PH urges Thailand to respect cigarette tax ruling

Philippine trade officials are set to meet with their counterparts in Thailand to discuss the new tax evasion charge slapped against Philip Morris Thailand Ltd. (PMTL), a case that can undermine the ruling issued by the World Trade Organization (WTO) five years ago.

The consultations would be held in Bangkok on June 2. The Philippines earlier questioned Thailand’s compliance of a WTO ruling ordering it to impose a fair valuation of tariffs on imported cigarettes.

The consultations were aimed at protecting the interests of some 2 million Filipinos, who are either directly and indirectly dependent on the operations of Philip Morris Philippines, the country’s biggest cigarette manufacturer. Thailand is the product’s biggest export destination.

“We’ll be asking Thailand for the basis of their findings, which found PMTL allegedly underdeclaring its importation of cigarettes from the Philippines. The same products covered by these charges were supposedly covered by an earlier ruling issued by the WTO,” Trade Undersecretary Ceferino S. Rodolfo said.

“We found the basis for the Thai Public Prosecutor’s case against PMTL was also the same basis why we won in the WTO case. If Thailand truly recognizes the WTO decision, there is no way they can think the valuations made by PMTL on its cigarette imports from the Philippines are wrong,” he added.

Rodolfo referred to an order issued in 2011 wherein the WTO ruled for the Philippines in a case it filed in behalf of Philip Morris Philippines Manufacturing Inc. (now Philip Morris Fortune Tobacco Corp.).

The WTO had then determined Thailand gave imported cigarette brands less favorable treatment between August 2006 and September 2007 in terms of customs valuation practices, excise taxes, health taxes, TV taxes, value-added tax regimes, retail licensing requirements and import guarantees. It also said Thailand exempted domestic cigarettes from administrative requirements like the filing of tax returns, filing of revenue and expense reports and other related reports.

In January this year, however, Thai prosecutors charged PMTL with tax evasion for allegedly under-declaring the value of 272 batches of cigarettes imported from the Philippines. The total cost of the imported goods and duties was estimated to be more than 20 billion baht ($557 million).

If it loses the case, PMTL will have to face a fine four times the estimated cost of the imported goods, including taxes.

Rodolfo warned the case could gravely affect the operations of Philip Morris in the Philippines, with a possibility of a closure of its facilities here. This meant tobacco farmers and workers in related fields may be displaced and may lose their major market as well.