Tobacco Monopoly Expects 26% Drop in Sales Under Sin Tax Reform

Source from:  InterAksyon 11/29/2012

MANILA – The Philippines' tobacco monopoly on Thursday said sales would drop by over a fourth once the government-backed sin tax reform bill becomes law. "In the best case scenario, the total market under this revised bill will go down by at least 26 percent," Chris Nelson, Philip Morris Fortune Tobacco Corp. said, referring to House Bill 5727. The industry sells 100 billion cigarette sticks a year, with PMFTC cornering 90 percent of the market. Nelson said the expected drop in industry sales however won't mean consumption would likewise decline. "The tax-paid market may go down, but it will be offset by the illicit market, or counterfeiting and smuggling, which benefits absolutely no one, not the government nor the legitimate industry," he told reporters during a luncheon briefing. "That does not account for the fact if you get significant smuggling and counterfeiting, so it could even be higher. Thus, the impact on the tobacco industry could be much worse," Nelson said, adding that the industry employs 2.9 million people directly and indirectly. He said HB 5727 is lopsided in favor of the liquor sector since tobacco producers would shoulder 85 percent of the P33 billion in additional tax revenues expected from the sin tax reform measure. "If they can adjust for alcohol, why can't they make some favorable adjustments for the tobacco industry as well," Nelson said, referring to members of the House who early this month approved HB 5727, with 201 in favor and 21 against the bill. Nelson said the tax rate for tobacco under the lowest of three tiers will surge by 700 percent in two years, while those for the next two tiers would jump by 300 percent and 150 percent, respectively. Nelson said this is higher than the eight to 32 percent increase in the tax rates of alcohol products. "The difference is enormous which we feel needs to be looked at," he added.Enditem