Philip Morris Rejects DOF Tax Measure

Source from:  Manila Times 02/22/2012

PHILIP Morris Fortune Tobacco Corp. (PMFTC) wants the version of the bill that allows for the continuity of the subsisting excise tax scheme on sin products be enacted versus that of the Department of Finance' version. "The tobacco industry has 2.7 million people in employment. If you look at the alcohol industry, their estimate is 5 million people. So in other words, these industries employ 7.7 million people. A unitary tax system will obviously have severe repercussions on employment prospects in this country," Chris Nelson, president of PMFTC said in a press briefing. The press conference was held after Finance Secretary Cesar Purisima assured tobacco farmers of subsidy to enable them to shift to other cash crops once the department's version of sin tax bill is enacted. He said that the company strongly prefers a version of the bill closer to that of Rep. Eric Singson Jr. of Ilocos Sur, which allows the continuation of the current scheme. The Department of Finance version of the sin tax bill, on the other hand, seeks to change the current multi-rate specific structure of the of the excise tax by adopting a unitary rate. The government said that with the new six tax in place, an additional P60 billion in taxes will be generated a year from tobacco products versus the current P30 billion. "I think the illicit trade would grow exponentially [if the unitary tax is applied]. It may not impact the demand, but will only have an impact on the supply of that demand. The other key issue which needs to be addressed, is tax administration," Nelson said. The PMFTC which accounts for at least 90 percent of the country's tobacco inudstry is the combined company of Philip Morris Philippines and Lucio Tan's Fortune Tobacco. At present, the lowest tax imposed is P2.72 per pack of cigarette. Under the DOF proposal, the firm will be paying some P30 in three years, or more than 1,000 percent increase, Nelson said. "That's unheard of no one has actually done that. And based on those countries which took a large increase-but less than that-they already had severe problems," he said. He said that the company saw illicit trade has "risen substantially" in countries such as Malaysia, Hong Kong and even Singapore after the imposition of higher excise tax on these products. Enditem