THE British American Tobacco Co. (BATC) which pulled up stakes and left the country in 2009 following a Supreme Court decision that made continued Philippine operations untenable is ready to do battle with competitors again in a cigarette market considered the 15th largest in the world.
James Lafferty, chief executive officer of the BATC who replaced the Australian BAT General Manager Jeremy Flint, said his principals in London have been encouraged by more recent signals from President Aquino to reform the local excise tax system and generate more revenues from both cigarettes and alcohol products.
Lafferty said he supports the legislative proposal backed by Finance Sec. Cesar V. Purisima seeking a one-time but large increase in excise rates under consideration at the House of Representatives.
He said the four-tiered excise system put in place in 1996 makes for an uneven playing field that makes it impossible for players entering after the date to compete with a reasonable chance at success.
He cited the case of the Fortune brand of cigarettes with a net retail price of P5 per pack and classified at the low end of the excise bracket and paid an excise tax of P1 in 1996.
That same brand of cigarettes which now has a retail price of P10.03 is still classified at the low end of the excise bracket and pays a tax of only P2.74 per pack.
Without the 1996 legislation that froze the net retail price at then prevailing rates, the Fortune brand should now be classified at premium class and pay a tax of P28.30 instead of only P2.74 per pack.
“What they did was draw a line in 1996 that says you are a boxer who weighed in at 147 pounds and you get to fight at 147 pounds no matter what happens. Soon you weigh 200 pounds and you know what, you still get to fight 147 pounds. Then a boxer comes along like Manny Pacquiao who didn’t weigh in in 1996 but only in 1998 at 147 pounds and who does he get to fight? The boxer who is now 200 pounds!” Lafferty said to illustrate the state of the local excise tax structure for cigarettes and alcohol.
“All we are asking for is to make everybody get back on the scale. We don’t get to say I’m going to fight at the weight I was in 16 years ago. It doesn’t work like that, but that is the system in place we have right now,” he said.
Lafferty said the unequal tax treatment in the excise tax division is why the World Trade Organization has overruled the Philippines and has asked the government a lot of questions.
“The WTO has overruled the Philippines because its excise tax system is not fair. Don’t even argue it is,” Lafferty said.
His immediate predecessor, Flint, left after the Supreme Court ruled on the constitutionality of provisions affirming the imposition of higher excise tax rates for cigarette brands that came in after 1996.