Despite sin tax reforms, Philip Morris eyes to keep monopoly

MANILA, Philippines – The merged company of cigarette producers Philip Morris and Fortune Tobacco Corp. (PMFTC) will do what it takes to keep its monopoly over the market amid a threat from the looming passage of sin tax reforms.

PMFTC will improve aspects of operations such as distribution and marketing to keep its 96% share of the cigarette market, its president Chris Nelson said.

Nelson said the cigarette industry could shrink by 26% to 74 billion sticks annually from the current 100 billion once the new sin tax bill is approved. 

“At best, the tobacco market would drop 26% once the new tax regime is approved,” he told reporters on Thursday, June 14.

On June 8, the House of Representatives passed House Bill 5727, which will result in higher prices for most cigarette and alcohol brands, thus discouraging consumption especially among the poor.

The bill is meant to level the playing field in the “sin” industry by simplifying the 4-tiered tax structure into 2 for tobacco, and 3 for alcohol. The 4-tiered has mostly favored the brands marketed by PMFTC.

Nelson said it will turn to the Senate for help in protecting their industry and the farmers and workers who benefit from it. 

“Our arguments will resonate on the impact of this increase on the farming sector and those who are employed directly and indirectly in tobacco industry, farming, retail, wholesale and manufacturing,” he said.

Despite the planned sin tax reforms, Nelson said Philip Morris has “no regrets” about merging with its former rival, Lucio Tan’s Fortune Tobacco. “We have no regrets at all and it’s working very well.” 

The approved House bill is expected to translate into P33 billion revenues. The bill was watered down from the original proposal, which sought a unitary tax system for tobacco and intended to raise P60 billion.

At least 85% of the revenues from the new sin tax measure will go to health services, including health coverage for indigents and informal sectors under the National Health Insurance Program. – Rappler.com