Philip Morris Phils urges uniform tax on cigarettes

Philip Morris Philippines Inc. (PMPI) , maker of high-end cigarette brands, is urging Congress to revise the excise tax on cigarettes from the current four-tier system to a single or uniform taxation.

Chris Nelson, managing director of PMPI, said the revision will not only correct existing price gaps but will also provide a more level playing field among competitors in the industry.

Under the current taxation scheme, price ranges between P1.25 per pack for low-end brands to about P13.44 per pack for high-end brands.

The company’s proposal involves carrying out the shift in taxation to a flat or uniform taxation over a three-year period, beginning with the replacement of the four-tier system by two specific tax tiers on the first year.

A reduction in the gap between the tax tiers will be imposed on the second year.

In the third year, the two tiers will be merged into single specific rate and will be applied equally.

PMPI said the proposed tax administration by the Bureau of Internal Revenue will be easier to implement since only the volume of cigarettes sold – and not the price at which they are classified, will determine the potential tax revenues of the government.

"A single tax rate is immune from consumption shifts in favor of lower tax cigarettes. Thus, with a single specific tax rate, future government tax revenue should be higher as well as being more predictable and secure," Nelson said.

From a projected tax revenue improvement of 43.8 percent on the first year, potential earnings will go up 66 percent to P32.2 billion on the second year and 92 percent to P37.2 billion on the third year from P19.4 billion in 2001.

Currently, the House committee on Ways and Means is deliberating a proposal that seeks to raise the prevailing excise tax rates on cigarettes through an across-the-board increase of all tax tiers.

This will be achieved through the indexation of the current rates by cumulative inflation from 1997 to 2001.