Lucky Strike maker regrets leaving Phl

KUALA LUMPUR, Malaysia – British American Tobacco, the maker of Lucky Strike cigarettes, has regretted its decision to pull out from the Philippine more than three years ago and is now back campaigning for major reforms that would level the playing field in the tobacco industry.

BAT Malaysia managing director William Toh said in an interview with reporters that the cigarette maker decided to establish its presence anew in the Philippines after pulling out in 2009 due to frustration over a lack of level playing field in the country.

 “We should not walk away from the problem and we should fight for a level playing field so we made a decision to come back. We should not pull out and we should continue to fight and work with the regulators to promote a level playing field,” Toh stressed.

Incidentally, Toh was the one who made the recommendation to the BAT headquarters to close down its Philippine operations in 2009 due to the existing excise tax regime that favors domestic players rather than foreign brands as well as the controversial decision of the Supreme Court involving one of its brands – Pall Mall.

 “We were losing money and we thought there was no light at the end of the tunnel. There was no level playing field so with a heavy heart we pulled out of the Philippines,” he said.

After the comeback with the relaunching of the Lucky Strike brand in the country last February, he pointed out that BAT is contemplating on investing in the Philippines either through the establishment of a joint venture or putting up its own manufacturing plant.

 “If given a fair chance to compete in a level playing field, we are very keen on investing in the Philippines,” he added.

Early last month, BAT Philippines general manager Jim Lafferty said the company was preparing to invest $200 million in the Philippines if the reforms of the current excise tax structure for alcohol and tobacco products are enacted into law.

The planned $200-million investment would go to developing, producing, distributing and marketing BAT brands in the country within the next five years

For his part, BAT Philippine head of corporate and regulatory affairs Roberto Eugenio said the administration under President Aquino as well as the need to pass a new excise tax law as the last tranche of the increase under the previous law was undertaken last year prompted the company to re-establish its presence in the country.

Eugenio said the company would continue to push for a fair and level playing field and that there should be no distinction between old brands and new brands

BAT has been fighting a law that imposes higher taxes on cigarette brands that entered the market after 1996. That meant higher taxes for brands like Lucky Strike that was introduced in 2001 and lower taxes for brands carried by its competitors including Philip Morris and Fortune Tobacco.

 “We are here for the long term regardless of what will come out of the Philippines. We consider the Philippines as an important market and we hope that reforms will be adopted,” the official said.

He added that BAT is supporting House Bill 5727 of Cavite Rep. Joseph Emilio Abaya that seeks to change the current multi-rate specific structure of the excise tax on tobacco and alcohol products by adopting a unitary rate and raise additional P60 billion for the government coffers.

The proposal seeks to shift to a much simpler structure by adopting a unitary rate which would address problems attendant to the current multi-rate specific structure of the excise tax like unfair tax treatment between and among tobacco and alcohol products.

The bill proposes a three-year transition period in unifying the tax rates on cigarettes and distilled spirits. The tax structure for fermented liquor will be immediately unified on the first year of the reform.

An essential feature of the bill, Abaya said, is the automatic adjustment of the tax rates using the relevant National Statistics Office-established tobacco and alcohol indexes. The adjustment would allow the specific rates to track inflation and maintain the buoyancy of the revenues from this source.