SCHIZOPHRENIC USE OF TOBACCO FUNDS

Bongbong Marcos is opposed to the tobacco tax reform, while his sister is being grilled for allegedly misusing the sin tax revenue devoted for farmers he professes to protect.

The probe on Ilocos Norte Governor Imee Marcos’s alleged misuse of tobacco funds for projects unaligned with the intended purpose of Republic Act (RA) 7171 to earmark a share of tobacco excise tax for tobacco farmers (e.g. purchase of vehicles worth P66.4 million and cash advances worth P32 million) demands close attention. Setting aside the issue being a political spectacle, we see this as a timely opportunity to assess the earmarking of tobacco tax for the tobacco-growing local government units (LGUs).

The 1991 RA 7171 allocates a portion of cigarette excise taxes to support tobacco farmers through post-harvest, secondary processing activities, and infrastructure projects such as farm-to-market roads. This was perhaps a response to the declining volume of production and number of farmers in the 1990s. But one cannot discount the motivation of politicians like Chavit Singson to introduce a hard earmarking that economists deem inefficient: largesse.

Data from the Bureau of Agricultural Statistics, however, show that the downward trend for volume of production and number of farmers continued even with the enactment of RA 7171. Thus, although not directly amending RA 7171, the sin tax law (RA 10351) widened the scope of the use of tobacco funds to also cover support for viable alternative livelihoods.

With farmers still planting tobacco among the poorest in the country even after over 20 years of earmarking — an average total of P4 billion a year, equivalent to over P100,000 per year for each of the estimated 37,000 farmers in the Ilocos region — it is crucial to ask how LGUs, which are in the exact position to uplift farmers’ welfare, have fulfilled (or blocked, contradicted) such duty.

Unfortunately, politicians from tobacco- growing areas are exposed to two forms of corruption: being captured by the tobacco industry and/or misusing tobacco funds for their personal benefit.

The tobacco lobby in the Philippines, the biggest in Asia ( Alechnowiz, 2004), desires to capture those politicians who can serve its interests. The lobby resists taxes and tobacco control. The tobacco lobby spreads the propaganda that cigarette tax reforms lead to massive unemployment of tobacco farmers, despite the fact that nine out of 10 of these farmers actually do not depend solely on tobacco but on diversified sources. The main consideration of those who choose to plant tobacco is not any inherent “joy” for tobacco farming, but the presence of loan availability from the tobacco industry, which LGUs however can be of assistance for any crop.

In addition, corrupting the earmarked tobacco funds has become common. The Commission on Audit ( CoA) annual reports show that violations on the use of RA 7171 were committed, for instance in 2006, 2007, 2012, and 2013 in Ilocos Sur, and in 2012 in Abra. Although the CoA includes RA 7171 in its annual audit of LGUs, the standards assessing the supposed welfare improvements from the funded programs and projects are lacking. Over 85% of the funds go to easily politicized infrastructure projects like sheds and roads, but how such projects meet criteria on effectiveness and efficiency in improving farmers’ welfare is left unexplained.

Supporting cigarette tax rate increase is in fact a desirable action for politicians. Their LGUs reap billions from taxes levied on final products (cigarettes), despite the fact that around 70% of the local leaf production volume gets exported. In 2015, the value of local non-exported production of tobacco leaves was at P15.6 billion, and the government generated P100 billion in cigarette taxes that year.