708% ‘sin tax’ hike stuns Big Tobacco

MANILA — A 708% tax increase on low-priced cigarettes in the country, as set by the lower House-approved “sin tax” bill, has been described as “unprecedented” by the head of the country’s largest tobacco company, abscbnNEWS.com said.

Philip Morris Fortune Tobacco Corp. (PMFTC) president Chris Nelson, in an interview with ANC Friday night, said no other country in Asia has come close to the tax rate hikes that House Bill 5727 wants to impose on tobacco products in the Philippines.

“If you look at what’s being proposed, the rate increase is 708% on low-tier (cigarette brands) over 2 years, 150% on the high tier, and on the medium it goes up nearly 300%,” Nelson said.

“Seven hundred percent on the low, that’s unprecedented. I can’t think of any country that has done that,” he said.

He said the tax hike will have a detrimental effect on tobacco farmers, workers, and the entire industry.

“Let us not destroy this industry,” he said.

Nelson said PMFTC does not oppose taxes, but any additional levy should be moderate.

He said the tobacco giant earlier advocated a P1 across-the-tier increase in 2004.

“The reason for that is we recognize the dynamic of the market,” he said.

“We’re not against the tax increase. In fact, Philip Morris is working with the government. What we’re recommending is a tax increase sustainable for the industry and which gives future revenue streams for the government,” he added.

“We are looking for moderate tax increases. We like increases that are planned out because we can plan our business,” Nelson said.

He said that under House Bill 5727, the tax increase for beer is between 8% to 32%.

“That is what we call a moderate increase, as opposed to 700%,” he said.

Consequences

PTFMC said if the Senate approves a similar measure to HB 5727 and the proposal is signed into law by President Benigno Aquino, the cigarette manufacturer expects a 50% drop in demand for tobacco for domestic consumption.