Uniform excise tax seen to push tobacco prices to record highs

MANILA, Philippines - A cigarette manufacturer said yesterday that a uniform excise tax rate will push prices of its tobacco products to record highs, resulting in markedly lower sales and even lower revenue collections for the government.

Opposing a plan by the Department of Finance (DOF) for a uniform excise tax system on alcohol and cigarette products, Associated Anglo-American Tobacco Corp. (AAATC) vice-president Blake Clinton Dy said the current P2.72 excise tax on low priced brands would increase to P30 – a hike in excise tax rate by more than 1,000 percent.

 “Such a significant excise tax increase can push up retail prices of our cigarettes by more than 200 percent. This will drive away our consumers and it will no longer be economically viable for us small manufacturers to produce cigarettes,” said Dy.

“As one of the smallest manufacturers, it will be very difficult for us to compete with importers and multinational companies in the industry which will be the only ones left standing under the DOF proposal,” he said.

 If this happens, he explained that “we may contemplate on shutting down our business, resulting in the layoff of roughly four hundred of our employees.”

Dy noted that only tobacco and alcohol products have been subjected to regular tax increases every two years since 2005.

He also criticized the DOF why it seeks to “kill the goose that lays the golden egg,” citing that excise tax collections on tobacco products have been increasing over the past years.

The Bureau of Internal Revenue (BIR) had reported that its total excise tax collection in 2010  reached P67.2 billion against the goal of P62.4 billion.

Of this figure, the BIR collected P31.6 billion from the tobacco industry, which is more than 22 percent above its goal of P25.8 billion. Year on year, this represents a 32 percent increase over 2009 collections.

Dy said, “for us it is incomprehensible why the Department of Finance would seek to punish rather than encourage a sector that regularly delivers such a large amount of income to its coffers and provides livelihood for millions of Filipinos across the archipelago. Especially so because it is at the behest of foreign funded advocacy groups who cannot remotely claim to contribute even one percent of that amount to the Filipino people.”