JUNE 26, 2012 (MALAYA) Written by AMADO P. MACASAET - (‘What the Purisima plan will likely accomplish is the loss of jobs in the tobacco growing regions and cigarette making industries and the inability of the government to collect the announced P27 billion from tobacco.’}

Finance Secretary Cesar Purisima has a not-too-clever plan to punish the Philippine tobacco industry and give undue advantage to British American Tobacco who left the country in 1997 because it could not compete.

The strategy is not exactly favoring the foreign cigarette importer with a favorable tax rate.

Rather, Purisima chose to increase the excise tax on cheap Filipino-made brands which account for an estimated 65 percent of total demand.

The effect is to make prices of the poor man’s cigarette way beyond his capability to buy. For example, the present tax rate of cigarettes with a net retail price of P11.50 per pack or below is P2.72.

If the Senate allows Purisima his way, the poor man’s cigarette will be taxed at the rate of P12.50 per pack in the first year, to increase some more to P22 in the second year.

Strangely, neither Purisima nor British American Tobacco has revealed the prices of cigarettes it will import, like Lucky Strike .

It is estimated that the price of cigarettes to be imported by BAT will be close to the prices of low-end brands consumed by the poor smokers. When that happens, even the most popular brands such as Marlboro made by Philip Morris and several brands made by Fortune Tobacco will be eaten away by imported cigarettes of BAT which will not contribute anything to the economy except promote the smoking habit and take out of the country millions of dollars in profits while the revenues of local cigarette makers continue to decline.

It is in this sense that the excise tax plan of Purisima is patently anti-Filipino and does not consider the fact that an estimated three million Filipinos depend on tobacco for survival.

It is clear that Purisima, who comes from the tobacco growing Ilocos region, has developed an unbridled hatred for tobacco farmers and local cigarette manufacturers.

He would rather support a come-backing importer of cigarettes than help the local tobacco industry which consumes leaf grown by the Filipino.

Purisima’s undisguised desire to punish local tobacco growers and the cigarette manufacturers is more blatantly shown by the fact that he did not lift a finger when the House ways and means committee reduced the earlier estimated P60 billion incremental revenues from cigarettes and alcohol, beer, and distilled spirits to P33 billion.

The logical presumption is the House and ways committee practically taking the dictation of Purisima would equally divide the reduced estimate between the two sin products.

That was the furthest from his mind. Under the revised plan, cigarettes and tobacco products would have the burden of paying 85 percent of the reduced estimate of P33 billion. The other sin product will share only 15 percent.

The flaw in Purisima’s one-track mind is that illicit trade begins to flourish and cannot be controlled not even by efficient law-enforcing countries whenever the tax on cigarettes is raised to intolerable levels.

This was clearly established by at least 10 highly developed countries, among them the United States and Singapore.

Since this is the case, it may not be easy to collect the P27 billion from cigarettes as the market will be dominated by the imported brands of British American tobacco and smuggled cigarettes that are sold for much lower prices.

Why Purisima picked tobacco for such cruel punishment is difficult to fathom. Little does he know that alcoholic drinks, specially beer, are hardly ever smuggled. They are fertile source of revenues but Purisima wants the distillers and beer brewers to pay less or at least keep the present excise tax rate.

To promote consumption? I would not debate that. In fact as a mere function of unchecked population growth, the incremental consumption is big enough to ensure the survival of the two sin products.

Why in the mind of Purisima one must die in favor of an importer of cigarettes and the other must be given favor it does not even ask for is an indication of the twisted economic logic of the finance secretary.

It is bruited about that British American Tobacco has allocated huge lobby money to ensure it gets what it wants against the interest of the tobacco farmers and cigarette manufacturers.

But knowing Purisima from his glory days in SGV as a managing partner, it would be most unkind to suspect that he is on the take. I will not believe that.

There must be other hidden and dark forces that keep Purisima’s mind on writing the obituary of the tobacco and cigarette industries while British American Tobacco celebrates the success it is bound to have, courtesy of the secretary of finance.

The deliberation of the proposed excise tax on sin products has been attended by anomalies.

For example, in the discussion of the subject on May 12, the agenda was specifically for “alcohol excise only”. But apart from doing a favor to beer, the members of the House ways and means committee with the representative of Purisima in attendance, thoroughly chewed cigarettes and came up with a plan clearly anti-Filipino, pro-foreign and with no any assurance that the government can collect the estimated P27 billion from cigarettes.

Neither is there an assurance that smuggling will not flourish as the consumers prefer to smoke cheaper smuggled brands that do not pay a tax.

In the end, what the Purisima plan will likely accomplish is the loss of jobs in the tobacco growing regions and cigarette making industries and the inability of the government to collect the announced P27 billion from tobacco.

Purisima who must have hastily crafted the initial unitary tax plan under HB 5727 pulled P60 billion from thin air as incremental revenues from the sin products. Why he allowed the reduction by 50 percent to P33 billion and shift the burden of P27 billion to cigarettes may indicate that Purisima has an ax to grind against the tobacco farmers and the cigarette makers.

If this is the way a cabinet member like Purisima helps President Aquino flesh out his “daang matuwid” philosophy of governance, the finance secretary must be reminded that he has strayed from the President’s objective of good governance.

Chief News Editor: Sol Jose Vanzi

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