By Reicelene Joy N. Ignacio, May 19 2019; Business World

Image Credit to Business World

THE PROPOSED INCREASE in sin tax from the current P35 to P60 per pack is intended to “kill” the Philippine cigarette industry, according to Finance Secretary Carlos G. Dominguez III.

“That’s what we want, to kill it…There will be a lot of other revenue sources. Besides, our economy is growing, so we will be able to fund it.” Mr. Dominguez told reporters in an ambush interview on Friday.

“You want to make it so that the increase in price will be bigger than the increase in income. Because what happens now is the increase in the income of people overtook ’yung maliit naincrease (the small increase) from P30 to P32 to P35. Kayang kaya na nila ’yun kasi ’yung increase nila ng income is also high (They can handle that because the increase in income is also high),” Mr. Dominguez said.

Mr. Dominguez said that tobacco farmers should not be planting crops that are bad for health, noting that land planted to tobacco is also good for other crops.

“If you’re not producing a good product you should not do it. …It’s actually good land. It can be used for many other things — corn, sorghum, fruit trees — those are better products,” Mr. Dominguez said.

According to Mr. Dominguez, the Department of Finance (DoF) will work with the top tobacco-producing regions to allot funds for crop diversification.

“We will work with the four tobacco-producing provincial local government units (LGUs) who collectively receive about P15 billion annually as their share of the tobacco tax, to allocate funds for crop diversification,” Mr. Dominguez said in a mobile message to reporters on Saturday.

The DoF and the Department of Health, together with Senator Emmanuel D. Pacquiao, launched a campaign against the use of cigarettes, by increasing the sin tax which will be used to fund Universal Health Care (UHC), which will require an estimate of P1.44 trillion combined from 2020 to 2024.

Mr. Pacquiao wrote Senate Bill 1599 which seeks to raise the sin tax to P60 per cigarette pack in the first year of implementation and an additional 9% per year thereafter.

Early this month, LT Group, Inc (LTG) President and Chief Operating Officer Michael G. Tan, said that “the hikes should be moderate” on cigarettes. LTG is the parent company of Fortune Tobacco Corp.

PMFTC, Inc, a leading cigarette firm in the country, is a joint venture between Philip Morris Manufacturing, Inc and Fortune Tobacco Corp.

“The tobacco business will remain as the main source of LTG’s earnings. PMFTC will continue to be vigilant in the fight against illicit trade and continue to work with the government,” Mr. Tan said.

Asked to comment, JTI Philippines, Inc Managing Director Manos Koukourakis said that before implementing a tax hike, the government should consider the farmers, retailers, employees, and individuals who indirectly work for the tobacco industry, suppliers, and all those who benefit from the income generated by tobacco consumption.

“All of them will be negatively affected by a tax hike. The smugglers though will benefit because the higher the tax, the higher the benefit due to tax avoidance,” Mr. Koukourakis said.

Meanwhile, Mr. Dominguez said that the government has yet to review whether to regulate heat-not-burn tobacco products which LTG hopes to sell in the country.

“At the moment, there are very few regulations regulating the importations of these products so we are going to review it to see if in fact they are enough to keep them out or to start regulating them. That’s why the DoF and the DoH really have to study this because there is a lot of science we have to understand,” Mr. Dominguez said. — Reicelene Joy N. Ignacio