The Sin Tax, as passed by the House, faces tough opposition in the Senate. Senate President Enrile said it will be madugo. Why should it be bloody?

The bill, according to its opponents, deals primarily with revenue enhancement and only secondarily as a public health issue. And so, while people are dying from emphysema, cancer, liver cirrhosis and a whole host of ailments associated with smoking and heavy drinking, some senators will pretend that the issue at hand is fair and effective taxation and the welfare of those who depend on tobacco and alcohol for their living, not health.

Sen. Ralph Recto, chairman of the Senate committee in charge of all tax measures, opposes the Sin Tax. He says it penalizes consumers. He believes it is his duty to protect smokers and drinkers from high taxes.

“It’s not the cigarette or the alcohol company that would pay, but Juan dela Cruz, the public, me included, because I am a smoker and a drinker, occasionally. The job of the Senate is also to temper taxes that would be imposed to the public,” he said.

Okay, senator, let me see if I understood you correctly. The Senate must temper taxes on tobacco and alcohol so as to make suicide, which is what smoking and heavy drinking is, as painless as possible. That’s what you’re saying, right?

Sen. Enrile shares Recto’s concern for consumer welfare but with a pro-poor twist added.

“Sino ang tatamaan doon? Jeepney drivers, telephone operators in call centers, ordinary workers who could not afford heavy tax,” he said.

But, tell us senator, shouldn’t smokers and drinkers take responsibility for their chosen addiction? Why pass on the cost of their stupidity to the non-smoking, moderate-drinking taxpayer? Why not consider the Sin Tax as their down payment for the inevitable medical costs they will incur?

Other senators who share Enrile’s pro-poor stance, Jinggoy Estrada for one, looks at the tax from the tobacco farmer’s perspective.

“On my part, what about the plight of our tobacco farmers? Who will suffer the most? Is it our farmers? Who will gain the most? Is it the importers of cigarettes? Kasi kelangan balansehin natin,” he said.

Good questions, senator, if we are talking only about farmers growing crops that do not cause death and disease. But tobacco causes death and disease so there’s an over-riding public health issue involved here. You might want to ask what would make more sense, spend billions to help tobacco farmers shift to other crops or protect a status quo that burdens the taxpayer with never-ending ever-increasing billions in health care costs?

There are other costs as well. Tobacco growing is not environment friendly. Enormous amounts of pesticides are required from planting all the way to harvesting. Pesticides do not harm the farmers only, they harm all of us because they leak into the soil and the waterways thus finding their way into the food chain. Tobacco also extracts a lot of nutrients from the soil, more than most crops. Without fertilizers, land planted to tobacco would become barren. Thus tobacco-ed land becomes dependent on fertilizers. But the biggest cost of growing tobacco is the trade-off of land that can otherwise be used for food production. Why grow tobacco when you can plant crops that sustain life?

The last Sin Tax law was passed in 2004. That bill was a carefully worked-out compromise between the tobacco and alcohol industry and government. Unsurprisingly, the compromise worked in favor of tobacco and alcohol.

First, the law made a distinction between old brands (pre-1996) and new brands. Old brands would be taxed based on 1996 prices notwithstanding the fact that the prices of those products have gone way up over the years. Second, the government created four price tiers, from cheap to expensive brands, with corresponding tax rates for each tier. Third, the government did not index taxes to inflation. In effect, while the price of everything was going up for everybody including government, the tobacco and alcohol industry did not have to share the burden. In fact, for many brands, the tax increase was below the inflation rate. So nakalamang pa sila.

The new Sin Tax bill passed by the House and pending a bloody fight in the Senate provides for a transition from a four-tier to a two-tier and finally to a unitary rate on all tobacco and alcohol products. No more tiering, just one tax rate. Simple with no loopholes for tax cheats. Second, taxes will be automatically indexed to inflation. No more free rides. Third, the price freeze classification based on “old” and “new” brands will be eliminated. No more favored brands. And so from a purely revenue enhancement and collection perspective, the new Sin Tax is superior to the old one.

And there’s more. Part of the incremental revenues from the bill will be used to help the transition from tobacco to more productive endeavors. More importantly, the bulk of sin tax revenues will augment the universal health care program of the government. So why spill blood fighting against the new bill?

Because the revenue argument does not end there.

Smuggling has been raised as an issue against the Sin Tax. It is a valid argument. Countries that imposed high sin taxes experienced a corresponding increase in smuggling. However, the question is do you not do anything because you are afraid of smuggling or do you do what you have to do and try to control smuggling at the same time? Besides, will the revenue lost because of smuggling surpass the savings on the health and social costs of smoking and excessive drinking?

Recto also asked a question that strikes at the heart of the revenue enhancement aspect of the bill.

“Mahirap sabihin na kaya natin tinataas para ang tao di manigarilyo. Eh bakit nyo sinasabi kokolekta tayo ng napakalaki? (You say that the reason we are raising taxes is to stop people from smoking. So how can you claim we will collect a lot of taxes when there will be less smoking going on?)”

It is a sensible question if enhancing revenue is the only purpose of the Sin Tax. But there is a larger issue at stake. Public health. If the Sin Tax does not earn as much revenues as projected, if all it will accomplish is to discourage smoking and immoderate drinking, it would still be a good law. It will have reduced public health care costs and more importantly, suffering and death from smoking and drinking.

The Sin Tax will penalize the hell out of smoking and drinking so only the rich will be able to afford cigarettes and alcohol. That means only the rich will die. Take note of that you pro-poor senators, your poor votes will be alive and well!

But seriously, the high prices will lead not only to less consumption by current consumers but will also discourage first-time users. That’s excellent, isn’t it? “It’s bloody great!” as my Anglo cousins would say. So why make passing the Sin Tax madugo? Why defend a status quo that causes so much suffering and death?

If senators opposed to the Sin Tax are truly concerned about the public’s welfare they will introduce amendments to strengthen the bill passed by the House and not water it down to favor the purveyors of death.

What do you think the Senate will do?


Buencamino is a fellow of Action for Economic Reforms (