British Tobacco Firm Junks Plans for RP Plant

Source from:  By Jun Vallecera BusinessMirror Reporter  03/18/2008

The British American Tobacco Corp. (BAT), trademark owners of locally manufactured Pall Mall cigarettes, has withdrawn its plan to put up a P2-billion facility in the country. The withdrawal came in the wake of a Department of Finance (DOF) decision reinstating the hotly contested excise-tax rate for its Pall Mall brand at the highest possible, or at P26.06 per pack. Pall Mall, emboldened by a DOF order classifying the brand at the mid-price level, or at only P6.74 per pack, came under attack from competitors who insisted it be taxed at the premium category. Pall Mall Philippines general manager Jeremy Flint has called the new DOF order unjust but has yet to disclose what he and his principals will do next. But thus far, the case has led to the resignation of Finance Undersecretary for administration Gaudencio Mendoza, who has tendered his resignation effective April 1 this year. Mendoza crafted the DOF order that classified Pall Mall at the mid-price range of P6.74 per pack, a decision that raised hell in Congress, which pointed out that a reclassification of the excise-tax rate was prohibited by law. Previously, then-Bureau of Internal Revenue chief Jose Mario Buñag ruled that Pall Mall should pay the premium rate of P26.06 a pack, only to be reversed by Undersecretary Mendoza on appeal. Pall Mall's competitors were scandalized that BAT was paying only the midprice rate of P6.74 and ran to Congress for validation, which was given. Mendoza refused to be interviewed and took a leave of absence soon after Finance Secretary Margarito Teves reviewed the hotly contested DOF order he signed, on the conviction that Pall Mall was truly a midprice brand that should not pay premium excise rate, as everyone insisted. On Monday, colleagues at the DOF said Mendoza's resignation takes effect April 1 this year, and that he has since left for a vacation in the United States. Official sources revealed that the American Chamber of Commerce gave official notice that the BAT has withdrawn the plan to open a new cigarette manufacturing plant for an initial investment of $50 million or roughly P2 billion. BAT, through local licensee La Suerte Cigar and Cigarette Factory, manufactures an estimated 100 million cigarette sticks a year or just a tenth of the estimated 1-billion cigarette sticks produced locally by all brands combined. Senior officials said they, too, will resign if their decisions were reversed in the manner like Mendoza's, who has a master's degree in law at the Harvard Law School. Enditem