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WHO wants probe on 1.9B excess packs of cigarettes manufactured in PHL

MARK MERUEÑAS, GMA NEWS September 23, 2012 7:00pm

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.

Granted that the market demand is met this year, that would leave almost 2 billion packs of cigarettes in tobacco factories. So why is such an industry tolerating such an excess, and where are these extra packs going to go?

These are the questions that the World Health Organization, through its Tobacco Free Initiative, seeks to find out, even as it urged the government not only to launch an investigation into the phenomenon but also continue with its thrust toward higher taxes for cigarettes.

“Who’s gonna smoke all these if the market is 3.5 billion? 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 Dr. Aida Yurekli, coordinator at the WHO-TFI.

Yurekli says the WHO began to observe such 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 3.3 billion packs of smoked cigarettes based on the survey respondents’ declaration of tobacco consumption level.

That same year, however, the government racked up tobacco taxes, one of the so-called “sin taxes,” accounting 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 they do pay [higher] taxes,” Yurekli added.

Though admitting further studies and investigation are required to prove it, her hunch is that the excess cigarettes do not benefit local consumers but end up being puffed abroad.

“They don’t mind paying extremely low taxes here. They pay local taxes then they smuggle out,” Yurekli said, adding that such practice has long been observed in countries like Russia and Ukraine.

And there seems to be a huge demand for imported tobacco products coming from the Philippines in neighboring countries like Thailand, Indonesia, Brunei, and Taiwan.

“We have reports that smuggled cigarettes in southeast Asian countries are originated from the Philippines. I didn’t believe in that before—China is the usual main source—but once I compared, I found there was a huge difference [and that it was true],” Yurekli said.

That is precisely 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 through 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.

She also suspected that the tobacco industry is overproducing tobacco products now to get away with higher taxes in case the Abaya Bill 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.

However, Yurekli, who has been actively meeting with Philippine officials, particularly from the Department of Finance, and extending technical support to improve the efficiency of the country’s tobacco tax system, is optimistic about the support of the government for the Abaya Bill.

“What is interesting and very good is that President Benigno Aquino III is very committed and he cares so much about the lives saved by tobacco taxes and he also cares about the youth,” Yurekli said.

“From that perspective, he is very unique when I compare the Philippines with many countries and it is a great opportunity for the Philippine government,” she added.

Yurekli commended the President for having “a good public health mentality.” “It is very rare and many governments have to choose the more financial side of the investment and sometimes they give their priorities on public health later on when they already paid the price,” she said.

She said the WHO has already gotten assurances from senators who would help ensure the passage of the amended sin tax bill.

Yurekli said the Abaya bill would also benefit the often overlooked tobacco farmers, saying that the government estimates that 15 percent of sin tax revenues from the proposed tax system will go to the farmers. — BM, GMA News

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