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[Tvoivozhd <tvoivozd AT infionline.net>]

Governments should exercise some restraint in taxing most business---no 
reason whatsoever for restraint in taxing the worst killers of our 
time---Tobacco Merchants of Death that visit their costs on all segments 
of society, not just smokers themselves.



Philippines’ tax move to hurt Philip Morris
By Roel Landingin in Manila
Published: September 23 2004 12:41 | Last updated: September 23 2004 12:41

Philip Morris logoLess than two years after Altria’s Philip Morris 
invested $300m in a new factory in the Philippines, the world’s biggest 
cigarette maker is finding that its hopes for healthy market growth is 
about to be dashed by Manila’s plan to raise taxes on the industry.


President Gloria Macapagal Arroyo last month said the Philippines was 
“in the midst of a fiscal crisis” and proposed legislation increasing 
taxes on cigarettes, beer and alcohol as a priority measure to boost 
government revenue.

The finance department is now asking Congress to raise taxes on the 
so-called “sin products” by a third and reclassify some low-priced 
brands into the higher-priced categories where they will be subject to 
higher tax rates.

The twin moves would double the government’s tax take from cigarettes 
from 19bn pesos ($337m) to 37bn pesos.

That is worrying cigarette makers such as Philip Morris which is banking 
on continued domestic market growth to recoup its investment in a new 
factory that began commercial operations in January 2003. Before that, 
the company’s brands were made and distributed in the Philippines by a 
licensee.

Chris Nelson, managing director of Philip Morris’ Philippine unit, told 
lawmakers during a congressional hearing this week that a big jump in 
tax rates in a short period of time could price cigarettes beyond what 
smokers could afford and cause a drop in tobacco consumption.

“That’s what happened in France and Germany, where they increased the 
tax rates very fast and the market contracted” he said.

Since Philip Morris started building its factory in the Philippines in 
2001, cigarette consumption in the country had been rising by an average 
of 7.6 per cent per year, more than double its long-term growth rate of 
2.6 per cent.

With four of every 10 adult Filipino puffing an average of 13 sticks a 
day, the Philippines now ranks as the world’s 12th largest cigarette 
market, according to Philip Morris.

“Clearly, the Philippines is a growing market compared to other markets 
which are in decline,” said Mr Nelson.

Philip Morris is urging lawmakers to increase taxes by a fixed amount of 
50 centavos ($0.09) per pack gradually over the next five years, as an 
alternative to the finance department’s plan to raise tax rates by a 
third this year.

The company argues its proposal will yield more revenues for the 
government, as it won’t force smokers to shift to lower-priced brands 
which are taxed at a rate that is a fifth of those on higher priced brand