Philippines: Cigar Firms Worry Over Frequent Tax Changes

Source from:  Business Mirror 09/14/2009

CIGARETTE manufacturers are pleading for a respite from frequent changes in applicable excise rate for their products, and urged the government on Friday to defer implementing still more changes soon after the last adjustments shall have been in place by 2011. Chris Nelson, Philip Morris Philippines Manufacturing Inc. managing director, told reporters　the latest adjustments have just been adopted this year and already there are plans to junk the existing four-tier system and adopt a single rate by 2012. This, at a time when the domestic market went down 30 percent in the first half, Nelson said at the sidelines of the Bright Leaf Awards Ceremonies that Philip Morris hosted at the Hyatt Hotel and Casino. He said the latest signals were from a revitalized economy fed by upbeat consumption activities that give them renewed hope the market would be down just 10 percent up to 15 percent only by the end of the year. This means reduced consumption of cigarettes totaling 92 billion sticks last year to more or less 82 billion this year. "Now is not the time to think of changes in the tax regime," Nelson said. The 2005 law mandating tax collectors to adjust excise rates on alcohol and cigarette products every two years from 2005 to 2011 imposes a four-tier system that does not respond to inflation, and the government is planning to adopt a unitary system that cures this imperfection and levels the market that unevenly taxes different product classifications. "The single-rate proposal needs a lot more study. Any study should be considered and should be very careful because these markets are very cognizant of the purchasing power of the consumer," Nelson said. Already, he pointed out, consumer activities have been down significantly as a whole this year and it was not as if the purchasing power of Filipino consumers has expanded. Latest data from the Bangko Sentral ng Pilipinas show the consumption confidence index still dominated by pessimists. "The market is also influenced by the global economy. Any excise-tax restructuring should be studied with extreme care. Certainly, there is no need to do it this year," Nelson said. He also said Philip Morris's domestic operations have been affected by the unfair treatment that its products receive in Thailand, enough to file a complaint before the World Trade Organization. Nelson said they were encouraged to pursue the case in part because the Philippine government was behind them in the case. Meanwhile, the Department of Finance expressed optimism the legislative support received by the tax-on- text proposal would also be afforded the same legislative treatment, given that the measure will generate incremental revenues of P19 billion on its maiden year, P42 billion on the second and P57 on the fourth year. "We hope the excise tax restructuring on sin products will come next," Finance Undersecretary Gil Beltran said on Friday. The government aims to generate increasing incremental revenues from the measure if implemented by 2012, Beltran said. Enditem