Anti-tobacco foreign lobby

In last week’s plenary debates on the sin tax bill, Zambales Rep. Mitos Magsaysay exposed the role of foreign-funded non-government organizations in the anti-tobacco campaign in the country.

These foreign groups, armed with hundreds of thousands of dollars in funds, could be questioned for interfering in the affairs of government in strongly pushing their anti-tobacco lobby in Congress.

Magsaysay ticked off some of the names of these groups — the Action for Economic Reforms, which secured a $255,000 anti-tobacco grant; the Ads Advantage Community Services, with a $158,405 fund; the National Center for Health Promotion, with a $369,877 grant; and the Framework Convention on Tobacco Control Alliance Philippines with a $454,565 grant. Magsaysay’s list of anti-tobacco groups with foreign funding covered eight pages. Their common aim is to push the passage of anti-tobacco legislation in the country.

They obviously succeeded because House Bill 5727, which seeks to impose higher taxes on tobacco and alcohol products, was approved on third and final reading before Congress adjourned sine die last June 7. They succeeded in getting the bill passed without any consideration for the plight of local tobacco farmers who would be displaced because of the measure’s grossly inequitable provisions against locally produced cigarettes. But they made sure the bill favored foreign cigarette brands in the form of lower taxes.

Under HB 5727, foreign imported cigarette brands are exempted from a tax hike in 2013, and get to pay only a measly P2 in excise tax per pack in 2014, while all other brands are taxed heavily, especially low-priced ones at up to 700 percent! Tobacco farmers, by the way, sell 60 percent of their produce to manufacturers of low-priced cigarettes.

Magsaysay correctly pointed out that the bill favors new entrants who have not invested in a single tobacco leaf here to the detriment of established industry players that have chosen to stay and help develop the local tobacco industry. These established players have helped and are continuing to help local tobacco farmers improve and increase their produce by providing them financial and technical aid. But what do they get in return?

Magsaysay also exposed the lopsided provisions of the bill, which pro-administration lawmakers brand as a “compromise measure.” This term is inaccurate because no compromise was given for low-priced cigarettes, which will shoulder the bulk of the tax burden, while premium brands and alcohol products get to enjoy low tax rates.

Magsaysay observed that under the current system, the excise tax collections from cigarettes in 2009 reached P23.8 billion, while alcohol’s share was P20.6 billion. The collections increased to P31.6 billion for cigarettes and P21.5 billion for alcohol in 2010. Last year, revenues from cigarette taxes amounted to P25.49 billion, while alcohol’s share reached P22.7 billion. The congresswoman made Rep. Isidro Ungab, the chairman of the House Ways and Means committee and sponsor of the bill, recite these figures to show that the tax collections from alcohol and tobacco were more or less level under the current system. In short, alcohol and tobacco equally share the excise tax burden.

But under HB 5727, Magsaysay noted that tobacco will have to cough up nearly 80 percent of the collections that the government expects from excise taxes. The Department of Finance expects excise tax collections from cigarettes at P26.8 billion, with alcohol contributing only P4.48 billion.

Thus, it does not surprise us that the Nationalist People’s Coalition of Danding Cojuangco readily expressed its support behind the final version of the bill. Beer products currently paying P15.49 in the medium tier and P20.57 in the high tier will enjoy reductions in tax upon the passage of the bill until 2017, after which they will be imposed minimal increases of eight percent every two years until year 2025 under HB 5727.

On the other hand, low-priced beer products which are currently taxed P10.41 would get a 32 percent increase starting 2013 equivalent to P13.75 and an additional eight percent tax increase in 2015 and 2017. The rate is even less than the present tax imposed on beer.

The truth is no one can competently explain why the government wants to punish local makers of low-priced cigarettes while favoring importers of foreign brands and beer manufacturers. The proponents and supporters of the bill cannot even explain how they expect to raise P33 billion from the restructured excise tax system and how they would address the certainty of rampant cigarette smuggling once this high tax regime is implemented.

The right move

We have just come across this great news that Transportation and Communication Secretary Mar Roxas has suspended an order that awarded 489 choice provincial bus franchises to companies owned by a single bus-owning family in Luzon , an unprecedented award which had been described as “illegal, hasty and brazen” and a direct assault on the integrity program of the Aquino administration.

The suspension will freeze all action on the award, including the efforts of the five awardees – all companies owned by the Hernandez family – to register, then run, buses using the 489 franchises .

Roxas said he will review the legality of the award made by the Land Transport Franchising and Regulatory Board (LTFRB) that covered 489 choice lines of a long-defunct bus company, the Pantranco North Express Inc. , which went under in the late 80s.

The awardees of the suspended franchises are Pangasinan Five Star, Bataan Transit, Victory Liner, Cisco Lines and First North Luzon, all owned by members of the Hernandez family, the largest and most dominant bus operator in the Luzon area. Five Star, Victory and Bataan Transit, ironically, were once hard-core opponents of the revival of the Pantranco lines.

The wholesale award was made by the LTFRB on May 21 2012, only a few months after informing Agham Party List Rep. Angelo Palmones, who inquired on the status of the franchises, that the lines had long expired and that the DOTC and the LTFRB had consistently ruled that the franchises had been declared legally dead since 1993 .

Palmones is leading a parallel inquiry at the House of Representatives on the franchise grant, shocked as he was, he said, over the hastiness of the award, and the LTFRB’s sudden turn-around from 20 years of established rulings.

Many are hoping that the DOTC and Secretary Roxas will continue to do the right thing by completely canceling the award of the Pantranco franchises. The award makes a mockery of the country’s public service and transportation laws, rules, and practices, as well as President Aquino’s anti-corruption drive.

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