Get real
Philippine Daily Inquirer, 17 November 2012


“The influence exerted by the sin products lobby has been obvious from Day I. A PR campaign has been mounted to create sympathy for (1) the struggling cigarette companies who supposedly contribute a disproportionate share of the government’s tax take, and whose viability will be in jeopardy if sin taxes are increased too much; and (2) the poor cigarette smokers who bear most of the burden of the tax (i.e., the tax is regressive, and hits the poor the most).

“There are, of course, other weapons taken from the cigarette lobby arsenal in the United States: specifically that sin taxes are not effective in either preventing sin (smoking or drinking) or in raising the desired revenues (not because consumption is discouraged, you understand, but because smuggling and corruption are encouraged)—in other words, sin taxes do not discourage sin, they encourage it. How about that?”

Déjà vu, dear Reader. Because the above is from a column I wrote eight years (2004) ago,  when sin tax reform was on the legislative agenda. The arguments of the lobby were very easily rebutted, but they won the round nevertheless—because they had very effective alternative means of persuading the majority of the legislators. Just as they won an even earlier round (1997), although at that time, their victory was achieved not in the plenary sessions of the legislature, but in the bicameral committee discussions.

This time around, the tobacco lobby trotted out the same arguments it used eight years ago. Had Sen. Ralph Recto had his way, his sin tax proposal would have handed them a third victory. Unfortunately for him/them, and fortunately for the rest of us, the reaction against his pro-tobacco stance was so fierce, and the health lobby counterattack so strong, that he was forced to beat a temporary retreat. I use the word “temporary”  because he did come back and tried his best to tear apart the version of Sen. Franklin Drilon during the interpellation.

An aside: When Sen. Ferdinand Marcos Jr. was interpellating, his backups—i.e., the people behind him—were identified by my (very reliable) source as lawyers Carmen Herce and Mario Zinampan, both from Philip Morris Fortune Tobacco Corp. (PMFTC). This should be of interest to the Presidential Commission on Good Government  because Marcos had testified in the Sandiganbayan that his father owned 60 percent of Lucio Tan’s companies (denied by Tan). Is it possible that the young Marcos and Tan have already settled their differences, unbeknownst to the PCGG? If this is so, and Tan has given the Marcos family some financial interest in PMFTC, then shouldn’t the senator have inhibited himself from the discussions?

In any case, Drilon had obviously done his homework, because he defended his version very well. And per the latest news reports, he seems to be optimistic that his “compromise” version will be passed by the Senate on Monday. Wonderful.

But there is still a fear: that the tobacco lobby will be able to snatch victory from the jaws of defeat by applying its powers of persuasion to the members of the bicameral committee, and mangle the Senate and House versions.

Is this paranoia? Not at all. The tobacco industry did the same thing in 1997, and it is notorious for getting its way by hook or by crook. We know, from past unhappy experience, how Lucio Tan (Fortune Tobacco and others) can get his way with the government, whether it be the executive, legislative, or judicial branch. What may not be so well known is what the tobacco industry—that is, the multinationals—is capable of.

For example, it took more than 40 years of litigation in the United States before the tobacco industry finally saw the writing on the wall and came around to negotiating a settlement with the Attorneys General of 46 states (they had already settled with the other four for $40 billion). True, it was a humongous settlement: something like $206 billion over 25 years, plus another $5.15 billion for assistance to growers in tobacco states and including a public education fund and a strategic fund, etc. etc.

But the tobacco industry fought and kicked for 40 years—and it would probably still be doing so had not some tobacco insiders (remember the movie?) risked life and limb to bring out very damning internal documents that showed the extent of the industry’s chicanery. One of the judges, in one of the court cases before that exposé, had actually called the tobacco industry “the king of concealment.”

There is another example: Remember the tobacco industry’s arguments against high taxes—that these would lead to smuggling and corruption? Well, it turns out that the industry itself was doing the smuggling and corrupting! I have already, in a previous column, adverted to internal industry documents noting how corrupt the Philippines was and how politicians could be bought.

What about smuggling? Four years ago, Canada’s two largest tobacco manufacturers “pleaded guilty to aiding and abetting the smuggling of cigarettes in the 1980s and 1990s and agreed to pay fines and penalties … more than $1.1 billion in an unprecedented settlement of criminal and civil cases.” The third largest company, JTI-Macdonald, and its former president, have also been charged with similar offenses. What’s more, the same pattern has also been established in Europe.

I single out JTI (Japan Tobacco International) because during the Recto committee hearings, it was JTI that made a presentation trying to show how higher taxes would lead to smuggling.

Unmitigated gall. Typical. Beware!