The nature of political economy of the Philippine cigarette industry: insights on cigarette taxation and the cigarette ad ban
Date
1996-10
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Abstract
The Philippine cigarette industry presents a quandary for the state, such that the government cannot act or intervene without having conflicting or contrasting conclusions. This paper illustrates the nature of these conflicts by analyzing two interventions of the state towards the industry: (1) the taxation of cigarettes; and (2) the attempt to ban cigarette advertising. From the common presumption that cigarette taxation exerts a regulatory/sumptuous effect on its level of consumption, this paper proffers that this taxation addresses a more important objective, which is bringing in an exceptionally large amount of revenue for the government, rather that the mentioned regulatory/sumptuary purpose. Unfortunately, along with this tax advantage comes a potentially damaging outcome, brought about by certain levels of taxation, to the following: (1) the already unequal distribution of income in the economy; (2) to the disadvantaged competing cigarette manufacturers brought about through increased industry concentration; and (3) the sector which is ultimately dependent on the cigarette industry, which is the tobacco farming sector. From the common presumption that a cigarette ad ban can reduce the level of cigarette consumption, this paper proffers that this government measure has very little, or no effect, at all in an economy like the Philippines'. Moreover, the ad ban, designed to meet the demands of the anti-smoking body to stop, if not control, the dangerous habit, cannot possibly be undertaken without conflicting with the interests of the advertising agencies who gain a considerably hefty profit from cigarette advertising. To a certain degree, the advertising industry has an existing economic dependence on the cigarette industry. The stated situations above is concluded to continue so as long as the Philippines remain a pre-industrialized economy.
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Keywords
Political economy, Philippine cigarette industry, Cigarette taxation