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THE
Department of Finance (DOF) has backtracked on its
original ruling and decided that Pall Mall manufacturer
British American Tobacco (BAT) be levied the highest
possible excise rate of P26.06 a pack, instead of only
P6.74 as it previously decided.
The
decision capped a year of struggle between Jeremy Flint,
BAT general manager in the Philippines, on one hand, and
everyone else in the tobacco industry, on the other,
about how the foreign brand should be taxed.
Flint had said taxing
Pall
Mall at P26.06 when it retails for only P14 a pack is
tantamount to killing the brand via taxation.
The
latest decision also effectively sustained the ruling of
former Bureau of Internal Revenue chief Jose Mario Buñag,
who insisted that the brand ought to be paying the
highest possible excise tax instead of Pall Mall’s
midprice-brand classification.
Cigarettes are classified as low, midprice, high and at
premium, and are taxed accordingly.
The DOF
decision dated February 11 but released only Wednesday
was a complete reversal of the original ruling that
Finance Undersecretary Gaudencio Mendoza issued July 24,
insisting that Buñag erred when he ruled that Pall Mall
must pay the higher possible excise.
“The
content of this document is disappointing,” Flint said
in an e-mail to financial reporters, referring to
Mendoza’s
turnaround, known as the DOF’s second endorsement on the
subject.
Flint said BAT and La Suerte Cigar and Cigarette Factory,
local
Pall
Mall manufacturers, were considering options and would
not be making any more comments.
Finance
Secretary Margarito Teves hinted at those options
Tuesday when he told reporters the parties are free to
elevate their case before the Court of Tax Appeals.
Flint had said his competitors want to drive them out of
business by urging the government to impose the highest
possible excise tax.
He said
Pall Mall sells only around 100 million sticks of
cigarettes a year in the Philippines, a small fraction
of an industry that produces roughly one billion sticks
annually.
But
Fortune Tobacco, Flint’s competitor and manufacturer of
the Hope brand of cigarettes, insisted on having Pall
Mall pay the highest possible excise because downward
classification of cigarette products was against the law
and would cause the government to lose more or less P100
million a year. |
