Press Release – Action for Economic Reforms – 31 May 2012

MEMBERS OF the Northern Luzon Alliance who have been flogging the Abaya sin tax bill for flouting the interests of tobacco growers may be in need of a reality-check. According to a body of over 10,000 farmers from the Ilocos region, a failure to enact the amended HB 5727 could actually be driving the livelihoods of tobacco planters and their families further into jeopardy.

“Our congressmen from Northern Luzon have been some of the harshest critics of raising taxes on cigarette products. But they especially should be the ones supporting the bill that will reform our sin taxes on tobacco,” stressed Avelino Dacanay, chairman of the Solidarity of Peasants against Exploitation (STOP-Exploitation). STOP-Exploitation is a farmers’ organization seeking to improve the welfare of small farmers in the Ilocos provinces through land reform and the fair pricing of planters’ produce.

“Kung tutuusin, ang pagtaas ng buwis sa tabako na iminungkahi ng HB 5727 ay dagdag na tulong sa amin kung ito ay totoong makakarating sa mga magsasakang nangangailangan ng tulong,” Dacanay said. (In reality, the increase in tobacco taxes proposed by HB5727 will benefit tobacco farmers if the proceeds will really go to the farmers who need help.)

Since Philip Morris International and Fortune Tobacco merged in February 2010 to form Philip Morris Fortune Tobacco Corp. (PMFTC), the new tobacco titan has cornered as much as 97.15% of the national cigarette market, based on BIR withdrawals data. Much of this market dominance owes to the fact that PMFTC’s brands have been preferentially taxed compared to those of potential competitors.

Yet this has threatened the incomes of small tobacco growers, more than half of whom sell their produce directly to cigarette manufacturers. Soon after the PMFTC merger, revealed Dacanay, selling prices for planters growers nose-dived by 23% to P73 per kilo in lopsided negotiations between buyers, government officials, and farmers’ groups during that year’s tobacco tripartite conference.

“This drop in prices has left farmers in worse straits than before, making the passage of HB 5727 even more urgent,” claimed Dacanay. “Reforming our cigarettes taxes will not only raise funds for projects for tobacco farmers; it will open doors for more buyers of tobacco leaf. These will help, not hurt, farmers.”

“Over the years, thousands of tobacco farmers have actually been phasing out of tobacco,” argued AER senior economist Jo-Ann Latuja, “Agricultural statistics show that land devoted to tobacco growing has halved over the past two decades: from 63,200 hectares in 1990 to only 29,707 hectares in 2010.”

In fact, a 2008 study of Dr. Rene Rafael Espino of UPLB discovered that farmers have already been shifting to other crops due to tobacco’s steep input costs and labor needs. Virginia tobacco— the most common variant in Region One— demands higher seasonal expenditures (P41,990) than crops like corn (P14990) and onions (P30310). It is also the single most laborious crop to grow, requiring 261 man-days of work per season compared to only 115 and 128 man-days for corn and sweet pepper.

Against views espoused by solons opposed to HB 5727, the same study conclusively demonstrated that tobacco-cultivating areas are suitable for alternative crops like corn, vegetables, and peppers. For some cases, the viable areas for these crops are even larger than those for tobacco.

“The reality of tobacco farmers is a sign that tobacco has become a sunset industry,” pressed Latuja. “Now more than ever, our legislators must act to improve the livelihoods of these farmers by approving the Abaya sin tax bill. HB 5727 will ensure more resources for farmers who want to transition smoothly out of tobacco. But it will also guarantee better bargaining power for those who will still plant it.”

“At all costs,” said Latuja. “This bill must become law in 2012. Should our lawmakers fail to do this, it will be the farmers, most of all, who will actually suffer.”