THE drop in cigarette excise-tax collections this year following an increase in rates on January 1 should force the Department of Finance (DOF) to rethink its proposal for yet another tax increase, as this would not only result in dwindling revenue take but may very well sound the death knell for the local tobacco industry.

Deputy House Speaker Eric Singson said based on the figures submitted by the DOF to Congress, tax collections for the first quarter this year fell by 35.62 percent compared with the same period last year.

DOF data showed collections for the first quarter of 2008 at P6.2 billion, but the figure dramatically dropped to an alarming P4.21 billion this year when the rates were adjusted.

Finance Secretary Margarito Teves maintained before the House ways and means committee that they are looking to tax cigarettes more because the product is not price-sensitive, a claim that was met with a lot of raised eyebrows in the committee.

Apparently, Teves was unaware of a presentation made by the DOF to the committee earlier which imputed a price elasticity factor of .235 for cigarettes, meaning for every 10-percent increase in price, demand is expected to go down by 2.35 percent.

“So what is the use of increasing the tax when we do not expect an increase in revenues? Imposing higher taxes would only force people not to buy, which would lead to lower collections. This will defeat the purpose of these bills to increase revenues,” Singson said.

In the Senate, Sen. Panfilo Lacson, chairman of the Senate ways and means committee, said he is now just pushing for the passage of his bill increasing excise taxes on alcohol products and not on cigarettes anymore. Lacson acknowledged numerous objections to the cigarette-tax increase from various industry groups including manufacturers, retailers and the tobacco-farming community.

Meanwhile, several of the country’s biggest tobacco-farming organizations also lashed out at Teves for sacrificing the welfare of more than 2 million farmers and stakeholders just to be able to collect more taxes that the government may not even realize in the end.

The Immayos Farmers Association, the Samara Farmers Associations, the Itawes Foundation Inc., as well as the Philippine Association of Tobacco-based Cooperatives (Patco), in a joint statement, said farmers and their families would be driven to poverty should Teves push for another excise-tax increase this year.

The farmers explained the government had just increased the excise tax on cigarettes on January 1, 2009, and imposing a similar tax this year would push prices of locally manufactured cigarettes higher.

They said this would result in lower demand, which would lead local cigarette manufacturers to cut down their purchases of tobacco leaf.

“Such a scheme is antitobacco worker. The decrease in the demand for locally produced tobacco will demolish the livelihood of tobacco farmers and will cause loss of jobs among the laborers under the farmers’ employ, which is contrary to the policy of the state to increase job generation. Also, there will be loss of jobs in the manufacturing sector, the tobacco-buyer sector, and within the government, as well,” said Patco president Alejandrino Reyes.

These views were shared by the Federation of Philippine Industries (FPI), which said that “higher taxes mean higher prices and less demand.”

“In the end, the government’s intention to raise more revenues out of these products will not be realized,” said FPI president Jesus Arranza.

Arranza also expressed fears the tax adjustment on cigarettes can create unintended consequences such as smuggling and the proliferation of counterfeit products. Already, he said the Presidential Antismuggling Group had intercepted large quantities of smuggled cigarettes in Northern Luzon.

He said it would be unfair for the industry to be imposed additional burden when the government is not going after smugglers that are raiding their market, nor addressing the tax leakages. (With Fernan Marasigan)

THE military’s anticoup force, that is also tasked to secure Metro Manila, will be on red alert on Wednesday in time for the massive anti-constituent assembly (con-ass) rally in Makati City, in the afternoon.

Maj. Carlo Ferrer, spokesman for the National Capital Region Command (NCRCom), said the red-alert status was raised in order to have enough troops should the situation call for it.

When red alert is declared, all leaves and furloughs are canceled and all personnel are required to be in their posts.

Ferrer said red alert was also raised in order to mobilize the military’s anti-riot troops, who have been directed to back up the police should there be a need to control the crowd at the rally site in Makati City.

“We will be on red alert beginning at 7 a.m. on Wednesday, partly for the purpose of providing crowd-disturbance management units to assist the police if they ask for it. We will just be inside the camp,” Ferrer said.

Meanwhile, the National Police activated its Task Force Manila Shield for Wednesday’s rally at Makati’s central business district in order to ensure that the demonstration would be orderly and peaceful, as promised by its organizers.

Senior Supt. Leonardo Espina, National Police spokesman, said the force will also remain on heightened alert, partly because of the opening of classes.

He said a big number of policemen will be deployed in different location as the need arises in order to undertake crowd-management operations in the venues of rallies including at the convergence points and in the routes of marchers.

“The general guidance to crowd management units is to observe maximum tolerance at all times, even when provoked,” Espina said.

As agreed upon between the organizers of the Makati rally and police officials, the ralliers will assemble at 3 p.m. in six different locations in the city and will simultaneously march to the rally venue at the corner of Ayala Avenue and Paseo de Roxas at 4 p.m.

“Let me emphasize that we in the National Police respect the right of the participants to free expression as much as we uphold as well the right of nonparticipants to unhampered access to our streets and thoroughfares. Thus, we will not allow mass actions beyond the authorized public assembly venue,” Espina said.

“Street bonfires, road barricades, destruction of public property and similarly unlawful activities bordering on anarchy shall be dealt with police response,” Espina added.

As agreed upon, the rally will start at exactly 5 p.m. and will run up to 8 p.m.

The protesters were given 15 minutes to voluntarily disperse after the program.

Espina said the police will be looking for possible infiltrators, and as such, control points will be put up on all roads leading to Metro Manila.