare.
"Does that sound right to you? And yet, this was accepted without demur by our legislators. Nonsense. There are 52,000 farmers based on National Tobacco Administration data," said Monsod.
If the annual income per hectare is P80,000, it means that the annual income of a tobacco farmer is P3,269, Monsod's data show.
"I am only using their data to show that their numbers are ridiculous... How can anybody survive with P3,000 a year," Monsod added.
Another argument against the Sin Tax measure claims retailers will suffer from loss of sales from cigarettes. Monsod said retailers will likely keep their profits from cigarette sales because the demand for the product is inelastic. And even if they lose sales from cigarettes, Monsod said it shouldn't be a problem.
"If people stop buying cigarettes, you think they're not going to buy anything else? Cigarettes loss will be milk's gain or rice's gain," she said.
4. Tobacco industry will die and gov't will lose money
All studies show the contrary, Monsod said. Price increase, she said, will not decrease sales because demand for cigarettes is inelastic.
Price increase will not deter smokers, said Monsod, because smokers are already "addicted." They will continue to buy cigarettes, she said.
"If you have diabetes and insulin increased by 300%, you are still going to buy insulin," she explained.
5. Negative net economic benefits
Based on Monsod's presentation, the annual gross revenue from cigarette sales is P103 billion but its cost to health is P188 billion. Monsod said that is a net cost of P85 billion.
'Even if the revenues were there, you will still say 'Remove Tobacco,' she added.
It's important that Congress passes a unitary sin tax, Monsod added.
"A unitary tax is absolutely imperative. If it is not unitary, what you are essentially doing is, you are throwing the poor to the dogs. Let them die. You are allowing them to kill themselves cheaper," Monsod said.
Most, if not all, countries like the U.S. and Great Britain have adopted a unitary tax, she added.
The House of Representatives in June passed on third and final reading a two-tier excise tax structure for tobacco products and 3-tier for alcohol. The diluted measure reduces projected revenues from P60 billion a year to P30 billion a year. - Rappler.com
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