Reframing the sin tax debate
CIRCULATING with speed and frequency is the news and the accolades of the record approval of the House bill seeking a return to the two-tier tax system for cigarettes instead of the unitary rate, which just commenced this January.
The full transition to a single rate was the biggest feature of the Sin Tax Law passed in 2012, which was approved by both houses of Congress.
In 2011, lawmakers and government regulators were bullish on the superiority of the unitary rate as the panacea to smoking while earning some serious dough for the government.
Now, the Lower House seemed to have a change of heart as reflected by their overwhelming approval of House Bill 4144, which keeps the two-tier rate while dishing the law-mandated single rate for cigarettes.
The bill proponents and its supporters argue that a unitary rate will only favor big tobacco companies and will undermine local tobacco players affecting tobacco farmers.
They argued that it would be unfair to tax low-priced cigarettes with the same single tax on high-priced cigarettes sold by big tobacco companies.
They are also afraid that with a single tax rate, multinational tobacco firms would only sell premium cigarettes and stop sourcing local tobacco leaves.
A two-tier tax system will protect small tobacco players and, by extension, the local farmers since a different and a lower tax rate would be slapped on them.
I’m all for legislation that would stop a vice and earn much needed revenues for government.
I also have no quarrel with the methods proposed by our legislators to curb smoking while protecting our local farmers.
My concern only is that when we say that a two-tier tax system will safeguard the well-being of local tobacco farmers, we might end up shortchanging them in the end.
For one, official government data do not support this as data released by the National Tobacco Administration would show that tobacco leaves volumes and its revenue value dropped when the transitory 2-tier system for cigarettes began to take effect.
Volumes or production of local tobacco leaves fell from 73.8 million kilograms in 2010 to 51.1 M kg in 2015.