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Cheaper brands keep Filipino smokers puffing, data show
Publication Date : 30-09-2013
Cigarette consumption in the Philippines fell-but only marginally-in the second quarter from a year ago, with an increase in the production of cheap 1 peso per stick brands helping demand stay afloat despite a hike in sin taxes.
Industry data showed average cigarette consumption at 14.13 sticks a day in the second quarter compared to 14.84 sticks in the same period last year.
Daily consumption was an average 13.53 sticks in the first quarter of the year, but rose back to over 14 per cent between April and June as some cigarette firms increased production of the cheaper brands.
Data showed the market share of brands costing 1 peso per stick rising from 5 per cent last year to 30 per cent in June this year.
Industry players said the market share of the cheap brands could rise further as the tax on cigarettes increases annually.
Brands selling for 1 peso a stick include those produced by Mighty Corp. and Philip Morris Fortune Tobacco Corp.
The sin tax reform law, which took effect in January, mandates an annual increase in the excise taxes on cigarette and alcohol products. The rates of increase are specified for this year up to 2017. Afterwards, cigarette tax rates shall rise 4 percent annually to cover inflation.
The new cigarette tax rates effective this year are: 12 pesos per pack for brands with a net retail price of 11.50 pesos and below, and 25 pesos per pack for brands with a net retail price of more than 11.50 pesos per pack.
The objectives of the law are to boost government revenues and to discourage smoking.
Some cigarette firms, however, are trying to prevent a substantial drop in demand by producing cheaper brands.
For 2013, the government projects a collection of 51.6 billion pesos in excise taxes on cigarettes. This is on top of the 6.2 billion pesos in value-added taxes and 6.7 billion pesos in corporate income taxes that it aims to collect from cigarette firms this year.
The excise tax collection target for this year includes 33.9 billion pesos in incremental revenues estimated to come from the tax rate hike.
The incremental revenues targeted for the succeeding years are 42.86 billion pesos for next year, 50.63 billion pesos in 2015, 56.86 billion pesos in 2016, and 64.18 billion pesos in 2017.
Some industry players have expressed concern the higher tax rates could result in a rise in smuggling of cheap foreign-made cigarettes into the country. They said the government would not achieve its revenue goals if smuggling became a problem.
US$1 = 43.21 pesos