Smuggling, sin tax, and piracy (from DVDs to cigarettes?)

There is some confusion in the Senate as to whether or not the sin tax bill will affect the cost of imported cigarettes, or if the tax adjustments the bill seeks to institute will be limited to local brands; taxing foreign brands, some say, might be covered by certain stipulations in the GATT-WTO. The Philippines is a signatory to the World Trade Organization’s GATT (or General Agreement on Tariffs and Trade) signed in 1994.

Whatever the case may be, according to some friends of mine who know Cebu’s notorious smugglers, these contraband kings are apparently rooting for the passage of the sin tax bill –and for them, the higher the tax imposed, the better. Makes a lot of sense: when cigarettes are ridiculously overpriced, contraband ones, cheaper alternatives, will soon find their way to our streets, peddled and priced like the ones we have now (similarly, it’s evident that more people buy pirated DVDs than pricey originals in AstroVision or Odyssey). 

It’s also absurd how legislators say that the sin tax is supposed to earn more revenues whilst discouraging the public from smoking. But isn’t the statement self-contradicting? It has to be one or the other, it cannot be both. If you successfully discourage the public from smoking, they won’t buy cigarettes; if they don’t buy cigarettes, you won’t raise more revenues. Conversely, if you raise revenues, it means people still buy cigarettes; if people buy cigarettes, you’ve failed to discourage them. 

Back to smuggling. It appears that smuggling is at its worst under Aquino. The annual average of smuggling estimates (in $ billions) comparing three presidents (Estrada, Arroyo, Aquino) based on IMF’s Direction of Trade Statistics has these figures to show: Estrada’s was 3.1 billion; Arroyo’s (throughout her close to 10-year rule) was a comparable 3.8 billion; and Aquino’s? A staggering $ 19.6 billion!

Comparing the first 24 months of PGMA and Aquino, smuggling estimates in $ billions, from China: Arroyo’s 2.0 billion, as opposed to Aquino’s 15.2 billion. Japan, Arroyo’s 1.1 billion versus Aquino’s 7.3 billion (China and Japan, of all countries in the smuggling index, usually tally the largest value of contraband goods shipped illegally to the Philippines).

According to Inquirer columnist Rigoberto Tiglao, “In Mr. Aquino’s first two years in office, the value of smuggling totaled $ 39.2 billion, more than the $ 35.6 billion during Arroyo’s nine years in office.” This  $39.3 billion represents 327 billion pesos of uncollected revenues, 207 billion of which is VAT, and 120 billion pesos of uncollected customs dues, all in all accounting for 12 percent of the state’s total revenues. ‘Tuwid na Daan’ my foot! Better than Arroyo my ass! 

With horrific smuggling figures like ours, there is a good chance that if and when the sin tax bill is passed into law, the smugglers will be ready, willing, eager and able to fill the void. They will supply the need of every nicotine-addicted Filipino with their cheap contraband cigarettes from God knows where and this government’s Customs won’t be able to do anything to stop them. Heck, they’d even make sure they earn their fair share from the institutionalized business of corruption.

So people will still smoke, they will still be unhealthy, and in the meantime, we lose more revenues because Filipinos will surely patronize the cheapest cigarettes they can get. Who earns in this equation? The smugglers, their networks, and the corrupt people in Customs and the higher-ups who protect them, maintaining a symbiotic and extremely profitable relationship among lowlifes.  

Why am I not very optimistic? Apart from the smuggling figures that make you instantaneously blurt “que horror!” –it’s because I am not like most people who buy this mediocre Yellow crap shoved down people’s throats.

Case in point: we have a president who goes out on a limb to defend the actions of his senior political adviser, Ronald Llamas of his most-favored Akbayan, a cabinet-rank secretary of his most worshipped administration, when said cabinet secretary is caught buying pirated DVDs. And the presidential defense? “Pirated DVDs are not my priority.” Never mind that the government loses hundreds of millions in taxes each year due to piracy; yes, never mind that, because it’s only Gloria he’s after, Gloria who fared far, far better than him in the IMF’s smuggling index.

What’s his presidential defense next? “Pirated cigarettes” are not my priority? I won’t be surprised if next time the president himself is caught buying and smoking “pirated cigarettes,” the smoker and the ‘jolog’ that he is. Hay ambot.