POSTSCRIPT / November 27, 2007 / Tuesday


Philippine STAR Columnist

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Gov't favors tobacco firm, but not old folk

DISTURBING: Sen. Loren Legarda has raised questions that should prick the conscience — if any — of government.

She asked last Friday: “Who should the government tax more — Filipino senior citizens or the makers of foreign cigarette brands? Whose interest should the government protect more?”

As chair of the Senate economic affairs committee, she was commenting on a plan of the Finance department to lower by 75 percent the excise tax on Pall Mall cigarettes and to block tax relief for senior citizens.

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SENIORS SLAPPED: Legarda, 47, has filed Senate Bill No. 269 exempting seniors from the 20-percent tax imposed on bank savings. But the Finance department is objecting, using arguments that insult elderly bank clients.

The DoF said the bill would benefit only wealthy elder citizens since, it said, only the rich can save money in the bank. It added that tax relief could be abused by seniors conniving with younger members of their family.

“I find untenable the premise that only the rich among senior citizens will benefit from this bill, especially with their (DoF) own admission that they do not have statistics on the savings profile of seniors,” the senator said.

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P56-M LOST: While going slow on benefits for seniors, the DoF was quick to slash the excise tax of Pall Mall cigarettes to P6.74 per pack, way below the P26.06 per pack recommended by the Bureau of Internal Revenue.

The DoF, which is supposed to exert Herculean efforts to raise revenue, was just too willing to throw away almost P56 million in yearly revenues by giving special tax treatment to a favored cigarette maker.

Legarda has a point. Why should tobacco, which is covered by “sin” taxes, and one cigarette manufacturer get special treatment while senior citizens who had contributed to national growth are denied a well-deserved favor from a grateful government?

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DUTY-FREE SALE: A law, RA 8240, that came into effect Jan. 1, 1997, set up a four-tier cigarette tax classification system.

The Finance department approved in 2003 a BIR recommendation to hold a price survey of 23 cigarette brands. This did not include Pall Mall.

In March 2004, British American Tobacco entered into a licensing agreement with La Suerte Cigar and Cigarette Factory for the manufacture and local sale of its products.

That year, these tobacco products were already being imported by Duty Free Philippines for sale in its shops at $1.65 per pack or $16.50 per ream. At that time, imported cigarettes were not yet subject to excise tax.

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HIGHER-RATE RULE: Also, that same year, La Suerte sought BIR’s permission to register and manufacture Pall Mall with a suggested retail price of P10 per pack inclusive of taxes.

In July 2004, RA 9334 was enacted to amend RA 8240. It provided that cigarette products introduced and classified before its enactment are subject to legislative protection from re-classification.

The new law provided that there should be no downward classification for taxing purposes.

Imported products are required to be subject to the same excise taxes as those locally produced. Excise taxes are to follow the whichever-is-higher principle, meaning that whichever rate is higher will be applied uniformly for all products of the same brand.

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UNIFORM RATE: Before the effectivity of RA 9334 on Jan. 1, 2005, BIR gave La Suerte a permit to manufacture Pall Mall cigarettes.

Pursuing RA 9334, Finance Secretary Margarito Teves approved RR 3-2006, which provided that under Section 6 of that law, imported cigarettes are subject to the same excise taxes as locally produced ones.

The rule also provides that if there is a locally made product with the same brand as the imported kind found at Duty Free Shops or within the country, its excise tax rate shall follow that of the higher priced cigarette, whether local or imported.

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SUSPICIOUS: It is a wonder then that the Finance department made a downward classification of Pall Mall cigarettes. It reversed a decision of the BIR that was made after a study on the market presence of the brand.

This is unusual, some say suspicious, because the goal of the law is to maximize, not reduce, revenue. A downward classification denies the government substantial revenue it should collect.

If DoF’s position is sustained, the excise tax difference between local and imported Pall Mall will be P19.32 per pack.

The government stands to lose P55,641,600 a year with Pall Mall’s downward classification (4 brands x 120 bases x 500 packs x P19.32 x 12 months).

This is not to mention the effect that the downshifting would have on patrons of other cigarette brands.

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AUF FETE: In Angeles City, meanwhile, there is excitement at the Angeles University Foundation celebrating the 100th birth anniversary of its founder and first president, Dr. Barbara Yap-Angeles.

Dr. Emmanuel Y. Angeles, AUF chancellor, said the year-long commemoration will be capped with academic, cultural, religious and sports events Dec. 4 – 12.

A memorial Mass honoring the founders will be officiated on Dec. 4 by Pampanga Archbishop Paciano B. Aniceto, DD, AUF chaplain Fr. Ramil Capulong and former chaplains.

The culminating rites on Dec.12 with have President Gloria Arroyo as guest of honor and speaker. The day will see the launching of the founder’s biography titled “Teach Me How to Dream: The Story of Barbara Yap-Angeles.”

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(First published in the Philippine STAR of November 27, 2007)

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