Merchants of death

Calling A Spade

By Solita Collas-Monsod

THERE SHOULD no longer be any doubt whatsoever regarding the following health issues related to smoking:

(1) The probability of falling victim to many medical problems -- Dr. Tony Dans lists 49 of them -- is greater among smokers than among non-smokers, the largest risk being attached to lung cancer. For example, the probability of getting lung cancer is 13 times greater for male smokers than for non-smokers. It may also interest the Reader that the risk of a smoker (obviously male) suffering from erectile dysfunction is 1.5 times (or 50% more than) the risk for a non-smoker.

(2) Smoking prevalence is greatest among the poor. Dans cites a 2012 PIDS study that smoking prevalence is 39.9% in the poorest quintile a 24.8% in the wealthiest quintile. This is also true for other countries (Malaysia, Vietnam, Laos, Myanmar).

(3) While smoking prevalence is lower in males living in the main tobacco-producing regions (I, II, CAR), it is significantly higher among women and boys under 14, as compared to the other regions of the Philippines. Moreover, death rates in I, II, and CAR from cancers and atherosclerosis (heart disease, stroke) are also significantly higher.

(4) Smoking in the Philippines kills over 300,000 people a year, and costs the country AT LEAST ₱188.8 billion a year in loss of productivity from sickness and death, and costs of care. Losses far greater than the combined costs of any earthquake, tsunami, typhoon, or other natural disaster that has hit the Philippines in the past twenty or thirty years. And Dr. Dans says "AT LEAST" because, among other things, his estimates include only costs related to the four major non-communicable diseases that afflict smokers (lung cancer, COPD, coronary, stroke); neither do the estimates include the costs attached to those who are second-hand or passive smokers. To support the assertion that this is an underestimate, the Quimpo study on the economics of tobacco and tobacco taxation, cites, for 2003, estimates of ₱44.6 billion for treatment costs for the above four diseases and ₱270 billion in lost productivity from morbidity and mortality.

One would think that the country’s decision makers, in the face of such a health crisis, a situation which surely costs the country in one year more than the combined costs of all natural disasters -- typhoons, earthquakes, floods, landslides -- that have occurred over at least the past 20 years (most likely closer to 50 years), would be resolute in their desire to get smokers to quit smoking.

One would also think that in the face of all the data and studies, here and abroad, that show that imposing excise taxes on tobacco would (a) result in a decrease in its consumption, thus saving lives and other health costs (the higher the taxes, the greater the decrease), while (b) at the same time earning very much needed revenues for government (the higher the taxes, the greater the revenue); our decision makers would think they had died and gone to heaven with such a measure, i.e., reached a win-win solution (win for people’s health; win for government) or "hit the sweet spot" in a golf swing.

One would have to think again.

Because our legislators seem to be marching to a different tune -- that played by the tobacco lobby. Even if that tune (the facts they present) is out of synch with the actual music (the hard evidence).

An example of a ridiculous/out-of-synch claim: the Philippine Tobacco Institute (PTI) asserts in its Senate presentation that there are 840,416 Filipinos engaged in tobacco farming (the National Tobacco Authority itself makes no such claims -- it’s more like 52,000). Why should that be ridiculous? Only consider: the total area used for tobacco farming in the Philippines (2011) is 32,235 hectares (overall total hectarage of agricultural farms: 9.7 million has). The PTI employment estimate would imply that there are therefore 26 farmers/farm workers employed in each hectare of tobacco land on the average.

Moreover, the ridiculousness of the claim boomerangs on the PTI: It says that the average yearly income per hectare of a tobacco land is ranges from ₱40,000-₱100,000. That will therefore mean that each of the 26 workers in the hectare will earn anywhere from a little over ₱1,500 a year to at most a little under ₱4,000 a year for his efforts. Which should force them to come to the conclusion that tobacco farmers would be better off working at other, more highly paid occupations.

Then there is the lament that tobacco is the most highly taxed industry in the Philippines. Of course it has to be! Because of its nature, and the harm it causes those who consume it, it is actually not a good, it is a bad. Which is why the tax on tobacco is called a sin tax in the first place.

Or the claim that sari-sari store owners (all 300,000 or 680,000 of them, depending on which industry presentation is used), stand to lose something like ₱1,000 a month of revenue with the reduction in cigarette sales. The only way that this statement can be true is that if the tobacco lobby assumes that the money not spent on tobacco products will not be spent at all on other products. Which is of course patently ridiculous.

And then there is the claim, meant to tug at the heartstrings, that the poor are being discriminated against with a unitary tax. "Equity" requires that they be taxed less. Excuse me. The "regressive" argument has to take second place to the fact that it is the poor who smoke more, and suffer more of the consequences of smoking than the non-poor. It is not as if cigarettes are a "good." They are a "bad," and the less the poor purchase a "bad" the better off they (and their families) will be. 

But the claim of the tobacco lobby that seems to have captured our solons’ hearts, judging from the way it is repeated, is the claim that the tax on tobacco should not be too high, because the higher the tax, the greater the smuggling (to avoid the tax) that will take place, and therefore the less the revenue that can be collected. The JTI (a tobacco company based in Japan) presented a slide entitled "Relativity Between Cigarette Affordability and Non-Duty Paid Consumption," and claiming, on the basis of the data presented, that higher the cigarette prices are as a percentage of disposable income would lead to non-duty paid consumption (i.e., smuggling). 

This apparently was swallowed, hook line and sinker by the audience. But applying a little more rigorous (meaning, more than just eye-balling it) statistical testing to that data shows that the higher prices as a percentage of disposal income explains only -- are you ready for this, Reader? -- only 5% of the smuggling activity (adjusted R2=0.05). Good grief. 

The bottom line: The empirical evidence unambiguously shows that the higher the excise tax on tobacco products, the greater the reduction in its consumption (and therefore the greater the health benefits), and the greater the additional revenues for government. That’s the win-win. That’s the sweet spot. Will the tobacco industry die? Alas, of course not. But it really should. Why should anyone sympathize with merchants of death?