Local cigarette firms buck Philip Morris tax proposal

Makers of low-priced cigarettes joined hands yesterday in rejecting a proposal by tobacco giant Philip Morris Philippines Inc. (PMPI) for a uniform tax increase of P1 for all cigarette brands.

In a joint statement, Fortune Tobacco Corp. and Associated Anglo American Tobacco Corp. said that while they fully support President Arroyo’s appeal to help raise much-needed revenue from the tobacco industry, PMPI’s proposal will effectively "kill" low and medium-priced brands and displace thousands of tobacco farmers and factory workers.

"Most of our brands are hand-made cigarettes which pay an excise tax of only 40 centavos per pack of 30s. With the proposal of Philip Morris, the taxes we pay for these brands will jump by as much as 250 percent. If this happens, we’re as good as dead," said Florante Dy, president of Anglo American.

Fortune Tobacco Corp., meanwhile, said the taxes of its brands which now pay P1.12 per pack of 20s will jump by as much as 90 percent, while those paying P5.60 per pack will increase by 17.86 percent if Congress adopts the P1 upward adjustment proposed by PMPI.

"Philip Morris misleads the public when it says that a uniform tax increase is ‘equitable’. How can it be fair when its high-priced brands like Marlboro and Philip will only effectively carry an 11 percent increase whereas poor smokers will be slapped a 250 percent tax increase?" asked Lt. Gen. Salvador M. Mison (Ret.), spokesman for the Lucio Tan Group of Companies.

He then urged Congress to dismiss Philip Morris’ proposal and instead revert to the old ad valorem tax system which he said is more progressive and effective in capturing revenues.

Mison also described as "illusory" the P4.4-billion in additional tax collections projected by PMPI as a result of the P1 across-the-board tax increase.

"PMPI’s Chris Nelson simply multiplied P1 by 4.4-billion packs produced by all cigarette companies in 2003 to reach his projected tax collection. What he’s not saying is that while such a tax increase might not affect volumes of Philip and Marlboro, the volume of lower-priced cigarettes like those made by Fortune and Anglo American will drop significantly, thus making it impossible to reach the target," he stressed.

Dy, on the other hand, explained that most of his brands like Gloria, Ito Na, Balitang Matamis, Balasang, Sportman, Miracle and other lesser-known brands are consumed by the "masa" like carpenters and laundrywomen who can’t afford higher-priced brands.

He said Philip Morris’ objective is clear: to phase out the low-priced segment of the cigarette market so everybody will smoke the multinational firm’s brands.

"Anglo American appeals to President Arroyo and Congress to reject PMPI’s uniform tax proposal which will jeopardize the jobs of our more than 1,500 contract growers in Ilocos and between 600 to 700 employees," Dy stressed. – Marianne Go