Evidence is clear: High tobacco taxes save lives, don’t cause smuggling

Manila, 23 May 2019: The Southeast Asia Tobacco Control Alliance (SEATCA) reiterates that legislators should rely on the scientific evidence that raising tobacco taxes saves lives and brings in much needed government revenues without leading to more smuggling.

Claims made by Japan Tobacco International (JTI) that higher taxes on cigarettes may exacerbate cigarette smuggling are not supported by scientific evidence. The tobacco industry routinely uses this false threat of illicit trade in many countries to scare policy makers and oppose effective tobacco tax increases. Tobacco companies simply want to keep cigarettes cheap and affordable to the youth and the poor, and they often overstate and inflate illicit trade estimates,” said Dr. Ulysses Dorotheo, Executive Director of the Southeast Asia Tobacco Control Alliance (SEATCA), noting that tobacco companies are using this same argument in Cambodia, Malaysia, Myanmar, Vietnam, and elsewhere.

Some Philippine legislators are echoing the same industry argument – that increasing tobacco taxes will worsen illicit trade – to oppose the bills being deliberated in the Philippine Senate that propose to increase tobacco taxes to 60 to 90 pesos per pack from currently 35 pesos per pack.

In reality, worldwide evidence shows that illicit trade is low or has not increased in many countries with increasingly higher tobacco taxes such as Australia, Chile, Singapore, Kenya, Uruguay, UK, and others, where tax increases have helped reduce smoking prevalence while raising much needed government revenues. In contrast, illicit trade incidence has not been reduced by keeping taxes low in countries with cheap tobacco products. A major World Bank (WB) report entitled Confronting Tobacco Illicit Trade: A Global Review of Country Experiences exposes the flaws of this industry argument, concluding that non-tax factors such as corruption, weak or absent regulatory frameworks, and the availability of informal distribution networks appear to be far more important factors.

Like in many other countries, the Philippine case study presented in the WB report documents how tobacco tax reforms implemented since 2013 have generated significant government revenues and reduced smoking prevalence, even as illicit trade was reduced due to a robust campaign led by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), employing a wide range of enforcement tools aligned with the WHO Framework Convention on Tobacco Control (FCTC) particularly Article 6 Guidelines and the Protocol to Eliminate Illicit Trade in Tobacco Products. These include the affixture of revenue stamps, profiling, licensing, monitoring and surveillance of taxpayers and importers, use of x-ray machines and other technology, audit programs and the imposition of stiff penalties for violators.

“History has also disproved the false claim that another round of tobacco taxes will kill the tobacco industry and the livelihood of thousands of Filipinos. In 2012, the tobacco industry made similar claims against the Sin Tax Reform Law (R.A. 10351), which increased tobacco tax rates by as much as 820 percent for low-priced brands, yet the tobacco industry continues to make huge profits,” said Dr. Dorotheo

“Tobacco tax increases are also a win-win policy for tobacco farmers, who will benefit from Universal Health Care (UHC) funded by sin tax revenues, in addition to the billions of pesos, equivalent to 15 percent of tobacco tax revenues, already earmarked every year for tobacco-growing provinces under R.A. 7171, and an additional 15 percent of the incremental revenues under R.A. 10351 earmarked to help tobacco farmers and workers find alternative livelihoods.

“Health and economic experts, including the Department of Finance and Department of Health, agree that the substantial public health gains from past tax increases are being eroded by inflation and economic growth. To sustain the reduction in tobacco use, cigarette tax rates should be increased immediately to Php 90 per pack followed by an annual increase of ten percent,” said Dorotheo.

This would generate an additional 45 billion pesos annually to help finance UHC and lead to one million fewer smokers by 2022. Otherwise every year of delay has been estimated to result in 200,000 more smokers, who will be at high risk of tobacco-caused diseases, disabilities, and early death according to Dr. Antonio Dans, an academician of the National Academy of Science and Technology and professor at the U.P. College of Medicine.

Currently, there are more than 16 million smokers in the Philippines and tobacco use kills about 150,000 Filipinos annually. #TaxTobaccoToTheMax #RaiseTobaccoTaxesForUHC

 

Contact:
Wendell C Balderas, Media and Communications Manager – SEATCA
Email: wendell@seatca.org | Mobile: +63 999 881 2117 ##

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About SEATCA
SEATCA is a multi-sectoral non-governmental alliance promoting health and saving lives by assisting ASEAN countries to accelerate and effectively implement the evidence-based tobacco control measures contained in the WHO FCTC. Acknowledged by governments, academic institutions, and civil society for its advancement of tobacco control movements in Southeast Asia, the WHO bestowed on SEATCA the World No Tobacco Day Award in 2004 and the WHO Director-General’s Special Recognition Award in 2014.