British American Tobacco (BAT), owner of the Pall Mall cigarettes, has threatened to pull out the brand from the Philippine market if the Bureau of Internal Revenue (BIR) will insist to tax Pall Mall the excise tax rate of P26.06 per pack.
“We will pull out Pall Mall at P26 per pack because it doesn’t make commercial sense anymore so we hope that (Internal Revenue Commissioner Lilian) Hefti will respect the decision of the DOF,” BAT general manager Jeremy Flint told reporters yesterday on the sidelines of a legislative inquiry on the controversial tax classification of the Pall Mall cigarettes.
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 BIR and the Department of Finance (DOF).
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 DOF 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 DOF is now reviewing its July 24 ruling after other cigarette companies complained against the lower tax rate given to the Pall Mall brand.
As this developed, lawmakers yesterday insisted on their position that the Secretary of Finance cannot assign to a subordinate his review powers under the tax code especially if this authority was exclusively delegated to him by Congress.
At the resumption of the legislative inquiry on the controversial tax classification of the Pall Mall cigarettes owned by British American Tobacco, Deputy Speaker Arnulfo Fuentebella questioned the authority of Finance Undersecretary Gaudencio Mendoza Jr. to reverse a ruling by the Bureau of Internal Revenue (BIR) which allowed Pall Mall cigarettes to pay a much lower excise tax.
Mendoza, however, asserted that Finance Secretary Margarito Teves delegated his power in a manner that as if he who signed the order.
“I did it by the authority of the Secretary. I did not sign it as an Undersecretary so it were as if the Secretary had signed it,” Mendoza said during yesterday’s hearing.
He said that under the Revised Administrative Code, the BIR is under the supervision of the DOF.
Fuentebella said the proper way was for Mendoza to conduct his review process but Teves should have signed the order. “I don’t know why the Secretary avoided or evaded signing this particular order,” he said.
He urged the Ways and Means Committee chaired by Rep. Exequiel Javier to inquire from Teves his official position on the issue.
“We have to get the official stand of the finance secretary himself. We have to ask him his basis for delegating this review power to Mendoza,” Fuentebella said.