Calling a spade
Business World , 21 November 2012


I have yet to see the estimates of the revenue impact of the “sin” tax bill (SB 3299 ) passed on third reading Tuesday night. But it stands to reason that compared to the original (Drilon) proposal, the lower-than-envisioned tax rates will result not only in a corresponding lower-than-envisioned revenue stream to the government (the original proposal was a unitary rate of ₱32 per pack by 2016 versus the approved ₱26 per pack by 2017) but also a related lower-than-envisioned reduction in cigarette/consumption, resulting in more smoking-related deaths — something like 2,500 more deaths per year for every peso reduction in excise tax from the original unitary rate of ₱32 per pack, which means roughly 15,000 more deaths. That is not all: Every peso reduction from the ₱32 per pack excise tax reduces the number of quitters by 85,000 — which means that 510,000 less people will quit smoking at a tax rate of ₱26 per pack.

Those who were responsible for the watering down of the Drilon proposal were trumpeting, during the Senate proceedings, that they were doing it to help the tobacco farmers. If that is the case, then the implication has to be that the general interest — the interests of 95 million Filipino people — took second place to the supposed interests of 50,000 tobacco farmers.

But that is not the case. Because if the interests of the tobacco farmers were really of primary importance to the legislators, they would actually be pushing for the bill rather than trying to water it down. Why?

UP’s Dr. Tony Dans, using data from national health surveys, shows that smoking prevalence of women and boys in tobacco country (Regions 1, 2, CAR) are significantly higher than in the rest of the Philippines. Moreover, deaths from cancer, heart disease and stroke in tobacco country are also significantly higher.

We’re talking here about 116.4 and 69.9 deaths per 100,000 population from heart disease and stroke respectively in tobacco country vs. 97.9 and 58.3 deaths in Regions 3, 5, 7, 8, 9, 11, 12, ARMM and Caraga; and 101.2 and 59 deaths in Regions 4B, 6 and 10. The differences in death rates are significant at the .001 level.

With respect to cancer, the death rates in tobacco country are 35.9 and 11.8 per 100,000 population for malignant neoplasms and respiratory neoplasms. Compare this to 30.0 and 7.2 deaths for the nine regions named above; and 33.4 and 8.0 for Regions 4B, 6 and 10. Again, The differences in death rates are significant at the .001 level.

In other words, pushing for a strong sin tax bill would save the lives of tobacco farmers and their families.

From the financial point of view, this column has previously pointed out that a survey conducted by a UP team of researchers found that farmers actually preferred to plant non-tobacco crops, because not only do the latter require less labor hours, but the farmers get a higher net income per hectare.

The Philippine Tobacco Institute (PTI) itself, albeit unwittingly, bolstered this finding when it claimed that there were a total of 840,416 farmers, workers and dependents involved in tobacco production. Further on in its presentation, before the Recto committee, it also asserted that the average annual income per hectare of tobacco was ₱85,000 (2011). At the same time, the Bureau of Agriculture Statistics data show that overall, 32,235 hectares are planted to tobacco. So do the math. That means that about 26 people live and/or work off each hectare of tobacco land. Given that ₱85,000 figure cited as average income per hectare, that means that the annual per capita income implied is ₱3,269. Compare this with the food poverty threshold of ₱11,686 per capita and the income poverty threshold of ₱16,841 per capita (2009). This means that if the PTI figures are accurate, the tobacco farmers and families should all have starved to death by now, because their per capita income is less than one-third of what is needed just to eat.

Which is of course ridiculous, but that’s what the PTI figures lead to. Another ridiculous offshoot of the PTI figures would be that tobacco farmers and farm workers (based on the National Tobacco Administration estimate that each hectare of tobacco farm land would be worked by one farmer and one farm worker), have 11 children on the average (26 people per hectare consisting of the farmer and the farm worker, their respective wives, and 22 children).

In any case, the point is that if indeed this is the “plight of the tobacco farmers,” then the obvious conclusion is that they should be encouraged to seek alternative, more lucrative livelihoods, and provide them with safety nets in the process — which is exactly what the “Sin” Tax Bill does. So anyone who has the best interests of the tobacco farmers at heart would be pushing tirelessly for the bill.

But instead, they oppose it — or tried to water it down to meaninglessness. So if they do not have the best interests of the tobacco farmers at heart, just using the latter as a cover, whose best interests do they have at heart and are pursuing?

It is as plain as the nose on one’s face: the manufacturers of tobacco products — the tobacco lobby. And anyone who still entertains doubts on that can just look at the pictures taken of the people feeding Senator Bongbong Marcos the information he needed when he was on the Senate floor arguing against the “Sin” Tax Bill. It was a dead giveaway: the people are connected to Philip Morris Fortune Tobacco Corp. (PMFTC).

It is the height of irony that Senator Marcos, presumably advancing the cause of the tobacco farmers, is being helped by the same group who seem to be exercising monopsony power over these farmers — paying them less than what is paid for the same quality tobacco imported from China. It also has not escaped notice that after the merger of Philip Morris and Fortune tobacco, thus creating an entity which controls 95% of the market,the price received by farmers for their raw tobacco decreased from ₱95 per kilo to ₱73 per kilogram.

If it is any consolation, Filipino tobacco farmers are not alone: “Time and again farmers in Mexico have been given a stipend and bused into Mexico City by the tobacco industry to protest against proposed tobacco control measures that the industry claims would threaten farmer’s livelihoods. In reality, the unfavorable conditions for tobacco farmers in Mexico has more to do with international tobacco company strategies and not with tobacco control policies designed to protect public health.”

The bottom line therefore is that any watering down of the “Sin” Tax Bill is because the interests of the Filipinos are being subordinated to the interests of the tobacco lobby. These legislators from tobacco-producing regions are not protecting their constituents. They are selling them down the river.