Congress  to probe DOF rule on Pall Mall tax

Congress is set to investigate the ruling of the Department of Finance (DOF) that lowered the excise tax rate of the Pall Mall cigarette brand owned by British American Tobacco (BAT).

Sen. Juan Ponce Enrile, chairman of the Senate finance committee and Sen. Francis Escudero, chairman of the Senate ways and means committee, have agreed to look into the issue.

“We will have to expose this to an investigation,” Enrile told DOF officials yesterday during a Senate hearing on the department’s budget for next year.

The House of Representatives also wants to look into the matter and is now preparing to schedule its own investigation, a government source yesterday said.

Enrile believes that the DOF erred when it reversed an earlier ruling by the Bureau of Internal Revenue (BIR), effectively lowering the tax rate of the Pall Mall brand.

At present, BAT is paying an excise tax rate of P6.74 per pack for its Pall Mall brand, significantly lower than the P26.06 per pack tax rate earlier imposed by the BIR. The BIR had slapped the higher tax rate on Pall Mall as the brand was previously sold in duty-free shops.

Last July 24, however, the DOF reclassified Pall Mall as a mid-price brand which is subject to a lower excise tax of P6.74 per pack.

Enrile, who authored the Comprehensive Tax Reform Law, argued that a new cigarette brand must be charged the highest level of rate and the proponent of the new brand must suggest the price.

“Pall Mall is a foreign brand. The same product was introduced in the duty-free shops for almost one year. The BIR said they have to be taxed at the highest level but you reversed it,” a visibly irked Enrile told Finance officials led by Undersecretary Gaudencio Mendoza Jr.

Earlier, four other cigarette companies appealed to the DOF to review Pall Mall’s prevailing tax rate.

Fortune Tobacco, American-owned Philip Morris, Associated Anglo-American Tobacco Corp. (Anglo-American) and Japan Tobacco International (JTI) Philippines have appealed for a review of the DOF’s July 24 ruling.

BAT, however, said the July 24 ruling is already final and that only an Act of Congress can change the present classification of Pall Mall.

Mendoza, for his part, said the DOF is currently looking into the requests of both sides.

“We are now reviewing if we can review the ruling,” Mendoza told reporters yesterday.

La Suerte Cigar and Cigarette Co. is the local producer of Pall Mall under a manufacturing licensing agreement with the BAT.