BAT says supply of Pall Mall may soon be depleted

British American Tobacco (BAT) said the supply of its Pall Mall brand in the market may soon be depleted if the Bureau of Internal Revenue (BIR) will insist on slapping the brand with the higher tax rate of P26.06 per pack.

BAT general manager Jeremy Flint said the company and its local partner La Suerte Cigar and Cigarette Factory Corp. is still unable to withdraw new supplies from the factory at an excise tax rate of P6.74 per pack.

The BIR stood by its earlier ruling and kept the excise tax rate of Pall Mall cigarettes at P26.06 per pack, saying that the brand is a premium brand which is subject to a highest tax rate.

As such, the BIR wants BAT and La Suerte to withdraw cigarettes from its factory at an excise tax rate of P26.06 per pack.

Flint said BAT and La Suerte cannot agree with the BIR and withdraw new supplies at the higher excise tax rate of P26.06 per pack.

The BAT official has appealed anew to the Department of Finance (DOF) to thumb down the BIR’s position on the excise tax rate slapped on the Pall Mall and to instead uphold the department’s earlier decision.

“We respectfully reiterate our request that the appeals of BAT and La Suerte’s competitors are dismissed outright and the earlier DOF decision dated July 24, 2007 be upheld,” Flint said.  Flint said that the BIR’s position is based on erroneous interpretations of existing laws.

“The BIR said they could not classify Pall Mall at the mid-price rate of P6.74 per pack because of the higher excise payments made by Duty Free Philippines when it imported Pall Mall in October 2004,” Flint said.

In its decision, the BIR invoked Revenue Regulation 3-2006 which states that the classification of a new brand shall not be lower than the highest tax classification for such new brand or any existing variant. 

“However, we cannot over-emphasize this point, Section 6 presupposes that there is a prior tax classification for such brand, which in this case clearly does not exist,” Flint said.

Since last year, the Pall Mall brand of cigarettes has been at the center of debates among lawmakers, the government and cigarette industry players because of two different tax rates given to the brand by the BIR and the Finance department.

In February last year, 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, in July last year, 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 that was imposed by the BIR.

The BIR said that there is no legal basis for the claim of BAT that Pall Mall has no final classification and that imported brands were already de-listed in the duty-free shops.

“Locally manufactured Pall Mall brands are already given a final classification by this bureau. Thus, any maneuver or scheme to declassify said brands is beyond issue. Moreover, simply ‘de-listing’ of a product in the market should not result to the reclassification of the same for purposes of the imposition of the excise tax,” the BIR said.