Economist Winnie Monsod debunks claims of anti-sin tax advocates

Amid deliberations in the Senate on the sin tax bill, economist and educator Solita “Winnie” Monsod called for an end to what she labeled as exaggerated claims by the tobacco industry and debunked fallacies being propagated against the measure.   During a forum in Quezon City on Tuesday – organized by the Action for Economic Reforms – Monsod challenged from an economic perspective what the tobacco industry have been claiming in their fights against the sin tax bill.   "It is so clear that there are so much exaggerations that are going on at dapat alisin na ang mga 'yan," she said.   The objective function of the tobacco industry is to maximize profits, according to the economics professor at University of the Philippines in Diliman, saying that is why she wants to set the record straight.   The claim that the Philippine economy benefits from the tobacco industry is a fallacy, said Monsod.   While the country receives an economic benefit of P103.8 billion from the tobacco industry, it is overshadowed by its economic costs – pegged at around P188 billion, Monsod noted in a Power Point presentation.   The economic cost covers healthcare, foregone income on account of sickness and premature deaths as a result of diseases acquired through smoking.   The economic benefit, minus the economic cost, equals a net deficit of P85 billion – that, Monsod said, is an understatement.   That government would lose money, because the tobacco industry will die, was another point Monsod challenged. The increase in cigarette prices – as a result of higher tax once the measure is signed into law – will not shrink the revenues of tobacco companies, Monsod noted. “All the studies – without question – show that because of the inelasticity of demand that when you raise the price, total revenue will go up because there are addicted consumers. It’s as simple as that,” she said.   "In no country in the world with even greater excise tax proportion to retail price has revenues decreased," she added.   Cigarette prices in the country are not that high to begin with, Monsod noted, that some people will still buy them. "Hindi malakas ang sipa ng presyo" should the excise taxes be applied, she said.   She challenged the claim that farmers and retailers would lose their livelihood and questioned industry data presented by anti-six tax proponents during the second Senate hearing on the proposed measure.   In that presentation, the Philippine Tobacco Institute pegged the number of tobacco farmers in the country at 840,146 compared with Bureau of Agricultural Statistics data showing 32,235 hectares of land specifically for tobacco farming.   "If we divided the 840,000 with the 32,000 hectares, that means there are 26 farmers per hectare. Doesn’t that sound ridiculous to you?” she said.   The bureau said that in 2011 the annual income per hectare was P85,000. Monsod said that amount over the supposed 26 farmers per hectare will yield the amount of only P3,269.23.   "How can anybody survive with P3,200 a year from farming?" she said.   "I am only using their data to show napaka-ridiculous naman," she added.   Monsod labeled as false the claim that a tax increase which the sin tax bill proposes will intensify smuggling. She presented data that concluded there were no relationships between price and illicit trade.   "It's so easy to make an assertion: you increase those taxes, and there's going to be smuggling… So wala ka ring taxes makukuha,'" Monsod said.   She supports the sin tax bill because it will support public welfare.   "Ano exactly ang issue dito? Usually, ang desisyon ng ating decision-makers is supposed to maximize social welfare, maximize the well-being of the public," Monsod said.   The passage of the sin tax bill is the only win-win situation, according to the UP professor.   The House of Representatives approved HB 5727 – its version of the sin tax bill – in June, which indicated P31.35 billion in additional revenues in the first year of a unitary tax rate. Almost 90 percent of those revenues will go to government healthcare services. — VS, GMA News