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PMI awaits 2017 uniform rates

Cigarette manufacturing giant Philip Morris International, Inc. (PMI) has no plan to ask for the repeal of the reformed excise tax law that was enacted in 2012 despite its local unit’s declining market share.

Andre Calantzopoulos, PMI Chief Executive, said the forthcoming unitary rate system for cigarette products by 2017 will be favorable for local cigarette-maker PMFTC, Inc., the foreign firm’s joint venture company with the Lucio Tan group.

“While the initial phase of the excise tax reform was unnecessarily disruptive, we are encouraged that the law envisages the gradual closing of the gap between price tiers to a single one in 2017,” Calantzopoulos said.

“This should compress price gaps, which would position us favorably given the more premium skew of our portfolio, led by Marlboro, and our national distribution network,” he added.

During the sin tax reform act deliberation, the government’s fiscal and health authorities had proposed for the immediate implementation of a unitary rate as early as January, 2013, but it was opposed by PMFTC.

In 2013, the government raised taxes on cigarettes to P12 a pack for low-end brands and P25 for higher-priced brands, a hefty increase compared with levies ranging from P1 to P12 for the past 16-years.

By 2017, excise tax for low-end brands will increase 150 percent, while the levy for high-end brands will rise 20 percent in the same period. The government will then arrive at a uniform rate of P30 on each pack for both low- and higher-end categories.

But despite Philippines’ new excise tax regime, Calantzopoulos said the country’s potential for profitability has remained strong.

“Like Indonesia, it [Philippines] benefits from a growing adult population and has witnessed continued economic improvements, backed by an expanding steady stream of remittances from overseas Filipino workers,” the PMI official said.

Earlier, PMI reported that its shipment volume to the Philippines declined by more than a quarter last year, or at a much faster pace compared with the drop in the country’s cigarette output.

PMI said that the country’s cigarette industry fell 15.6 percent in 2013, while PMFTC’s output dropped by a hefty 26.2 percent.