The great debate

Before diving into “sin taxes,” I can’t help wonder if Senator Ralph Recto knows something we don’t? 

Senator Recto has been pushing hard for his proposal to increase the excise tax on mining from 2 percent to 7 percent instead of what Recto alludes to as Malacanang’s plan to increase royalties on mining. Recto believes that the government will collect P3.3 billion with his proposal compared to the royalty system.

If Malacanang gives in to lobby pressure and pursues the less profitable route, Executive Secretary Ochoa should bear in mind the possibility of being charged with graft and corruption for passing an EO that is unfavorable to government. Considering the fact that a sitting Senator has submitted such a bill, it is no big leap to build a case or prove the point that opting for royalties instead of the billions that could be collected upfront via the 7 percent excise tax is highly disadvantageous to the government!

At a time when P-Noy refuses to stop collecting the VAT to ease the prices of fuel, people won’t be forgiving if Malacanang gives the mining industry such a break. Sorry but fair is fair. If you tax one, you must tax all.

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As I read up on “sin taxes” on cigarettes and alcohol, I noticed that everything on the subject talks about taxes, costs, and undue advantage. Yet no one is talking about what products do the most damage to consumers, what products bring the highest profits to the manufacturers and what the real costs are to government and taxpayers once we start with the problems created by “Sin products.”

For starters let me be clear that I am not a hardliner or some fundamentalist who wants everyone to go dry and smoke free. I would suggest it but I will respect peoples’ choice of poison as much as I recognize the concerns of business and free enterprise. 

Nonetheless, I have to point out that every time lawmakers debate issues, they always talk about money but barely recognizing public health concerns or the fact that in some instance, what they now protect is something they banned in another form.

For instance, every time you board an airplane that is registered in the Philippines, the purser or flight attendant always make the pre-departure announcement saying: “Philippine Air Safety Regulations strictly prohibit the smoking of cigarettes inside the aircraft”. In fact the same rule applies to all international flight carriers. 

Based on numerous laws, it is illegal to smoke cigarettes in enclosed areas particularly in schools, churches and hospitals. In other words lawmakers both local and national have long been convinced that cigarettes are addictive and dangerous to your health. So why are we even arguing about how much to tax a product that is addictive and is dangerous to your health?

Instead of quibbling over how much tax to impose on the different types of cigarettes, shouldn’t we work at classifying cigarettes as a dangerous drug and declare it illegal? Yes that sounds extreme, but why are they banned on aircraft? Why do governments around the world make so much effort at minimizing their use and distribution? Why do other governments tax the hell out of them? Because they are dangerous and deadly.

Here in the Philippines, I cannot not help but wonder how the entire nation and its citizens should be endangered and tax laws held hostage by a handful of Congressmen who call their group the Northern Block or the Northern Alliance so that they can promote the interest of cigarette manufacturers. Is it mere coincidence that Congressmen, governors and mayors are all financially well off with businesses such as resorts, hotels, transport companies etc. but the poor tobacco farmers are generally still poor tobacco farmers? So whose interests are really at stake as far as the proposed new taxes on cigarettes are concerned?

After decades if not a century of producing and promoting a product that kills Filipinos, isn’t it about time for the Northern Alliance to think of the national interest? What about an agricultural transformation program to convert tobacco lands to cassava, corn and livestock. The national government would be better off investing in the agricultural transformation of Ilocos and get something good out of it than spending billions of pesos caring for sick Filipinos because of cigarettes.

At least this way, we all benefit and not just a bunch of middlemen, lobbyists and a couple of multinational executives whose only motive is their compensation package.

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As far as sin taxes for alcohol is concerned, the only product I would target for higher taxes are the cheap booze with high alcohol content because these are unjustifiably too cheap, intended for people along the D & E market who tend to over indulge and where there is an increased incidence of alcoholism.

People who only earn minimum, can’t even afford to rent an actual house, don’t have any means to pay for their hospitalization and can barely make ends meet, should not have access to cheap alcohol. What has happened in the Philippines is that certain manufacturers have “dropped” their prices in order to capture a large but very poor market thereby bringing a curse upon them in exchange for profits.

Frankly, I would support the Department of Trade and Industry if they imposed a mandatory price increase for such cheap alcoholic products. This would be a win-win situation because the manufacturers earn more, poor people will drink less, the government won’t have to impose additional taxes, we reduce the incidence of below poverty alcoholism, and the government can collect more from the increased prices through VAT.

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