Business Circuit
“It is ridiculous to call this an industry-It’s not. This
is a rat eat rat, dog eat dog. – Ray Kroc, founder of McDonald’s , Quoted in Big
Mac, 1976
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Lower costs?
One of the silly arguments that British American Tobacco uses
to justify the downward classification of the Pall Mall brands is that it has a
lower production cost.
There is only one way to find out. I would guess that the
costs of imported tobacco leaf is reasonably similar.
Why La Suerte, licensee of BAT, is capable of having lower
costs and therefore its Pall Mall brands and variants should be taxed lower, is
subject to verification.
The trouble with the present system is that manufacturers of
cigarettes are allowed to declare their costs to the BIR and then they determine
the tax and the retail price. The excise tax of P5.60 and the retail prices of
P12 per pack of local Pall Mall were unilaterally declared by La Suerte.
It made its own classification. Now, it wants the tax to
remain in that level although the BIR determined the excise tax on imported Pall
Mall at P25 per pack.
The argument that Pall Mall is no longer imported by Duty
Free Philippines does not remove the higher tax. That is all there is to it. The
law says new brands, local or foreign, must have the same tax.
La Suerte’s false claim
La Suerte claimed that it launched the
locally made Pall Mall brands and its variants in December
2006.
Some launch!
The BIR, in a periodic survey of the market, did not find any
Pall Mall cigarettes in nine of the largest supermarkets in Caloocan and Quezon
City. Yet it claims that it had a nationwide launch in the last month of 2006.
Discovering the anomaly (although I suspect they knew it from
the start), the BIR conducted another survey on orders of the Department of
Finance.
But according to a member of the House committee
investigating the tax case, there were flaws in the survey.
The committee does not exactly welcome the idea of the BIR
failing to come up with required minimum volume to be qualified to be surveyed.
The ways and means committee, according to a member,
concluded that guidelines should be crafted or promulgated by the BIR before it
goes out to the field on a survey.
Sounds fair to me.
I thought I said that
After Sen. Anthony V. Trillanes and Gen. Danilo Lim failed to
get military and civilian support for their mission to drive President Arroyo
out of Malacañang, I suggested that the failure was due to the fear of
politicians to join Trillanes and company.
But if the rebellion had succeeded, the benefits would have
gone directly to the politicians. That is the reason I suggested that the
politicians should lead the march with priests and nuns and prepare themselves
for the bullets of Gloria Arroyo’s army.
Now I am seeing it in a smaller way and without the
politicians.
Some nuns "seized" Rodolfo Lozano and brought him to the
Senate. They are staying with him and seem to be prepared to die if anybody much
lays his hand on the shirt of Lozano.
I am not by saying this in support of rebellion. What I am
merely saying is that the politicians want President Arroyo knocked out of
office but none of them will risk life or limb to attain the objective.
On the other hand, the nuns have nothing to gain but show to
themselves and the rest of the Filipinos that vigilance, as often said, is the
price of justice.
Most unfortunate ratings war
Now that the issue is moot because the court has ruled on it,
we might now say that the ratings war between ABS-CBN and GMA 7 was most
unfortunate. Both channels are clients of AGB Nielsen.
It may not have been proper for ABS-CBN to force the rating
firm to reveal the identities of its respondents.
Neither was it proper for AGB Nielsen to use the court
decision to dodge allegations of ratings rigging.
It should listen to people who come forward to tell their own
story. The company may be strengthened or gain higher credibility if it listens.
The point is AGB Nielsen should come clean by not denying
what some people are claiming.
It is also important to make the observation that the war
between ABS-CBN and GMA 7 will get worse before it gets better. One trying to
outsmart or outperform the other is fair. But dragging the ratings agency into
the fray is another story.
Iron and steel on the throes of death
Global Steel promised President Arroyo when it bought
National Steel Corp. that the Indian company would put up $1 billion for
backwards integration.
Nothing has come of it. I do not think anything will.
The proof that Global is in dire straits is that it produces
iron products only when there are orders. And orders do not come that often.
The market has a cheaper source of the same products, the
smugglers who are killing the industry.
Long lines of creditors are waiting for Global to pay its
obligations. But the market has been practically taken over by the smugglers.
One large mill is in deep trouble. It owes a bank a lot of
money but it is not operating at full blast.
But why? Again, because its biggest competitors are the
smugglers. They use the customs bonded warehouse to avoid payment of taxes. One
importer I know paid only P250,000 in processing fee.
The other taxes – tariff and the EVAT are avoided. The
government looks the other way.
By next week I would have completed the documents on how the
smugglers ply their trade. The documents I have were supplied by customs people.
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