Press Release – Action for Economic Reforms – 16 October 2012

Amid the public outcry against the Senate version of the sin tax bill, former Senator Jamby Madrigal, said “this bill does not only generate less revenue for health care but also increases demand for lower priced cigarettes. This is the same dog with a different collar. Where is the reform here?”

Madrigal recalled that in 2004, she was “one of the few senators, together with Sen. Ping Lacson, who consistently and vigorously pushed for the basic reforms that included a unitary specific tax, a high tax rate and an indexation of the tax rate.” She also recalls that it was the Arroyovadministration who pushed for the passage of a very weak bill, now a law that is being revised because of its glaring weaknesses.”

Unfortunately, the reforms that she and Lacson advocated were defeated because of the powerful tobacco lobby.

Madrigal explains, “The econometric study I commissioned in 2004 shows that increasing the tax rate to generate an additional P30 billion in revenues would barely change the demand for tobacco. The demand is highly inelastic, which in layman’s terms means that a significant increase in price would hardly decrease demand and only encourage the sale of cheaper brands, due to the highly addictive nature of tobacco.”

“This will not kill the tobacco industry but they may not make as large a killing,” Madrigal added.

In response to the claim that there is also a model showing the loss of revenues with a very high tax rate, Madrigal said, “the theory and the evidence worldwide will negate this claim. Look at what happened in Thailand, they are now benefitting from increased revenue and better health care. If they can do it so can we.”

She said that it could only mean that the other model showed biased results in order to fit the tobacco lobby. She warned that regression results can be twisted merely by manipulating the data or making false assumptions.

“I hope history will not repeat itself,” said Madrigal. “the economic facts are clear, anyone can study these and come to the same conclusion. She added, “Unfortunately, Taking the same old position will result in a bad bill sacrificing the country’s welfare.”

An advocacy closest to Madrigal’s heart is the welfare of women and children. She added, “I strongly support a real sin tax reform that will effectively deter our women and children from the harmful effects of smoking.” Currently, 17% of women and 22.7% of in-school youth aged 13 to 15 are smokers, and the numbers are rising.