Tobacco Firm Warns of Shutdown

Source from:  Manila Bulletin 09/16/2011

An Anglo-American firm has warned it may consider shutting down its business if the proposed measure that aims to uniform excise tax system on alcohol and cigarette products is passed into law saying it would be difficult for small tobacco manufacturers to survive under such environment. The Associated Anglo-American Tobacco Corporation (AAATC) said a uniform excise tax rate would push prices of its tobacco products to record highs, resulting in markedly lower sales. "Such a significant excise tax increase can push up retail prices of our cigarettes by more than 200 percent. This will drive away our consumers and it will no longer be economically viable for us small manufacturers to produce cigarettes,' Blake Clinton Dy, AAATC vice-president said. As one of the smallest manufacturers, Dy said it would be very difficult for them to compete with importers and multinational companies in the industry which "will be the only ones left standing under proposal." "We may contemplate on shutting down our business, resulting in the layoff of roughly four hundred of our employees," he added. The Department of Finance is proposing that the current P2.72 excise tax on low priced brands will increase to P30 a hike in excise tax rate by more than 1,000 percent. Dy noted that only tobacco and alcohol products have been subjected to regular tax increases every two years since 2005. But the finance department argued the current tax structure is inequitable because products having the same current net retail price can be taxed differently if one was introduced before January 1997 and other one after 1997. Furthermore, the department said there is no provision in the current structure that allows the specific tax to track inflation. The government wants to change the current excise tax system on cigarettes and alcohol or the so-called "sin products" by adopting a single rate structure for each category of alcohol such as distilled spirits, wine and fermented liquor and for each category of tobacco products such as tobacco, cigar and cigarettes. The government expects to raise P31.5 billion in the first two years of the implementation of a uniform tax rate on all tobacco and alcohol products sold in the country. The government stands to earn as much as P12.9 billion in the first year of implementation of a single tax rate on cigarettes and tobacco products and P18.6 billion in the second year of implementation. Enditem