Excise tax collection seen to reach P70B this year

MANILA, Philippines - Philip Morris Fortune Tobacco Corp. (PMFTC), which holds more than two-thirds of the Philippine tobacco market, expects excise tax payments to reach P70 billion this year or 97 percent of the government’s total projected collections from cigarette firms for 2014.

“Based on the yearly increase in tax rates and current trends, PMFTC will itself likely contribute around P70 billion in excise tax payments for 2014,” said PMFTC president Paul Riley.

Riley, however, believes that the government should get more than its collection goal of P72.1 billion this year since PMFTC only controls 71 percent of the Philippine tobacco industry.

 “Given our current market share of 71 percent, if all manufacturers were to pay excise tax on all the cigarette packs they produce, then the DOF should expect to receive excise tax payments well over P90 billion, which is considerably more than its original target,” Riley said.

Among the other major players in the market include Bulacan-based Mighty Corp., Japan Tobacco International (JTI), Anglo American, and  British American Tobacco (BAT).

Based on the survey done by Nielsen Corp., Mighty now holds around 24 percent of the total cigarette market, JTI (2.6 percent), Anglo American (1.7 percent) and BAT (0.7 percent).

PMFTC has been lobbying for increased monitoring and interception of illicit cigarette sales as revenue leakage still persists despite the passage of the sin tax reform law, which effectively jacked up tax rates.

In particular, it cited the meager excise tax payments made by main rival, Mighty.

PMFTC, a joint venture between global giant Philip Morris and taipan Lucio Tan’s Fortune Tobacco, claimed it cornered 85 percent or P23.6 billion of the P28.18 billion in excise taxes collected from cigarette companies in the first half of the year.

In particular, PMFTC noted the wide disparity between Mighty’s market share and its likely percentage of total tax paid withdrawals during the six-month period.

For this year, fiscal authorities are eyeing P110.3 billion in revenues from excise taxes on tobacco and alcoholic products, 5.3 percent higher than the original goal.  Of the total, P38.21 billion will come from manufacturers of alcoholic beverages.

PMFTC is hopeful that the government can effectively address the issue of tax evasion, which has cost the country around P400 billion in foregone revenues a year or about four percent of the country’s gross domestic product.

It is banking on the Bureau of Internal Revenue’s stamp tax project to help plug tax leakage and generate additional revenues for the government.

The project, which will have a machine-readable quick response (QR) code, aims to curb illegal cigarette sales.

 The new stamps that will be affixed on cigarette packs, once scanned, will show when a particular pack has been manufactured and when the appropriate taxes have been settled.

 The implementation of the project, however, was delayed anew pending the issuance of the implementing rules and regulations.  The Department of Finance seems to be dragging its feet on the signing of the proposed IRR, which have long been submitted by the BIR.