New Zealand-born Australian tobacco executive Jeremy Flint, general manager of British American Tobacco (BAT) Philippines has quit smoking and has abstained from the habit the past five months or so.

He vows not to touch the stuff ever again and promises to keep clean from now on. The first time the BusinessMirror met Flint about a month earlier at his Citibank Tower offices in Makati, there were at least two ashtrays lying around, empty.

Back then Flint was busy parrying questions about his company allegedly getting preferential tax treatment from the government and that precious little revenues escaped the tax net as a result.

He is hurt that such are charged against a business that consciously makes the effort to be transparent and aboveboard at all times.

BAT’s operations in the Philippines is just a fraction of the 85 billion cigarette sticks produced locally in a year and, already, Flint’s million-a-year production commitment has earned the ire of all six of his competitors.

All six want his Pall Mall brand taxed at the highest possible rate of P26.06 a pack, and all have written letters of protest to the Department of Finance (DOF) saying the government lost revenue money when it agreed to classify the brand at the midprice range rather than at maximum.

“We’re a small brand representing only a small portion of the market while our six competitors have more than 85 percent,” Flint says, bewildered by the hostility.

He claims competitors falsely accused his company of unduly influencing the DOF into giving the Pall Mall brand preferential excise tax treatment of just P6.74 a pack.

“We have always behaved ethically and have followed the laws of the Philippines in all our business transactions. We only want to be able to compete on price, not on government protection,” he says.

Free competition

It amazes Flint, a journalist in Australia prior to joining the tobacco industry, that some would actually seek to thrive under protective government cover.

If it were all up to him, he says some of the provisions of Republic Act 8240, or the Tax Reform Act of 1997, will be removed and allow the domestic tobacco industry to compete on even terms.

“I believe the Philippines is a strong supporter of free competition. We at the British American Tobacco feel strongly about the playing field where everyone competes on even terms as good for the Philippines,” he says.

His problems with the Pall Mall brand, however, have made him pensive.

He recalls that New Zealand in the 1980s used to have only one airline, and this state of affairs made its owners haughty and their staff rather inconsiderate of passenger needs.

Airline food and service were terrible until the New Zealand government allowed the entry of competitors.

“Within six weeks the food and the service substantially improved,” he says.

It would be a sad day in the Philippines should one competitor fall by the wayside simply because the others want to keep their competitive edge and would not want the small players to make matters harder, he adds.

“The existing players don’t want competition,” Flint says.

His deepest wish is for government to stand up for greater competition, not less of it.

“I can understand why the competition does not want more, but I hope the Philippine government doesn’t stand for less,” he says.

Retirement plans

The former journalist from Melbourne also calls the Philippines his new home, having lived with a Filipina in recent years.

Flint holds a lifetime Philippine resident visa and has maintained a holiday house in Tagaytay Highlands where he goes to on most weekends.

He plays golf there as both exercise and recreation and he loves to dive, especially in Anilao, Batangas, which is practically just a stone’s throw away.

He finds Filipinos generally friendly, and he says he finds “a sense of progress in the Philippines” no matter that his competitors want to ease him out of the market the soonest they possibly could.

Then from his back pocket he took out his wallet and showed his daughter Abigail, 12 years old, by a previous marriage.

She’s pretty like her mother, and he obviously dotes on her.

Flint says he comes and visits her regularly in Melbourne and vows to come to the Philippines with her four times a year when he retires.

“I would probably spend half of my retirement here in the Philippines when it comes. I like it here very much,” he says.

Then he switches back to the Pall Mall case again, its problems never far from his mind.

“We have done everything in a legal manner, and I believe we always behaved in an ethical manner,” Flint reiterates.

Controversial decision

His competitors, however, do not seem convinced and have collectively made their thoughts known in letters of protest to Finance Secretary Margarito Teves, Bureau of Internal Revenue (BIR) chief Lilian Hefti and Finance Undersecretary Gaudencio Mendoza.

Mendoza signed the controversial decision reversing the 11th-hour decision of former BIR chief Jose Mario Buñag classifying Flint’s Pall Mall as premium products deserving of the highest possible excise of P26.06 per pack.

Buñag has insisted he acted within the bounds prescribed by law and stands by his claim the government stands to lose P93 million a year from foregone excise tax as a result.

The former revenue chief also claimed it was illegal for the DOF to reverse his February 22, 2007, ruling and made so much noise the legislature cannot help but notice the commotion.

But as far as Flint is concerned, it bothers him to think that Pall Mall is sold, excise tax included, only at P14 per pack while the direct competing brands Hope and Winston sell for P23 a pack, and yet it was his brand that got clobbered at the recent Senate committee hearing when they all pay excise of P6.74 per pack.

Flint reiterates that no preferential treatment was given to the BAT and its Pall Mall brand.

“The Pall Mall classification is consistent with the classification of other leading tobacco brands,” he would later say in full-page newspaper ads to correct what he felt were misimpressions they allegedly got preferential tax treatment.

Flint flatly denies the allegations, pointing out that its local licensee, La Suerte Cigar and Cigarette Factory, always paid the then-excise rate of P5.60 per pack, now P6.74, since the Pall Mall brand was introduced in August 2004.

The law says a price validation and revalidation process must be observed when determining the excise-tax classification of all cigarette brands in the country, a necessary process either denying or corroborating the manufacturer’s stated net retail price, a key determinant of the excise-tax rate.

Midpriced brand

Being a midpriced brand at the time of its introduction, Pall Mall paid the appropriate excise ever since.

Under the law, the price survey must be conducted within three months of introduction followed by a second price survey 18 months later.

No such surveys were conducted by the BIR within the prescribed periods despite repeated requests, and in such cases, the law may accept the manufacturer’s stated price for purposes of taxation.

On this basis alone, Pall Mall should have been granted its final excise-tax classification as a midprice brand at a resultant excise rate of P6.74 per pack, the BAT said in a paid newspaper advertisement.

The BAT and its local partner La Suerte continued paying excise at this rate until Buñag made the controversial order classifying Pall Mall as a premium brand deserving the highest rate of P26.06 per pack rather than as a mid-price product in February.

Flint notes the BIR finally conducted its own price survey 28 months after Pall Mall’s introduction to the market, and this same survey that BIR chief Buñag authorized confirmed the brand’s classification as a midprice product.

Finance Undersecretary Mendoza would later be dumbfounded when Buñag conveniently forgot this same survey that confirmed the status of Pall Mall as a midprice brand when on February 22 this year he issued an order reversing his own findings and put not just the BAT but his former colleagues at the DOF in a bad light for supposedly and illegally downgrading the tax classification of the Pall Mall brand.

Flint recalls they hired independent market researcher AC Nielsen to conduct a survey parallel that also validated their claim that Pall Mall was being sold at P14 per pack.

“Disregarding the results of his own survey, former commissioner Buñag issued on February 22, 2007, a ruling classifying Pall Mall at the premium segment with an applicable tax rate of P26.0 per pack, almost twice Pall Mall’s retail price of P14 per pack,” the BAT said in the paid newspaper ad.

Buñag said the basis for classifying the product at the premium bracket was the price at which Pall Mall was sold at duty-free stores when they imported and sold the brand starting December 2004, or five months after its introduction in the market.

Flint finds it funny that a third-party lawyer, Mike Baron, urged then-BIR chief Buñag in a letter to classify the brand at the highest excise segment. Flint maintains Buñag’s 11th-hour decision classifying Pall Mall as premium instead of midprice “unfairly raised the tax classification of the brand,” and this was the reason they successfully appealed to the DOF and had the excise rate finally determined at only P6.74 per pack.

“The excise rate of P6.74 per pack is legal on two grounds. It is the automatic classification of Pall Mall when the BIR failed to conduct the required validation and revalidation process within the prescribed period. More important, it is based on the results of the price survey which confirmed that Pall Mall should be classified as a midprice brand,” the manufacturers insist in the paid ad.

Flint maintains there was never a final classification of the brand until the DOF ruling and that, therefore, they cannot be accused of engineering a downward reclassification prohibited by law.

Flint finds his competitors simply hostile as they all want Pall Mall to pay the premium excise of P26.06 when none of the existing brands pay tax at this level.

He notes all locally manufactured brands are either value-for-money brands paying excise of P2.23 per pack, midprice brands paying P6.74 per pack or high-price brands paying no more than P10.88 per pack.

Had Buñag’s findings not been reversed, Pall Mall would be the only locally manufactured brand that will pay the premium rate of P26.06 per pack, Flint says.

Dim outlook

FLINT once remarked the long-term outlook of the local cigarette industry has dimmed, mainly because they have become one of the most heavily regulated industries not just in the Philippines but everywhere else.

For instance, cigarette manufacturers are not allowed to openly display their products in Thailand, and retailers resort to selling them “always behind something.”

Singapore, which encourages them to make the island-state their hub of operations and invest there, does not allow them to market openly, as well. The same goes for India, where regulators encourage the open flow of foreign investments such as that from the cigarette manufacturers, but close their ears to the open and public display of their wares.

“As long as the Philippines allows free competition and continues to impose fair excise tax for everyone, we will maintain our presence,” Flint says.

He vows support for even higher excise tax for their products as long as everyone else pays the same.

He also says increasing the tax on the bottom segment of the industry should raise a significant amount of revenues for government that it could use to offset spending on cigarette-related ailments among Filipinos.

“But that is government policy they alone determine,” he says.

Huffing&puffing

New Zealand-born Australian tobacco executive Jeremy Flint, general manager of British American Tobacco (BAT) Philippines has quit smoking and has abstained from the habit the past five months or so.

Place your bets on the future you want

Which firms will gain and which will lose as governments and businesses begin to take climate change seriously? Corporate balance sheets provide a few clues: As greenhouse gas emissions get costlier, the relative value of such assets as natural gas, which produces less carbon dioxide than coal when burned, will increase.

Five Questions

Restoring the fortunes of a company that has fallen on hard times often calls for bold moves, says Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School and author of Confidence: How Winning & Losing Streaks Begin and End (Crown Business, 2004).

Winning: Boardroom benchwarmers

Q:  I sit on a board with two members who, for the past year, have said and done very little. Regardless, both were just reelected unanimously with the support of the nominating committee. What’s your take? Name withheld, New York 

A: So, two seat-warmers on your board were just reelected unanimously, you say? Doesn’t that mean you voted for them, too? If so, don’t worry. You’re definitely not the only board member in history to endure an ineffective or otherwise dysfunctional fellow director.

Cyber Ed, Thai Style

The advent of the Internet has brought many wonders to people’s lives. One of them is education. Through the Internet, educators have been able to widen their reach to cover far-flung places that used to have limited access to learning tools.

Moral? Revolution?

SOMETIMES we must listen to our political leaders even if they give us the feeling that they are just leading us by the nose. We may even take them seriously, if only because we have no choice: we elected them. But first we must unravel the meaning of their words when they seem to speak earnestly and dramatically. At this time, the words are Moral Revolution.

After Wolfowitz

WASHINGTON—If one thing has become clear since Robert Zoellick became World Bank president three months ago, it’s that he isn’t Paul Wolfowitz.

Commentary: Will the ‘bottom billion’ ever catch up?

The World Bank’s new president, Robert Zoellick, passed a major milestone: his first time leading the bank’s annual meetings. As the world’s finance and development ministers descended on Washington last week, Zoellick established himself firmly at the head of the most important agency designed to ensure that globalization does not leave people behind, mired in desperate poverty. But he faces a planet that has changed far more rapidly than his institution has.

What makes change happen?

You have been charged with implementing a significant new initiative. Perhaps your company has defined a new competitive strategy and you need to align your group behind it. Or maybe you’ve identified stubborn problems in your unit that need solving.

If you’re not at the table, you’re on the menu

When the companies of the United States Climate Action Partnership (USCAP)—businesses including GE, Alcoa, DuPont and PG&E—announced their call for federal standards on greenhouse gas emissions in January 2007, The Wall Street Journal castigated these “jolly green giants” for acting in their own self-interest in promoting a regulatory program “designed to financially reward companies that reduce CO2 emissions, and punish those that don’t.”

ValueIT

ORGANIZATIONS have conventionally relied on commercial software products to back up their operations. But rising software costs has brought the value of commercial software into question.

Winning: Key lessons for new leaders

Q: What are the keys to insuring a strong start in a leadership position? Christopher Finlay, Chicago

A: You could fill a book—in fact, you could probably fill dozens—with all the ways to get off to a good start as a leader.

Going paperless

The advent of modern office devices and digital technologies has presented many opportunities for today’s businesses to achieve greater productivity, save on both costs and office space, and easily share information.

The forbidden fruit

SHIFTEE Velasco is one of those who are itching to try the Apple iPhone, which combines a mobile phone with the company’s iconic iPod music player, even before its debut next year in Southeast Asia. “I just want to be a braggart,” he says blithely.

Making gender issue history

FIRST of all, let me thank the Economic Journalists Association of the Philippines (Ejap) for this privilege to speak before a distinguished group of journalists, people from government and from business.

Passport to success

AMERICANS, the joke went, spent millions of dollars to produce a pen astronauts can use in space; the Russians, on the other hand, used pencils.

Selling beauty

Another cosmetic surgeon battles it out in crowded market

The current rage for beauty and wellness has led to an assortment of clinics offering surgical and nonsurgical procedures to make clients look good and feel good.

Winning: Competence trumps corporate bias

Q: I am seeking a rewarding career, having recently completed my bachelor’s degree in management. What obstacles will I likely need to overcome in the corporate world being an older, five-foot tall, African-American woman? Name Withheld, Houston 

A: When we first received your letter, we put it into a file labeled, “How To Succeed In Business While Looking Different.”

Looking backward

At a union hall in Detroit packed with 800 members of the AFL-CIO and their families, Democratic presidential candidate and New York Senator Hillary Rodham Clinton promises to break the mold on trade.

It’s Greek to me

NO one in the UN picked a quarrel with President Gloria Macapagal-Arroyo when she told that great assembly that the Philippines is the most democratic nation in Asia. It would have been pointless; the UN is not the forum for a debate on political theory and practice, but over here, there were some voices which greeted the President’s boast with not much enthusiasm.

Best teachers, worst practitioners

EIGHT executive directors of the World Bank were here in the Philippines on the very first day of the Senate hearings into the national broadband network/Zhong Xing Telecommunications Equipment Co. Ltd. (NBN/ZTE) contract. The executive director for the Philippines, a Brazilian national, was part of the team. They were here to learn about World Bank projects in the Philippines.

Are you delegating so it sticks?

You know that a key part of any executive’s or manager’s job is helping subordinates develop professionally—including honing their problem-solving and decision-making powers.

How to teach pride in ‘dirty work’

Managers in occupations that the public considers repellent can use an array of techniques to help their employees cope with and indeed feel proud of their work, according to a study that drew on interviews with 54 managers in 18 stigmatized occupations, including exterminator, “exotic” entertainer and prison guard.