British American Tobacco wants chance to compete in local mart

MANILA, Philippines - British American Tobacco (BAT) Philippines wants a chance to compete in the Philippine tobacco industry, saying that it is prepared to take on cigarette giant PMFTC, the merged entity of Philip Morris and Fortune Tobacco Corp., which currently controls roughly 90 percent of the market.

In a briefing with reporters yesterday, BAT’s new general manager James Michael Lafferty said his company is prepared to invest significantly in the Philippines once the government is able to level the playing field in the tobacco industry through better tax treatment.

“I just want to fight. Get us into the ring and allow us to fight,” Lafferty said.

The cigarette company, which owns the Dunhill, Lucky Strike and Vogue cigarette brands, supports raising excise taxes on alcohol and cigarettes, saying that this would allow new players to compete.

As such, BAT supports the Depatment of Finance-backed House Bill 5727, authored by Cavite Rep. Joseph Emilio Abaya. The measure calls for the adoption of a unitary tax system for tobacco and liquor and indexation of taxes to inflation.

According to presentations made by the DOF in Congress, the bill is estimated to yield additional revenues of at least P30 billion annually for the next five years, or P150 billion.

Lafferty said the measure would level the playing field in the industry. “Competition is good. It generally results to more jobs and more opportunities,” he said.

Under the current system, 1996 brands, which cover the brands of Fortune Tobacco, are permanently classified regardless of an increase in net retail prices but post-1996 brands are classified based on current retail prices.

According to BAT’s computation, a 1996 brand with a retail price of P32 per pack would have a tax rate of P12.

On the other hand, a new brand that would be introduced this year with the same retail price of P32 per pack would be slapped a higher tax of P28.30.

This, Lafferty said, is clearly a barrier to the entry of new players such as BAT in the local industry.

He said that if the current excise tax structure would change, BAT is prepared to go “very deep” in its investments in the Philippines.

He hinted that the company might even put up a manufacturing plant in the country if and when the business environment is favorable.

PMFTC on the other hand, warned that drastically increasing taxes on sin products could kill the local tobacco industry.

Its top official Chris Nelson also earlier said that higher tax rates could also create an environment that is conducive to smuggling.

PMFTC owns the Marlboro, Philip Morris, Fortune, Hope, Champion, Winston and More cigarettes.