Cigarette Case

Source from:  By Conrado R. Banal III Inquirer 08/30/2007 08/31/2007

Nobody said that it's a sin for our top government officials to be seen in the company of executives of foreign multinational groups. It's just plain suspicious, that's all! That includes the dinner for the Lola at the Palace there in London during her official trip early this year, hosted by British American Tobacco, or BAT, the world's second-biggest cigarette company. Today, we happen to know that BAT has been lobbying this administration for a huge tax reduction on its "Pall Mall" brand of cigarettes, from P25 per pack to P5.60 per pack, or an amazing 80-percent discount. The question is, who in heaven's name dumped the President of the Republic into such a rather compromising situation? Based on whispers among Cabinet members, the free dinner was arranged by none other than another Cabinet member. Oops! Did he inform the "Lola" [Grandmother] in the Palace about the strong lobby of BAT to reduce substantially its tax payments in this country? Or for that matter, did the Lola at the Palace know that the same BAT wanted the Supreme Court to declare the "sin tax law" as unconstitutional, which happened to be one of the main revenue-generating measures of the Gloria Macapagal-Arroyo administration? If BAT wins the case before the Supreme Court, this administration will surely get crippled. I mean, did our beloved Cabinet member even think about that? * * * Also sometime ago, during the yearly excise tax conference among ASEAN members held in Singapore, one of our gallant congressmen was seen in the company of the PR hired by BAT here in the Philippines. The same congressman, who is no longer in the legislature today, was also said to have been instrumental in tax measures of this administration in Congress. What do you know -- talk in business circles has it that the same lucky son of his mother was also instrumental in the new ruling of the Department of Finance (DoF), which happens to be favorable to BAT's "Pall Mall" brand of cigarettes. Nothing is wrong there, sure! * * * BAT, plus its supposed local licensee La Suerte Cigar and Cigarette Factory, can wage all the PR campaigns that they want, but they still cannot deny that a news report came out in London on that suspicious DoF ruling. According to insiders in the Bureau of Internal Revenue (BIR), the DoF ruling in effect reversed the BIR on the "Pall Mall" case, in which La Suerte and BAT asked the BIR to lower the excise tax on that particular cigarette brand. Here is a direct quote from the news report: "BAT has scored an unexpected legal victory in the Philippines over the excise classification of Pall Mall, one of the company's cluster of global key brands. "BAT is understood to have been notified late last month that its appeal against a ruling by the Philippines' Bureau of Internal has been successful. "The British company has argued that the previous excise ruling -- which levied tax on a pack of Pall Mall cigarettes valued at almost double the retail price -- should be significantly lower." There -- that's part of the report in the Sunday Telegraph by a certain Mark Kelinman, which came out last Aug. 4. Now, our sources in BIR said that the bureau only got a copy of the reported "legal victory" only last Aug. 9. And what was that the news report said about BAT's being notified in July? Was it only a case of advanced info? Sure, and the Pope is also my father! * * * Based on their position paper submitted to the BIR, La Suerte and BAT wanted the tax cut because "Pall Mall" is now produced locally. As a background, the BIR ruled that the excise on "Pall Mall" should be P25 per pack because this was the rate imposed on the "blue seal" (i.e., imported) "Pall Mall" cigarettes sold at the Philippine Duty Free. In effect, La Suerte and BAT argued that the locally produced "Pall Mall" is priced much lower than the imported cigarettes of the same brand. And so, the excise tax should be based on the lower price for the local. Well and good! Still, the BIR legal department, which submitted its findings on the "Pall Mall" case to ousted BIR commissioner Jose Mario Buñag, has an interesting retort to that argument raised by BAT and La Suerte. And that is, the price difference between the local and the imported "Pall Mall" is too humongous to be believed. Through field surveys, the BIR was able to determine that the imported "Pall Mall" was priced at about P35 per pack-without the excise tax. In comparison, the local "Pall Mall" (as claimed by BAT and La Suerte) was priced at less than P5 per pack. Here's what the BIR legal service had to say on that: "Considering that all brand owners, including BAT in the instant case, needs to protect the image and quality of its products, as well as to preserve and enhance the international reputation of their trade marks … it is very alarming that such a discrepancy in costs will arise." Thus, the BIR legal service recommended a "thorough investigation" of the huge price difference. Why, the difference is only a fantastic 600 percent! What's so mysterious about that? Enditem