Bongbong: Higher sin taxes may increase smuggling incidents in PHL

Senator Bongbong Marcos on Wednesday expressed concern that higher excise taxes on tobacco products may increase incidents of smuggling in the Philippines, noting cases in Malaysia, Brunei and New York.   "If we are going to increases taxes, there will be a greater motivation for certain quarters to start smuggling cigarettes, and this will cause all kinds of problems," Marcos said during the period of interpellation on the controversial sin tax bill at the Senate.   Among the other problems, he said, is that there will be a stagnant number of smoking incidents and less state revenue collection.   To demonstrate his point, Marcos read into the Senate record data about different countries. "I am a great believer of empirical data.  If empirical data is available I think it is more believable," he said.   In Malaysia, he said, there was a tax increase from 2001 to 2009 of 365 percent and a 150-percent increase of illicit trade from 2005 to 2009. Smoking incidents also increased from 2001 to 2009.   "Cigarette smokers will not stop smoking, they will just find a way to buy cheaper tobacco [and] smugglers will be more than willing to provide the cheaper [cigarettes]," Marcos said. "[So] the health side that the measure would like to achieve, they did not achieve."   Similarly, he said that when a large tax increase was implemented on the same products in Brunei, 80.4 percent of the industry became illicit trade.   "If they can do these in Brunei… they can do it here too.  You will not get the revenues, you will not get the lessening of smokers...that is the problem we have with illicit trade," Marcos said.   He also said that in New York, where there was a 495.56-percent increase in excise taxes, the volume of illegal cigarettes that was being brought into the city increased by 45 percent between 2002 to 2008. Smoking incidents only lessened by four percent.   If this is the effect on New York City, Marcos said there is no way the Philippines can do any better. "New York City is way more sophisticated than the Philippines."   Not connected   But in response, sin tax bill sponsor and author Sen. Franklin Drilon cited data that the number of adult smokers in New York City actually dropped by 14 percent between 2002 and 2010 while smokers aged 14 to 18 years old dropped from 18 to eight percent.   "[And] the economy of New York City has been unaffected.  How does that fit to the claim that cigarette smuggling has been rising in leaps and bounds in New York City?" he said.   "In fact the smoking prevalence has gone down... that does not fit the picture of rampant smuggling in New York City," he added.   As for Malaysia, he said the government there adopted a tracking and tracing system to solve smuggling and even earned $100 million in extra revenue during the first year of implementation.   Drilon said the Philippines could do the same.   "We will implement a tracking and tracing system in our country to address this smuggling.  Smuggling is not solely the function of price.  It is the function more of law enforcement because there is no one on one correlation between increase in price and increase in smuggling," he said.   On the other hand, Drilon contested that Marcos' data from Brunei were not from its government.   "We will have to disagree on that," said Marcos, who said that he will probably just propose a "better way" to achieve the intentions of the bill.   Drilon, who had earlier replaced Sen. Ralph Recto as Senate ways and means chairperson, had earlier introduced a substitute bill that intends to raise government revenues from tobacco and alcohol products to P40 billion to P45 billion    Drilon’s proposed a unitary tax rate of P32 per pack. The rates for hand-packed cigarettes were modified from P7.56 per pack to P12 in 2013, P22 in 2014, and P28 in 2015.   But Recto has said he doubts the government will be able to reach the P40-billion revenue target.  He also warned the scheme may result to job losses. — KBK, GMA News