Ducky Paredes also makes a similarly misinformed opinion in his article (Learning from Singapore, Malaya, May 24, 2011)
Strong
international evidence and experience exists to support tobacco tax increases,
because they are effective not only in raising government revenues but also in
reducing consumption of a harmful product, especially among vulnerable sectors
such as the young and the poor. This is why parties to the WHO Framework
Convention on Tobacco Control (FCTC), the Philippines among them, are obligated
to implement tax policies and, where appropriate, price policies, on tobacco
products so as to contribute to national health objectives aimed at reducing
tobacco consumption.
The
tobacco industry often argues that smuggling will increase with any tax
increase. The international evidence however shows that tobacco smuggling is generally higher in low-income countries where
taxes and prices are low, while smuggling is low in high-income countries where
tobacco taxes and prices are high. This correlates well with the levels of
anti-smuggling enforcement and corruption in each country. While a price
differential across borders provides an incentive for smuggling, it is the
laxity of anti-smuggling measures and the propensity for corruption that
facilitates the actual smuggling. Conversely, if there is very tough
anti-smuggling enforcement with stiff penalties, this is a strong disincentive
that discourages smuggling.
"Long
and porous borders" are also cited by the tobacco industry as an argument
against raising taxes because it is "impossible" to defend these
borders against smugglers. Aside from being an obvious insult to our
customs and border patrol officials, this argument also rings hollow. There are
many countries with long and porous borders that have strong anti-smuggling
measures in place, and which have high tobacco taxes and prices, such as the
UK, Japan, and Australia.
Singapore
Neal
Cruz is mistaken regarding smoking prevalence in Singapore, which he says was
unchanged from 2001 to 2007. Based on a 2010 ERC report (an industry-oriented
publication), per capita cigarette consumption dropped steadily from just under
1,200 sticks in 1990 to under 400 sticks in 2006. This is in consonance with
the declining adult smoking prevalence rate which dropped from 18.3% in 1992 to
15.2% in 1998 to 12.6% in 2004, and which correlates well with the regular tax
increases during the same period, averaging a 4% price increase per year.
Additionally, Singapore has banned all tobacco advertising, promotion, and
sponsorship and promoted smoke-free public places since the 1970s and also
began implementing pictorial health warnings in 2004.
Contrary to what the industry is
claiming, Singapore has been able to successfully curb cigarette smuggling and
keep its incidence low. In 2007 and 2008, according to a Singapore Customs
Media Release in 2008, around 4.4% of cigarettes were smuggled, but this was
significantly reduced in 2009 to around 2.37% (Singapore Customs Enforcement
Data 2010). This can be attributed to Singapore’s integrated and
multi-pronged-government tobacco control strategy that includes not only demand
reduction measures (less people smoking), but also supply reduction measures
such as strengthening customs enforcement, which subsequently saw an increased
number of arrests and seizures for cigarette smuggling. It is this increased anti-smuggling
effort that has resulted in increased seizure volumes, not that there has been
an increase in smuggling.
Unfortunately, there has been no
tobacco tax increase in Singapore since 2005, and given Singapore's economic
growth, this has made cigarettes more affordable and contributed to the
slowly increasing per capita consumption seen from 2006 to 2009 (also ERC data)
and the increase in adult smoking prevalence from 12.6% in 2004 to 13.6% in
2007. Tobacco industry puppets
attribute this to cheap smuggled cigarettes, but the truth is that it is
primarily driven by increasing affordability of legal cigarettes due to the
stagnation of tobacco excise tax rates since 2005.
Malaysia
According to the
ERC 2010 data, contrary to what Neal Cruz claims (that smoking incidence was
virtually unchanged), per capita cigarette consumption also declined steadily
in Malaysia from around 1,100 sticks in 1990 to under 700 sticks in 2009. It was the repeated tax increases over
the years that drove this decline, as well as a ban on all tobacco advertising,
promotion, and sponsorship in the past decade and the government’s “Tak Nak”
media campaign. In 2009, Malaysia also started requiring pictorial health
warnings on all cigarette packs.
The Confederation
of Malaysian Tobacco Manufacturers (CMTM), which is actually three transnational
tobacco companies (British American Tobacco, Philip Morris International, and
Japan Tobacco International) that control 97% of the local market, is the one
claiming that smuggling accounts for close to 40% of the local market. Given
that 97% of the market is controlled by these 3 large companies, primarily BAT
Malaysia, and given that most of the smuggled brands are reported by them as
not being their company brands, it seems unrealistic to believe that 4 out of
10 cigarette packs sold in Malaysia are illegal.
New York City
Over the past decade, New York City has prohibited smoking in
virtually all indoor workplaces, including bars and restaurants; raised excise
taxes; and launched a number of hard-hitting anti-tobacco media campaigns to
significantly raise public awareness.
The results? Prior to 2002, the prevalence of smoking among adults had
remained steady at about 22% for a decade. But between 2002 and 2010, that
number dropped to 14%, resulting in more than 400,000 fewer adult smokers in
New York City. Furthermore, between 2001 and 2009, smoking prevalence among
students aged 14-18 years dropped from 18% to 8%. Contrary to the doomsayers’ predictions about the economic
calamity that would come with strong tobacco policies, New York City’s economy
has been unaffected. And with consumer demand being that low, how does that fit
with the tobacco industry’s claims that cigarette smuggling is rising in leaps
and bounds?
Australia
It is surprising
that Neal Cruz recommends Australia as a best model for the Philippines to
follow, because, similar to claims in Malaysia, the tobacco industry (led by
BAT Australia) is claiming that 1 out of 6 cigarettes sold there is
illicit. Can any reasonable person
imagine this happening? If it is
so rampant, this would mean that 1 out of six smokers knows where to obtain
these illegal cigarettes, and wouldn’t the government authorities be aware of
this as well?
The facts around
tobacco tax increases being pegged to the CPI are also not exactly as they have
been presented. The truth is that
prior to a 25% tax increase in 2010, Australia had not raised tobacco excise in
real terms since 1999. The tax
increases in nominal terms that resulted from tax rates being in line with the
CPI may have increased government revenues, but they certainly did not produce
the decline in smoking rates that were expected. There were still around 15,000
Australians dying each year from tobacco-related diseases. Hence, the government raised taxes by
25% in 2010, at the same time announcing that there would also be significant
tax increases in 2011 and 2012. In the same effort, the Australian government
also announced that it would require the world’s first plain packaging of
tobacco products beginning in 2012.
Finally
The Philippines does
need an equivalent of the Australian excise tax system, which is indexed to
inflation but also significantly raises prices so as to effectively discourage consumption
of a harmful product that causes so much preventable disease, disability, and
death, as well as suffering, among Filipinos.
For a discussion
of cigarette affordability and the needed tobacco tax reforms needed to correct
the flaws current excise system, please read the policy paper here: http://seatca.org/dmdocuments/SITT%20Philippines%20Affordability%20Policy%20Paper_Final.pdf
A more
comprehensive discussion of these tax reforms can be found in the monograph
“Taxing Health Risks” by the UP College of Law and HealthJustice (http://seatca.org/dmdocuments/Taxing%20Health%20Risks%20Philippines%202010.pdf)
The key message here is to keep raising taxes and prices so
that consumption starts to decline and so that the government revenues from
such tax increases can be used for tobacco control (including smuggling
control), health promotion, universal health care, social development, and a
host of other socially beneficial programs.
And of course, don’t believe the tobacco industry’s
misrepresentation of the facts.
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