Column of the Day News Flash BAT blackmails the government
BAT blackmails the government
- Details
- Published on Tuesday, 17 July 2012 00:00
- Written by AMADO P. MACASAET
By A Web design Company
‘We do not exactly relish a foreign company threatening the government it will not make good its promise to invest $200 million if it does not get what it wants.’
IT is pure blackmail for British American Tobacco to tell the Philippine government to its face that it would withhold its purported $200 million investment in a cigarette factory if the proposal for a new excise tax plan does not become law.
The reality is this country produces enough cigarettes such that Philip Morris Fortune Tobacco exports them to some countries in Southeast Asia and cut filler to South Korea.
The country will not miss one more cigarette importer or maker like British American Tobacco which makes it sound that the new excise tax plan it fully supports is the only way of leveling the playing field.
This claim is entirely false. On the contrary, one more cigarette manufacturer will blunt the anti-smoking campaign of the Department of Health in the sense that more of the lung cancer-causing habit will be available in the market.
But not necessarily so because the plan originally called unitary tax contained in HB 5727 will drive out of the market the cheap cigarettes by raising the tax by an estimated 700 percent.
The habit will be hard to kick. The smokers will simply shift to smuggled cigarettes or to cigarettes made or imported by BAT maybe at nearly the same price as the poor man’s health hazard habit.
The claim that it will set up a $200 million facility on condition that it gets what it wants from Congress is as empty as empty can get. To begin with, an earlier full page ad claimed it will contribute to additional leaf consumption by using three million kilos of local leaf.
That volume is far from break even on an investment of $200 million. The truth could very well be the foreign company has an estimated two to three billion sticks and may have more by continuing its alleged manufacturing agreement with another cigarette factory.
If this is true, British American Tobacco may not implement its $200 million plan for a new factory. That is why it threatens or blackmails the government if it does not get to see the proposed new excise tax becoming a law.
British American Tobacco has a history of arrogance in the Philippines, arrogance that is practically encouraged by government itself. We remember that the company filed a complaint that reached the Supreme Court questioning the classification of cigarettes into four categories and that those not listed in an annex drawn up under the present excise tax law do not fall under any of the categories.
Supreme Court Associate Justice Consuelo Y. Ynares ruled in an en banc decision that the classification is fair and legal and does not discriminate against new entrants or players.
It will be recalled that then Finance Secretary Gary Teves allowed the downgrade of BAT’s Pall Mall brands from premium to mid-tier presumably to allow the company to pay a lower tax.
Then BIR Commissioner Mario Bunag refused to follow Teves’ decision. He was forthwith sacked at the behest of Teves.
When the anomaly was exposed in Congress, Teves relented after he was confronted in a hearing in the House of Representatives that his downgrade plan for Pall Mall does not sit with his idea of raising taxes.
My recollection is Teves, asked about his plan, meekly replied that he could not remember the details of the Pall Mall downgrade. If he does not, many of us still do.
Again, it is the same Department of Finance, this time under Secretary Cesar Purisima, that is clearly encouraging BAT to stage a comeback after leaving the country obviously because it could not compete.
This time around, BAT wants to invade the growing cigarette market by proposing a heavy tax on low-end brands which poor smokers prefer. These brands are said to account for about 65 percent of total demand.
If the proposal becomes a law, BAT will be able to dominate the market because, as result of an average increase of 700 percent, the price of brands for the poor can come very close to the price of cigarettes imported or manufactured by BAT.
We wonder why BAT did not object to the downward revision of the revenue target from P60 billion to P33 billion and that about 85 percent or P27 billion will be shouldered by cigarettes.
Is it because the proposed excise tax, earlier described as unitary, has a rider or direct provision that will exempt BAT from paying the same tax as the low-end Philippine-made brands but will dominate the market as a function of higher quality or perception of such?
We do not exactly relish a foreign company that lost a case in the Supreme Court trying to come back and threatening the government it will not make good its promise to invest $200 million if it does not get what it wants.
To begin with, we do not believe it will make the investment.
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