BY CECILIO ARILLO CONTRIBUTOR
A unitary tax system does not equate to pro-health and ultimately promotes monopolism, according to a veteran industrialist.
“Health advocates may have a noble objective but they are overlooking a glaring issue,” Engr. Ped Salvador, Ph.D., a prominent member of the National Economic Protectionism Association (NEPA) said. “A unitary [tax]system will cause upshifting to premium brands and will only benefit foreign tobacco players.”
NEPA is a prestigious organization founded by genuine Filipino industrialists in 1934 including the late great Salvador Araneta that focuses in the protection of Filipino industries.
When lawmakers passed House Bill No. 4144, health advocates mainly argued that keeping the two-tier system is anti-health since it causes consumers to downshift to cheaper cigarette brands instead of quitting altogether.
“However, the narrow price distinction between local and foreign brands will be negligible and therefore the average buyer will upshift to foreign brands instead,” Salvador said.
Comparatively, a study by World Health Organization’s Collaborating Center for Tobacco and Economics at Beijing’s University of International Business and Economics (UIBE) revealed that in China, drastic price increases in low-end cigarettes encouraged smokers to upshift to middle and premium cigarettes*.
“If the [upshifting]trend continues, it will kill off local manufacturers and be beneficial only to multinational companies… We should preserve our own,” the pro-Filipino industrialist stressed.
UP Economics professor Dr. Ernesto Gonzales likewise supported the notion, saying Filipino-owned corporations like Mighty Corporation invest their money in the country and provide long-term employment to Filipinos.
“On the other hand, multinationals [companies]remit income to their mother entities, enjoy the tax privileges of Foreign Direct Investment, invest their money overseas and worry about their stock health in the New York Stock Exchange,” Gonzales said.
The existing law provides a two-tier system where cigarette packs priced P11.50 and below have a P25 excise tax while those priced P11.50 above have P29 which converts by 2017 to a unitary (single excise) tax system or P30 tax regardless of category and imposes a 4% increase thereafter.
HB 4144 however seeks to discard the unitary system and maintain the two-tier system thereby increasing the current rates to P32 and P36 respectively per category plus a higher 5% increase starting 2018.