Unholy alliance flip-flops

(Starting this month, BizLinks will appear in the Philippine Star on Tuesdays and Fridays.)

In the world of business, I have always believed that the national interest prevails over the corporate bottom line – at all times. This is something that has consistently guided this column over the last decade in the many issues that have been tackled.

Thus, it came as a surprise when I heard Senator Franklin Drilon say that Philip Morris was guilty of flip-flopping on the government’s proposed single tax rate on cigarette brands, a departure from the current discriminatory four-tiered taxa rate structure.

It seems that Philip Morris, before the company merged with Lucio Tan’s Fortune Tobacco a few years ago to claim a 90 percent monopoly of the local cigar and cigarette industry, had already been calling for a single excise tax rate for all brands of cigarette.

PM’s original position

Drilon bared a letter by Philip Morris dated Feb. 5, 2003 and signed by no less than its managing director then, George Farah, supporting a unitary or single excise tax rate. The letter was addressed to former President Gloria Macapagal-Arroyo.

The letter also contained statements calling for a level playing field in the local tobacco industry, understandably since Philip Morris was decrying what it perceived were favors that Fortune Tobacco was enjoying under the four-tiered system.

The good senator then shared parts of this letter by Philip Morris:

“In brief, our proposal is that the current four (4) tier specific system should be changed to a single tier specific system over a period of three years. In the first year, two specific tax tiers should replace the current four (4) tier system, with a reduction in the gap between the two tax tiers in the second year. In the third (3) year, the two specific tax tiers should be merged into a single specific rate applied equally on all cigarettes.

“This proposal should increase estimated excise tax collection on cigarettes by P8.5 billion or 43.8 percent above 2001 actual collection. Over three years, this proposal is estimated to increase tax collection by 91.8 percent compared with 2001...”

But this letter and its contents have been conveniently forgotten by Philip Morris when it decided to oppose the current government’s position to adopt a single rate system on tobacco. The company even “forgot” that it had outlined the benefits of a unitary tax system.

Drilon revealed other parts of Philip Morris’ letter that enumerated the advantages of a uniform excise tax on cigarettes:

“A single specific tax should result in an increased excise tax collection.

“Tax administration for the Bureau of Internal Revenue will be easier with a single specific tax rate on all cigarettes since only the volume sold, and not the price at which they are tax classified, shall be the sole determinant of tax revenues to government.

“A single specific tax rate for all cigarettes is used in several Asian countries including Singapore, Malaysia and Hong Kong, and its adoption by the Philippine Government will align local tax policies with those of its neighbors.”

Corporate greed

So instead of pursuing the much needed reforms in the sin tax system, Philip Morris turned around and blindly embraced its unholy alliance with Lucio Tan’s Fortune Tobacco to create its current monopoly status. And the American tobacco firm chose not just to keep silent; it even decided to oppose the administration’s position.

Does this not seem to be the ultimate in corporate greed? When a company abandons its view or position that is grounded on what is right and beneficial for the public good at the very next opportunity when it sees better profits, is this not the height of insincerity and dishonesty?

Knowing how the government needs additional tax revenues, is it not treasonous or a treachery to abandon an original statement that recommended for a unitary tax system that would yield to higher tax collections?

Strong lobby

When the former government was proposing unitary taxes a decade ago, Drilon said that there were more legislators supporting this move. But now that Philip Morris is in cahoots with Fortune Tobacco, quite a number of his colleagues have withdrawn support for the sin tax reform. This clearly demonstrates that these lawmakers’ alliances are bonded not by principles but by loyalties to the companies concerned.

A good thing though that during the last hearing on sin taxes, Drilon was able to make Philip Morris admit mainly on the strength of the letter sent in 2003, that imposing unitary taxes on sin products is an acceptable proposition.

As such, other senators should not be swayed by Philip Morris’ protest, and should see this flip-flopping as nothing more than a company’s weakness to throw away its morals after it greedily sees that it could earn more by supporting an opposite position.

Health is now the issue

With Philip Morris conceding that unitary or single taxation scheme is acceptable, Congress should now move on to the next order of business, which is agreeing on the most effective tax rate for tobacco and alcohol so that it can deliver on its primary goal, which now is towards protecting the public’s health.

Our lawmakers should not lose sight of its resolve to reform sin taxes. It is not only about generating additional revenues for the government. The more important issue now is the need to curb smoking and alcohol drinking to reduce the economic cost of poor health, loss in productivity, and unnecessary deaths.

National collegiate championship outlook

Competitions in the collegiate leagues all over the country are in full swing. The teams in the provincial leagues are eyeing for spots in the regional championships which serve as stepping stone to the Sweet 16 finals of the champions league (PCCL) 2012 National Collegiate Championship.

In Metro Manila, teams in the UAAP and NCAA are jockeying for the top four positions that will automatically advance them in the step-ladder knockout phase of the Sweet 16 finals. UAAP and NCAA champions are seeded in the final four while the second, third and fourth placers are seeded in the step-ladder knock out games competing with the regional champions from north-central Luzon, South Luzon-Bicol, Visayan islands, Mindanao and the top qualifiers from Metro-Manila.

The national collegiate champions for the past three years were: Ateneo Blue Eagles (2009); Ateneo Blue Eagles (2010); and San Sebastian College-Recoletos Golden Stags (2011).     

Visit www.CollegiateChampionsLeague.net for more details about the 2012 National Collegiate Championships.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.