Lawmaker reminds DOF to assure government of steady revenues

A lawmaker yesterday reminded the Department of Finance over the weekend to assure government of steady revenues in light of the controversial excise tax issue on cigarettes which the department is currently dealing with.

Camarines Sur Rep. Arnulfo Fuentebella said the department should not be favoring any company in its mandate to slap taxes and raise revenues.

“The government must be law abiding,” Fuentebella said as he scored the DOF for allegedly taking the cudgels for British American Tobacco (BAT) – a UK-based cigarette company – when it lowered the excise tax on BAT’s Pall Mall cigarette brand to P6.74 from P26.06 per pack as the BIR had earlier ruled.

BAT, however, also said the government is losing at least P25 billion in potential revenues a year due to the low tax rates paid by cigarette manufacturing companies Fortune Tobacco and Philip Morris Philippines Manufacturing Inc.

The government could collect as much as P25 billion a year if the correct excise taxes are slapped on the three major brands produced by Fortune Tobacco and Philip Morris, BAT general manager Jeremy Flint said.

Fuentebella, for his part, maintained that BAT should pay the highest tax rate of P26.06 since lowering the same is prohibited by law.

The Pall Mall brand is at the center of ongoing debates among lawmakers, the government and cigarette industry players because of two different tax rates given to the brand by the Bureau of Internal Revenue (BIR) and the Department of Finance.

The BIR had slapped an excise tax rate of P26.06 per pack on the Pall Mall cigarette brand as this was previously sold in duty-free shops.

However, last July 24, the Finance department reclassified Pall Mall as a mid-price brand which is subject to an excise tax rate of P6.74 per pack or P19.32 lower than the P26.06 per pack tax rate earlier imposed by the BIR.

The Finance department is now reviewing its July 24 ruling after other cigarette companies complained against the lower tax rate given to the Pall Mall brand.

Baguio City Rep. Mauricio Domogan, meanwhile, proposed remedial legislation that would compel cigarette makers to produce the required minimum commercial volume of their new brands prior to final tax classification by the BIR.

“Cigarette companies like BAT insist on their right to have their new brands surveyed and tax classified by the BIR. But how can the BIR do this when BAT only produced 30 cases of Pall Mall in 2004 and 111 cases in 2005?,” Domogan asked.

He said Duty Free Philippines (DFP) imported and sold more Pall Mall brands in its shops than those manufactured locally.

Data submitted by DFP to the House ways and means committee showed that it imported 123 cases of assorted Pall Mall in 2005 and paid a tax of P25 per pack, the highest tax rate.

BIR revenue regulations require that makers of new brands should produce 120 cases per month for a continuous period of 18 months in order for said brands to be considered of commercial quantity.