Philippines: BIR Rejects PMFTC''s Reclassification Request

Source from:  Manila Bulletin  12/20/2013

The Bureau of Internal Revenue (BIR) has rejected the request of Lucio Tan's group PMFTC Inc. to reclassify its Marlboro brands from high tier to low tier category.

A BIR source, who declined to be identified because the matter is "confidential," said the tax authorities denied the registration of Marlboro Original, Marlboro Gold Lights, Marlboro Menthol, and Marlboro Black Menthol to low price category.

When sought for confirmation, BIR Commissioner Kim S. Jacinto-Heneres said she will let PMFTC to make the necessary announcement regarding the result of its request for registration.

But Jacinto-Henares said she had told PMFTC about "the beauty of a unitary tax rate system on cigarettes — there's no distinction between high and low tier brands — everyone pays the same excise tax rate."

Jacinto-Henares also disclosed PMFTC had opposed the government's proposal for a unitary excise tax rate system during the deliberation of Republic Act 10351 or the Sin Tax Reform Act of 2012 in Congress.

"Now they started complaining about low-priced cigarettes eating up their market share? This could have been prevented if they did not strongly oppose our unitary proposal from the start," the BIR chief said.

Under the new excise tax law, the BIR is required to adopt two-tiered excise tax rates — low and high segments — on cigarettes from 2013 to 2016 and eventually a single rate of P30 per pack by 2017.

PMFTC, the joint venture between taipan Lucio Tan and American tobacco giant Philip Morris International, earlier requested the BIR to reclassify its four premium Marlboro brand variants from high to low tier.

Paul Riley, PMFTC president said the company wants Marlboro to be reclassified to a much lower tier due to declining sales as consumers turn to cheaper brands and illegally imported cigarettes.

Riley said PMFTC's production volume has declined to 68 billion sticks this year from 92 billion in 2012. Production volume is expected to further decrease next year to 48 billion.

If approved, cheaper Marlboro cigarettes will compete with PMFTC's own low-priced brands Champion, Fortune and Jackpot, which were previously owned by Fortune Tobacco Corporation. Enditem