British American Tobacco ready to take on PMFTC

MANILA, Philippines - British American Tobacco (BAT) is still optimistic on pursuing investments in the Philippines despite the difficulties it is encountering in getting a level playing in the local tobacco industry.

“We are commited for the long-term. We are talking to the government, but so far there is still no commitment to level the playing field,” said James Lafferty, BAT’s new general manager in an interview.

“We are going to fight (for this investment). I’m an ethical man and we are an ethical company. We are going to fight fair. We may not be treated fairly all the time, but we are going to fight fair,” he said.

BAT pulled out of the Philippine market in 2009.

“We are back because of the change in administration. They said they were serious. we are very satisfied with the Aquino administration which is committed to change. We are optimistic in this country that this change will come, but we are also very cautious,” Lafferty said.

BAT wants a chance to compete in the Philippine tobacco industry, and is prepared to challenge cigarette giant PMFTC, the merged entity of Philip Morris and Fortune Tobacco Corp., which currently controls 90 percent of the market.

BAT, which, owns the Dunhill, Lucky Strike and Vogue cigarette brands, supports raising excise taxes on alcohol and cigarettes, saying that this would allow new players to compete.

As such, it supports the Depatment of Finance-backed House Bill 5727, authored by Cavite Rep. Joseph Emilio Abaya. The measure calls for the adoption of a unitary tax system for tobacco and liquor and indexation of taxes to inflation.

The bill is estimated to yield additional revenues of at least P30 billion annually for the next five years, or P150 billion.

Lafferty said the measure would level the playing field in the industry.

Under the current system, 1996 brands, which cover the brands of Fortune Tobacco, are permanently classified regardless of an increase in net retail prices but post-1996 brands are classified based on current retail prices.

According to BAT’s computation, a 1996 brand with a retail price of P32 per pack would have a tax rate of P12.

On the other hand, a new brand that would be introduced this year with the same retail price of P32 per pack would be slapped a higher tax of P28.30, which Lafferty said, is clearly a barrier to the entry of new players such as BAT in the local industry.

He said that if the playing field is leveled, BAT is willing to “get into deep investments.”

“Right now, even if we are not yet producing, we are putting up a new office and hiring new people. These are jobs that were non-exeistent before,” he said.