Cigarette firm warns BIR on Pall Mall tax issue

Cigarette maker Anglo-American Tobacco Corp. (Anglo-American) has warned officials of the Bureau of Internal Revenue (BIR) that they may face charges of graft and corruption if the agency implements the controversial decision on Pall Mall cigarettes.

In a letter to BIR Commissioner Lilian Hefti yesterday, Anglo-American legal counsel Rolando Lamson said that if the agency implements the July 24 decision of the Department of Finance (DOF) which provides an excise tax rate of P6.74 per pack on Pall Mall, its revenue stream may suffer.

“We understand the set revenue goals impose an enormous responsibility upon the BIR and its officers. However, the performance of that responsibility is intertwined with a duty to act in accordance with law, desisting from performing an act that would be injurious to the State’s efforts to collect the appropriate revenue in the long run and that would violate the Anti-Graft and Corrupt Practices Act, whether done intentional or arising out of culpable negligence,” Lamson said in his letter.

British American Tobacco (BAT), which owns the Pall Mall brand is paying an excise tax of P6.74 per pack or P19.32 lower than the P26.06 per pack tax rate earlier imposed by the BIR.

The BIR, then headed by former commissioner Mario Buñag, had slapped the higher tax rate on Pall Mall as the brand was previously sold in duty-free shops.

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

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

The DOF is now reviewing its present ruling and is expected to come out with a decision by the end of the month or early November.

Lamson said that the BIR should not allow the withdrawal of Pall Mall cigarette products from the La Suerte Cigar and Cigarette Factory using the lower excise tax rate of P6.74 per pack now that a review is ongoing.

Anglo-American said British American Tobacco and La Suerte should still be paying P26.06 per pack and file a tax refund later on if the DOF decides to uphold its July 24 ruling.

“These products can be withdrawn from the La Suerte plant with a payment in protest of the final classification rate of P26.06 per pack and thereafter when the process has been completed and the claim appropriate, file their tax refund, as what is normally done,” Lamson said.

“We respectfully impressed upon the BIR and its officers to bear in mind the consequences of any premature and prejudicial action as to product withdrawals relative the Pall Mall Cigarette Brand,” Lamson further said.

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

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

Anglo-American is the manufacturer of lower-priced cigarette brands including Asia Boston Menthol 100’s, Casino Royale Filter King, Balasang Filter, Villa Escudero Menthol King, Balita Filter and Balita Matamis.