The Philippines’ small tobacco firms and employees ‘doomed’ by tax changes

Small, local tobacco companies in the Philippines will be forced to shut down and lay off hundreds of workers once Congress passes a law imposing extremely high taxes on low-priced cigarette brands, according to a story in The Manila times quoting Blake Dy, vice-president of Associated Anglo American Tobacco Corp.

“We are doomed,” Dy said after members of the bicameral conference committee on excise taxes agreed that 69 per cent of the tax load would be shouldered by the tobacco industry and only 31 per cent by the alcohol industry.

This means that for the first year of implementation, tobacco will pay an additional P23.4 billion in taxes, while alcohol will pay only an additional P10.56 billion.

The division of the tax load is a far cry from the current setup in which the targeted revenues from excise taxes are equally provided by tobacco and alcohol products.

The Senate proposed a tax sharing of 60-40.

The committee also dropped the current four-tiered tax classification system for cigarettes to a two-tiered scheme in which brands priced at P11.50 per pack and below would be classified as low-priced. These low-priced brands, currently taxed at P2.72 a pack, would have to shoulder taxes of P12 a pack next year.

Dy said that tobacco companies will begin laying off employees in April.

“They have just signed our death warrant,” he said. “Local tobacco companies would not be able to survive under this grossly inequitable, unfair system that clearly favors alcohol with reasonable increases while killing us with exorbitantly high tax hikes…”