British American Tobacco Supports Sin Tax in Philippines

By Joann Santiago

British American Tobacco (BAT) continued to support moves to increase sin taxes in the Philippines but raised some issues on the Senate version of the bill, which it said does not provide a level playing field to market players.

BAT Philippines Corporate and Regulatory Affairs chief Robert Eugenio stressed they are not questioning the Senate's sin tax bill measure, approved last Nov 20.

The Senate's version provides for P40 billion additional revenues in the first year of implementation once the bill has been made into law.

Eugenio, however, said although the approved bill provides for higher tax rates it still follows the tiered system similar to the 1996 prices and the tax rates are based on how much the companies paid this year.

"Taken together those two provisions, in effect, they create a new annex, which is, the list of brands that are in 2012 and then all new brands since they have to be based on 1996 pricing levels," he said.

Based on these provisions, Eugenio said there will still be no level playing field because new entrants will still be taxed higher rates even if their retail price is lower than the higher priced brands.

"From the very beginning we have emphasized that that is our goal, that that should be one of the pillars of the sin tax reform bill, the level playing field. So we hope that the bicam will be able to clarify that," he said.

The Bicameral committee has scheduled to tackle the sin tax reform measure next week.

Under Senate Bill 3299 cigarettes packed by hand, which is taxed this year of less than P7.56 will need to pay P6 per pack effective May 1, 2013.

For those that are taxed this year between P7.56 but less than P12 they will be taxed P10 per pack while those that are paying P12 or more this year will pay P14 per pact next year.

The bill said brands that will join the market from March 1, 2013 to Feb 28, 2015 will be collected "an excise tax in accordance with the net retail price (excluding the excise tax and the value-added tax) per pack..."

The bill provides for a unitary rates by 2017and Eugenio said the almost four-year leeway until the tax becomes unitary provides "preferential treatments for existing brands."

Under the House version, tobacco products will be taxed based on two tiers - those that have net retail price of below P11.50 and those above P11.50.

""The beauty there is that for new brands, the net retail price threshold is P11.50. It is updated to current prices," Eugenio said noting that the House version has a "cleaner and clearer" rules.

BAT, which produces Lucky Strike that are currently sold at 7/11 stores, re-established its Philippine operations early this year and bids to expand once the sin tax issues has been resolved.