WHO charges PHL major source of smuggled cigarettes overseas
Cigarette companies in the Philippines are producing so much more than what the country consumes, leading to suspicions that the excess cigarettes are being smuggled overseas, according to a World Health Organization official.
Dr. Aida Yurekli, coordinator of the WHO's Tobacco-Free Initiative, says the nation's low taxes on tobacco drive the foreign demand for cigarette contraband from the Philippines.
Philippine cigarettes are among the cheapest in the world, primarily because of relatively low tobacco taxes. Many other countries heavily tax cigarettes as a public health policy. The Philippines, however, is close to passing new "sin taxes" that will substantially increase the cost of cigarettes.
"They pay (low) local taxes then they smuggle out," Yurekli says of buyers of Philippine cigarettes for foreign markets, adding that the practice has long been observed in countries like Russia and Ukraine. "We have reports that smuggled cigarettes in Southeast Asian countries originate from the Philippines. I didn't believe that before—China is the usual main source—but once I compared, I found there was a huge difference."
The Philippine tobacco industry is expected to churn out 5.4 billion packs of cigarettes this year for a market that only consumes about 3.5 billion packs annually, according to a WHO survey, leaving an excess of almost 2 billion packs of cigarettes.
"Who's gonna smoke all these if the market is for 3.5 billion (packs)? Why are they producing so much? How much are they going to produce next year and is this [overproduction] because of the tax increase... This needs to be investigated carefully," asks Yurekli.
She suspects that the tobacco industry is overproducing tobacco products now to take advantage of the lower taxes before the Abaya sin taxes bill pending in Congress gets enacted into law. "They do the frontloading before tax increases takes place so they can pay less taxes for at least a year or so," she said.
Yurekli says the WHO began to observe such an overproduction, or "frontloading," of cigarettes as early as 2009 through a survey that the organization conducted in the Philippines. That year, cigarette consumption was placed at about 3.2 billion packs of smoked cigarettes based on the survey respondents' declaration of tobacacco consumption level.
That same year, however, the government tobacco taxes, one of the so-called "sin taxes," accounted for about 4 billion cigarette packs.
"That's an 800 million-pack difference!" Yurekli said. "In other countries, what we find is that consumption is usually higher and tax paid is less... meaning there are smuggled [cigarette products]," she said in an interview with GMA News Online.
"But here in the Philippines, they smoke less but taxes account for more," Yurekli added.
Sin tax bill promises to cut cigarette consumption
The WHO believes higher tobacco taxes will reduce demand not only for locally consumed cigarettes but for cigarettes smuggled overseas.
That is why the WHO organization has been backing House Bill 5727, an amended excise tax reform measure authored by Cavite Rep. Joseph Emilio Abaya which simplifies the excise tax system and indexes the taxes against annual inflation, through a two-tier tax system. The bill passed the House of Representatives in May.
The government has said the bill promises to provide the government with an additional P33 billion in revenues. But more than the revenues, Yurekli said passage of the bill into law could cut cigarette consumption in the Philippines in half in the next five years. The country currently has about 17 million smokers, she said.
"These are the most important major public health impacts of the amended Abaya bill. It is very revenue-friendly as well as public health-friendly," Yurekli said. — BM/HS, GMA News
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