New consumer price index to possibly exclude tobacco

MANILA, Philippines — The Department of Finance (DOF) said it is eyeing the removal of tobacco products from the consumer basket to measure the consumer price index (CPI).

The proposal came amid rising inflation in the country, which rose to a new five-year high of 5.2 percent in June.

“(The DOF) will consider a proposal to remove tobacco from the basket of goods,” Finance Secretary Carlos Dominguez said.

Asked for the rationale behind this, Finance Undersecretary Gil Beltran said tobacco products should not be considered as consumer goods, as it is more appropriate to label them as vices.

“Because tobacco is not a consumer good – it is a vice. It is bad for the health and the pocket,” Beltran said.

However, he said global CPI computation still includes all products, even vices. He said only four countries have so far removed tobacco from their consumer baskets.

Socioeconomic Planning Secretary Ernesto Pernia, for his part, did not object to the proposal, citing the small contribution of tobacco in consumer spending.

“I think that might be okay. I don’t see anything objectionable to the proposal. It’s not really a big (portion) – its weight is 0.9 percent,” the National Economic and Development Authority (NEDA) chief said.

On the other hand, NEDA Undersecretary Rosemarie Edillon said the inclusion of vices such as tobacco in the consumer basket would help reflect the real state of inflation.

“To the extent that we want inflation in the CPI, just so we know what is happening out there and how do we interpret,” she said.

Rising tobacco prices – partly due to higher excise taxes and the improved compliance of tobacco companies – has been attributed by the DOF as one of the drivers of inflation this year.

However, Dominguez said jacking up the prices of tobacco is a deliberate move on the part of the government to discourage the public from smoking.