Philip Morris plan to make cheap cigs draws opposition

Tobacco giant Philip Morris Fortune Tobacco Corp. has sought permission to manufacture four variants of its Marlboro products as low-priced cigarettes. AP

MANILA, Philippines—A health group has lashed out at tobacco giant Philip Morris Fortune Tobacco Corp. (PMFTC) over its plan to manufacture cheaper cigarettes to compete with a local brand, saying this would defeat the purpose of the “sin tax” law.

The PMFTC earlier appealed to the Bureau of Internal Revenue (BIR) to allow the company to come up with cheaper versions of its leading brand Marlboro to level the playing field against local brand Mighty.

“If you are going to allow other players to produce low-priced cigarettes to catch up with others, then smokers will just choose cheaper brands instead of quitting. In the end you will not only perpetuate smoking but you are in fact promoting it,” Emer Rojas, president of the New Vois Association of the Philippines said in a statement.

Help smokers quit

He reminded the tobacco firm that the primary objective of the sin tax law was to raise the prices of cigarettes to discourage smoking and help smokers quit.

In a letter to the BIR last month, PMFTC, the joint venture of multinational Philip Morris and Lucio Tan’s Fortune Tobacco, sought permission to manufacture four variants of its Marlboro products as low-priced cigarettes.

Marlboro, a premium brand, is taxed higher than Mighty, which is classified as a low-priced cigarette product.

PMFTC argued that the sales of Marlboro had dropped significantly because smokers were switching brands and choosing cheaper cigarettes like Mighty as a result of the higher levies imposed on premium brands.

Four variants

It suggested that in order for the company to regain its dominance of the market, the government must allow it to come up with four low-priced variants of Marlboro.

Rojas said this move by PMFTC, which used to control more than 90 percent of the tobacco market, would undermine the health and revenue objectives of the law if not  deceive the public.

“There’s more than meets the eye in this move by PMFTC. If it comes out with cheaper Marlboro variants, it is possible that the public would think that the premium brand has returned to its original price and therefore smokers will continue to patronize it,” Rojas said.

A pack of Marlboro costs P55 but is sold at P4 to P5 per stick at retail stores.

On the other hand, Mighty sells for only P35 a pack and currently dominates the tobacco market as a result of the sin tax.

P36B in revenue

Approved in December 2012 after three decades of an impasse in Congress, the sin tax is expected to generate more than P36 billion at the end of this year—7 percent higher than earlier projected.

PMFTC, maker of Marlboro and Philip Morris, said its sales dropped by 3.5 percent in the second quarter as a result of the higher taxes imposed on its premium brands.

Health advocates were originally pushing for a unitary tax system but Congress opted for a two-tier system that imposed different tax rates on low-priced cigarettes and premium brands.