Recto’s false smuggling report
BY ANTONIO DANS
In his sponsorship speech of his version of the sin tax reform bill, Sen. Ralph Recto says that “a higher tax rate does not automatically result in higher collections” and will result in smuggling.
The Recto report presents anecdotal data from a few carefully selected countries (with no references) to convey a general story that higher excise tax will lead to 1) smuggling 2) loss of government revenue and 3) loss of impact on smoking prevalence. We show how these short-term “trends” have been spliced from the long-term picture, then taken out of context to deceive the Senate and the public. The larger picture around the world is that an increase in sin taxes leads to increased revenues and declines in tobacco consumption. Smuggling bears little relation to tobacco price per se and is related more to regulatory measures in each country.
The Recto Story: “High excise levels (22%), increased consumption of illicit cigarettes, undermined regulatory and fiscal objectives.”
The full story: From 1980 to 1994, the Canadian government enacted major tax increases on tobacco products. These actions initiated significant tobacco smuggling which the tobacco industry blamed on excessive taxation; it was later discovered that the tobacco industry had actually promoted smuggling schemes to increase their profits and provide an argument for tobacco taxation reduction. This has resulted in numerous U.S. and Canadian criminal convictions of tobacco industry officials and partners [Ref: Int J Health Serv. 2008;38(3):471-87.Public policy implications of tobacco industry smuggling through Native American reservations into Canada. Kelton MH Jr, Givel MS.]
The Recto Story: “Sharp, above-inflation increase in excise rate led to increased revenues initially but eventually to a revenue decline.”
The full story: In Hungary, regular tobacco tax increases resulted in decreased cigarette consumption. State incomes have increased in spite of regular cigarette tax raises. [Ref: Cent Eur J Public Health. 2007 Sep;15(3):122-6. Higher cigarette taxes--healthier people, wealthier state: the Hungarian experience. Szilágyi T.]
The Recto Story: “Steep excise tax increase resulted in swift emergence of illicit trade, and virtually flat cigarette duty revenues.”
The full story: Illicit tobacco neutralized government revenues in Ireland, when they pushed for tax escalation in 1998. This was because, even before the tax increase, they were already the highest priced cigarettes in the region. This certainly does not apply to the Philippines, which boasts among the cheapest cigarettes in the region and the world. Despite the extreme situation in Ireland, government revenues did grow after tax escalation [Ref: Economics of Tobacco: Modelling the Market for Cigarettes in Ireland. Padraic Reidy and Keith Walsh. Research and Analytics Branch, Planning Division, Revenue Commissioners. February 2011.]
Furthermore, smoking-attributable deaths decreased after the tax increase. [Ref: Tob Control. 2012 May 26. The effect of tobacco control policies on smoking prevalence and smoking-attributable deaths in Ireland using the IrelandSS simulation model. Currie LM, Blackman K, Clancy L, Levy DT.]
The Recto story: “Staggering increase in excise tax (in 2011,172% of 2004 rates) led to illicit trade growing to almost 40% of the market.”
The full story: Analysis of previously confidential documents from BAT’s Guildford depository demonstrates that smuggling in Asia was driven by corporate objectives. [Ref: Complicity in contraband: British American Tobacco and cigarette smuggling in Asia. Collin J, LeGresley E, MacKenzie R, Lawrence S, and Lee K. Tob Control 2004;13:ii104-ii111 doi:10.1136/tc.2004.009357].
Malaysia’s solution was not to pull back on excise tax as Recto proposes. Their solution was to implement tracking and tracing systems to control tobacco smuggling in 2004. They were able to recover approximately US $100 million in extra revenue during the first year alone. [Ref: Bharu, K. 2004. Security ink and tax stamps on beer, liquor. New Straits Time, November 5th.]
5. NEW YORK
The Recto story: “Excise duty hikes above underlying inflation leveled to a sharp drop in legal volumes, decline in government revenues, decreased smoking incidence and illicit trade reaching almost 40% of the market.”
The full story: Sales did plummet immediately following the 55% tax increase in 2000, but this recovered to settle on a new level lower than the sales level before the tax increase. Despite the decline in sales, revenue increased dramatically, aided by stricter regulation to curb smuggling [Ref: State Cigarette Excise Taxes: Implications for Revenue and Tax Evasion, Final Report. Prepared for the Tobacco Technical Assistance Consortium, Emory University, Rollins School of Public Health. Farrelly M, Nimsch C, James J.]
Recto story: “Continuous massive excise increases, increased government revenue, constant smoking incidence, illicit trade is more than ⅓ of total consumption.”
The full story: In Southeast Europe, smuggling is lowest in countries like Romania (25% of total cigarette consumption) where transnational tobacco companies have the largest presence and official market share. It is highest in countries like Albania (80%) where these companies are absent. Given the evidence of the tobacco industry’s complicity in smuggling this is unlikely to be a coincidence. [Ref: Tobacco use, a major public health issue in south-east Europe. Eurohealth Vol 9 No 4 Winter 2003/2004. Ivana Bozicevic, Anna B Gilmore, Thomas E Novotny]
Furthermore, the daily smoking prevalence in Romania dropped to 22% in 2011 from 29.7% in 2003, as revealed by a survey conducted by the Health Ministry with the support from the Bucharest-based Lung Diseases Institute [Ref: Romanian Business News – ACTMedia, Tuesday, November 22, 2011]
The Recto Story: “135% increase in 2005 over 2000, declining government revenues despite tax increase, smoking incidence was virtually unchanged from 2001, illicit trade grew.”
The full story: In the longer picture, we know from the Singapore Ministry of Finance, that the Government collected $621 million of excise duty on tobacco products in FY2006, $700 million in FY2007, and $794 million in FY2008. [Ref:http://app.mof.gov.sg]
In the long run too, Singapore excise tax policy has led to one of the lowest smoking rates in the region, and the prevalence continues to decline. Today, the country boasts of the biggest declines in smoking-related deaths among high income countries all over the world. [Ref: Cardiovascular Disease and Risk Factors in Asia : A Selected Review. Ueshima H et al. Circulation. 2008;118:2702-2709].
The Recto story: “Reduction in excise rates used to counter extreme levels of illicit trade (late1990s); massive increase led to increased illicit trade (2007and 2008) and reduction in total cigarette consumption.”
The full story: In fact 1998 is one of the few years that Sweden posted a decline in excise tax revenue. They lowered excise tax by 17% with hardly any effect in revenue, and as a result, tobacco consumption went up by 20%. [Ref: Nordisk tobaksstatistik 1970-2002 and WHO calculations].
Today, Sweden is the best example of how there is no relation between tobacco price and illicit trade. The country boasts of the highest priced cigarettes in the world, the lowest rates of illicit sales, and among the lowest prevalence rates of smoking and smoking-related diseases. [Ref: Cigarette smuggling in Europe: who really benefits? Luk Joossens, Martin Raw; Tobacco Control 1998;7:66–71]
9. UNITED KINGDOM
The Recto story: “’Duty escalator’ tobacco taxation led to down-shifting by consumers, increased illicit trade, government revenue loss but with no impact on smoking incidence levels.”
The full story: The UK has posted significant declines in smoking consumption since they imposed the “tobacco duty escalator in 1993”. [Ref: Econometric Analysis of Cigarette Consumption in the UK. Magdalena Czubek , Surjinder Johal. December 2010. HMRC Working Paper Number 9].
Furthermore, through an action plan to curb illicit trade in 2000, the UK has successfully suppressed smuggling and posted earnings in revenues. [Tob Control 2008;17:399-404 doi:10.1136/tc.2008.026567 . Progress in combating cigarette smuggling: controlling the supply chain. L Joossens, M Raw.
The tobacco industry waged a scorched earth campaign against the House version of the sin tax not because they were out to protect their humongous profits but because they are for the little guy, the poor schmuck who will bear the burden of sin taxes. They found an ally in Sen Ralph Recto, champion of the poor.
Echoing the concern of the tobacco industry Recto said,
“…contrary to the myth, the higher tax we are mulling will not be levied on a couple of taipans, or a foreign tobacco colossus, or a beer giant. The ones who will ultimately bear the additional tax burden are ordinary folks, like the worker who likes to cap his day with a cocktail of rum and coke or the call center employee who grabs a bottle of ice cold beer before he hits the road. In short, we are not taxing companies here but people. In the end, it is not big tobacco or the giant brewery who will pay, but small people.”
Kawawa naman ang mga mahirap, inaapi lagi. Heartfuckingwarming concern, isn’t it?
Sen. Ralph Recto, Chairman of the Senate Committee on Ways and Means and husband of Vilma Santos the Star for All Seasons, saw through the anti-poor arguments of health talibans. He exposed the government’s evil plan to finance the development of the country on the backs of the poor - “Lalo na sa isang batas na papataw ng buwis hindi sa mga dambuhalang kumpanya pero sa ordinaryong mamamayan” - and he would have none of it. So he threw out the anti-poor House version of the sin tax bill and introduced a bill that might as well have been written by the pro-poor tobacco industry. By so doing he demonstrated that a tobacco conglomerate and a senator elected by his wife’s fans can band together to keep cancer within easy reach of the less fortunate.
Recto took the late great President Ramon Magsaysay’s dictum – “Those who have less in life should have more in the law” – and turned it into “Those who have less in life should have more than one puff.” What else can you expect from a man who values equality?
Moreover, Recto is a nationalist like his illustrious grandfather Claro M. Recto. He is against higher taxes on tobacco because, as he said in his sponsorship speech, “under a regime of super high sin taxes, the local players will be taxed to extinction, or elbowed out of the market by foreign-made tobacco and alcohol products.” There is no way that Don Claro’s grandson is going to allow British American Tobacco to elbow out local players like Philip Morris/Fortune Tobacco. Nationalism runs in his blood.
The partnership between Recto and the tobacco industry proves that together businessmen and politicians can lift the poor from the embarrassment of not being able to afford lung cancer. Thanks to Recto and the tobacco industry the yaya and her señorito, the señora and her D.I., can now cough together and exchange chemotherapy stories as equals. Recto’s sin tax bridges the gap between the rich and the poor, the master and his servant. It brings them together through shared experiences. Why should the rich have a monopoly on tobacco-related diseases?
No one has argued the tobacco industry’s case on behalf of the poor better than Sen. Ralph Recto. Recto should be working as a highly paid advocate for Philip Morris/Fortune Tobacco and not as a mere Senator of the Republic of the Philippines. He should get his salary from them not from taxpayers because he deserves better pay and a more respectable means of livelihood. Let’s show the good senator how much we appreciate him by helping him find a better life for himself and his family.
Enrile and Legacy
by Filomeno S. Sta. Ana III
Senate President Juan Ponce Enrile yearns for immortality. Of course, not in the physical sense even though wealth and stem cells have made him look younger, alert, and vigorous. (On the last item, he has the energy to attend two birthday parties in one night, and he is still probably sexually active.)
He is in his Indian summer. He flourishes at the age of 88. In the political realm, he has a high trust rating based on the Social Weather Stations survey. His position as Senate President is secure, with the PNOY administration itself acknowledging his invaluable cooperation in promoting its legislative agenda.
The launch of his memoir was sterling, drawing the congratulations of the broad spectrum of the elite. Never mind that his memoir’s interpretation of martial law and post-martial law contradicts the belief and values of his principal guest, PNOY, and his publisher, the Lopezes.
The Senate President, through his memoir, wants to define his place in the pantheon of Philippine politicians. To quote Rappler’s Marites Vitug, who in turn cites an adage, “history is determined by who gets to define it.”
The jury is still out on Enrile’s place in history.
On the one hand, momentous events in Philippine history include Enrile’s crucial role—his revolt against Marcos, facilitating the EDSA people power that ousted the dictatorship; his vote in the Senate to terminate the Philippine-US military bases agreement; and his erudite, brilliant exercise of authority during the impeachment trial of the then Chief Justice, without which, some argue, would have led to Corona’s acquittal.
Yet, history cannot airbrush Enrile’s dark side—particularly his being an executor of the Marcos dictatorship and his association with the coup plotters who nearly toppled Cory Aquino’s democratic government.
The Chinese have a so-called “70-30” formula to assess their heroes. Mao Zedong described Stalin as 70 percent right and 30 percent wrong, despite Comrade Josef’s iron fist and savagery. Deng Xiaoping, in turn, said that Mao was 70 percent correct and 30 percent incorrect, despite Mao’s disastrous Great Leap Forward and Cultural Revolution, resulting in the death of scores of millions.
In Enrile’s case, he may not even concede that he is 30 percent wrong. His memoir justifies martial law. According to Ms. Vitug, Enrile’s “main regret was not spending more time with his wife, Cristina, and children.”
The publication of the memoir has sparked a firestorm. The public outrage in the midst of remembering the 40th year of the declaration of martial law, has resurrected Enrile’s dark side.
In addition Mr. Enrile is beleaguered by the attacks of Senator Antonio Trillanes and the media’s and civil society’s criticisms because of his opposition to legislative reforms like reproductive health (RH) and sin tax. In relation to the sin tax issue, someone close to Enrile confided to me that the Senate President is “upset with all the rumors linking him to Philip Morris.” Philip Morris, the biggest cigarette manufacturer, is lobbying for a weak sin tax law.
Nonetheless, the Senate President, a master of political survival, can weather the current onslaught. . Mr. Enrile can still attain history’s “70-30.” This will of course depend on his performance during the remainder of his term.
Specifically, the Philippine Congress is deliberating on three landmark bills, namely RH, sin tax reform, and freedom of information, which if passed, will assume great historical significance. Becoming a motive force in the passage of these reforms will hopefully move Enrile closer to attaining history’s “70-30” judgment.
As for RH, it might be unreasonable for us to demand from the Senate President to unequivocally support this. At his age, Mr. Enrile understandably wants to be closer to God, and maybe he wants to make amends to a devout Cristina. The best thing he can do, just like what he did during then impeachment trial, is to preside over the debate and the vote in a just manner, without impeding the voice of the majority.
On the sin tax, he can disprove any suspicion that he favors Philip Morris, by following what his friend Winnie Monsod once said in a column titled “A superior sin tax bill.”
I quote Professor Monsod at length:
“So now the Senate is where the battle over the sin taxes will be next played out. Rumor is that the cigarette lobby is bragging that it has captured more than enough votes….Which is why it is of crucial importance to civil society to apply counter-pressure, to use all means to ensure that the cigarette lobby does not get its way again.
“Sen. Juan Ponce Enrile’s version of the sin tax bill is the kind that civil society should be supporting vigorously. It has some very desirable features. First and foremost, it makes cigarette classification redundant because it adopts a uniform specific tax rate (instead of the current four tax rates) for all cigarettes….
“The Enrile bill also adopts, which the House bill does not do (another major flaw), a mechanism that will provide an automatic adjustment of tax rates relative to inflation every two years starting in 2013….
“Having done his homework, Enrile also has a provision in his bill to stop cold any attempt by manufacturers to front-load their cigarette production or importation in anticipation of increases in tax rates….
“The Senate can redeem itself. All concerned Filipinos should support this bill.”
Indeed, the Senate and Senate President Enrile can redeem themselves. The wisdom of Enrile’s bill must be upheld.
Incidentally, Ms. Monsod wrote the Inquirer column on 20 November 2004.
At present, the Senate President has not filed a bill on sin tax, but the essence of the reforms in the Enrile bill, circa 2004, is found in the bills now being deliberated in the Senate. What Mr. Enrile proposed in 2004 can now be realized. The essential role of Enrile to pass the reforms he proposed as far back as 2004 is indisputable. That will be history in the making.
At this point it does not matter anymore whether it was the Senate, the Batasan, the bi-cameral conference committee, or the President who is responsible for the anti-cybercrime bill. The two houses of Congress should have checked and balanced each other out and failing that, the President should have done it. They are all equally to blame for the passage of that law.
But the government has not failed us. It is our elected officials who did. Hacking government websites that perform a public service for our fellow citizens, ordinary folks who use those sites for information and transactions, is self-defeating. Let us not make war on our own kind. Let us differentiate between government institutions and elected officials.
If we are to take down sites then let it be the personal websites, blogs, and social media accounts of those elected officials who were responsible for waging war on our freedom. Attack the sites of congressmen, senators, and the president and those in his administration who were directly involved with the anti-cybercrime bill but please don’t hit the health department, social welfare services, passports, public works etc. because they have nothing to do with the crafting and implementation of that law. They are innocent bystanders in this war. They are simply performing public service. Hacking them just because they are part of the government is like exploding a car bomb in a populated area to send a message to the enemy. It leaves too much blood on the streets and alienates even those who might have found common cause with you, the hackers. Innocent bystanders are not fair game. Do not be a suicide bomber, be a sniper.
Government is made up of individuals, it is not a faceless entity. There is a list of legislators who voted for the anti-cybercrime bill, get their names and draw a bullseye on their websites and social media accounts. There is also a procedure that the executive department follows before the president signs a bill into law. Look into it so that you can identify the culprits. If any or all those people do not have any blogs or social media accounts, you can still hit them through your own sites and accounts. Pursue a scorched earth policy against them. Let those to whom you gave your trust know the wrath of the betrayed. No holds barred.
It is now up to the Supreme Court to strike down that law. If the Supreme Court upholds the law then that means our highest elected and appointed officials have declared war on those who elevated them to their positions. You will know what to do if and when that happens.