BIR sees P2-B add’l revenue from cigarette tax

The Bureau of Internal Revenue (BIR) expects to raise nearly P2 billion in additional revenue based on the results of a nationwide survey of new cigarette brands which the agency released yesterday.

In a public hearing presided by BIR Commissioner Guillermo Parayno and Finance Undersecretary Grace Pulido Tan, 11 of the 30 cigarette brands surveyed by the BIR were found to have higher retail prices than originally declared with the bureau. The survey was conducted in March in compliance with a directive from the BIR chief and Finance Secretary Jose Isidro Camacho.

Once in effect, the reclassification is expected to yield nearly P2 billion in additional revenue for the government based on present production volumes. Brands to be moved to a higher tax category are the following: Astro Filter KS, Astro Menthol 100s, Astro Menthol KS, Memphis Filter KS, Memphis Menthol, Capri Slims Lts., Lucky Strike Filter, Lucky Strike Lts., Lucky Strike M. Lts., Mighty 100s and Pentagon M. The tax for L &M, a relative newcomer, remains at P5.60.

Produced by La Suerte Cigar and Cigarette Co., Astro, Memphis and their respective variants are currently paying excise taxes of P1.12 per pack based on the suggested average retail price of P4.20 which it declared with the BIR in 1999. After the March survey, however, it was established by the BIR that the said brands were selling at an average retail price of P7.75 per pack. Given this pricing, the BIR said Astro and Memphis should be paying an excise tax of about P5.60 – or roughly P4.48 more than what it is currently paying.

If La Suerte maintains its 2002 production volume of 358 million packs, it will have to pay an additional P1.6 billion in excise taxes to the BIR. Likewise, the maker of Lucky Strike – British American Tobacco – is also expected to shell out more if the reclassification becomes final.

During the hearing, La Suerte representative Antonio Yao posed on objections over the BIR’s survey results, saying his firm is willing to shoulder the extra tax to be slapped on their products as a result of reclassification.

The BIR was supposed to have conducted the surveys as early as 1997. For unknown reasons, however, no survey or reclassification was done in the last six years which, in BIR’s estimates, cost government nearly P3 billion in uncollected revenues. BIR sources said the agency is still undecided whether to assess and collect back taxes from companies whose brands were in the wrong classification since 1999.

All cigarette companies to be affected by the proposed reclassification were given 15 days to submit their written positions after which the BIR will make a final decision.

Earlier, it was reported that Parayno wanted a shorter grace period since, according to BIR estimates, government is losing more than P7 million daily if the new cigarette brands will not be slapped higher tax rates. Pulido-Tan, however, overruled Parayno and gave the companies 15 days within which to submit their memorandum.

Meanwhile, local cigarette manufacturers are advised on the new basis for assessing the excise tax on cigarettes they export to Singapore.

The new policy issued by Singapore Customs changed the basis of assessing excise duty one cigarettes from weight to the number of sticks.

Under the new taxation methodology, which took effect last July 1, 2003, Singapore Customs has started levying excise duty on each stick of cigarette weighing one gram or less at S$25.5 cents, and each additional one gram or part thereof an additional duty of S$25.5 cents.

The duty payable is based on the average net weight of each stick of cigarette derived by dividing the total net weight of a batch of 1,000 sticks of cigarettes to which it belongs by 1,000. – With Rey Arquiza