Biz buzz: Galvanized opposition to 2-tier cigarette tax scheme

For more than two decades, anti-smoking advocates relentlessly fought for a unitary tax system to curb tobacco consumption. But now that the hard-won law imposing a uniform tax of P30 for all types of cigarettes is set to take effect in January 2017, Congress is threatening to spoil the party.

On Monday, members of the House ways and means committee voted unanimously to retain the two-tier tax system by imposing a levy of P32 per pack for low-priced and P36 per pack for premium cigarettes. House observers could only shake their heads in disbelief as the committee—after conducting only two public hearings—completely abandoned Republic Act No. 10351, the very law that Congress passed just four years ago to impose the simpler unitary cigarette tax in 2017.

While only half the battle is won—since the bill needs to be tackled in the House plenary and, eventually, the Senate—the two-tier tax proposal under House Bill No. 4144 is causing a lot of ruffled feathers at the Department of Finance and the health sector.

If passed into law, health advocates warn that HB 4144 would erode the country’s gains in tobacco control. For one, fewer smokers are expected to quit as they would simply downshift to cheaper brands.

Worse, it would be an administrative nightmare for DOF and the Bureau of Internal Revenue (BIR) to catch unscrupulous cigarette makers who use the multitier tax system to shield their illicit trade. Either way, the public is at the losing end.

But all is not lost, as they say. The DOF and anti-smoking advocates are said to be banking on the strong anti-tobacco stance of President Rodrigo Duterte whose home city of Davao has become a model of sorts for tobacco control. If the President could not prevail on his Congress allies to follow his lead, then perhaps the Senate would be the last bastion of hope. The silver lining though is that HB 4144’s alleged railroading in Congress seems to be a sort of wake-up call as it has galvanized public opposition to the controversial measure. —DAXIM L. LUCAS

Pizza appetite

It’s not exactly the Filipinos’ staple food but the appetite is nonetheless strong.

When pizza chain operator Shakey’s Pizza Asia Ventures Inc. (Spavi) priced its initial public offering (IPO) at P11.26 a share on Nov. 28, it was already oversubscribed by three times the base offer just based on demand from institutional investors. But as of last Monday, the IPO oversubscription rose even more to five times, said Eduardo Francisco, president of BDO Capital Investment Corp., which is among the IPO underwriters.

Francisco said there was something about the Po family that attracted investors, noting that the recently completed preferred shares issuance of property developer Arthaland Corp. was likewise subscribed four times over.

For Spavi, demand was mostly driven by foreign institutions, which accounted for 70 percent of the total, while local demand accounted for 30 percent, Francisco said.

Francisco said although PIZZA (its proposed stock ticker code) is priced at a little over 20 times its projected earnings, this was still cheaper than the high 20s price multiple of other listed restaurant chains like Jollibee Foods Corp. and Max’s Group. (PIZZA, however, is more comparable to casual dining chain Max’s than fast-food chain Jollibee.)

Spavi is pitching to investors an attractive Philippine consumer story alongside higher margins and a management team with a track record of delivering commitment. While Shakey’s is a foreign brand, Spavi it holds the rights and trademark in such a way that it doesn’t have to pay licensing fees, allowing the operator to maintain high margins. Compared to the number of stores and the size of Shakey’s (180 stores) versus competitors, Spavi still sees room to expand its footprint. Apart from the Philippines, Spavi also owns perpetual rights to use the Shakey’s brand for the Middle East, Asia (excluding Japan and Malaysia), China, Australia and Oceania.

The company will list on the Philippine Stock Exchange this Dec. 15, the last company to brave the market this volatile year. —DORIS DUMLAO-ABADILLA

Top entrepreneurs

Foreign Affairs Secretary Perfecto Yasay Jr. was a no-show during Romania’s National Day cocktails hosted by the Romanian Embassy last week at the Dusit Thani ballroom in Makati City. No, he didn’t blow them off unceremoniously. Instead, he sent one of his deputies to deliver his congratulatory remarks to the Romanian officials.

Well, we hope Mr. Yasay’s deputy didn’t say the country’s chief diplomat was “indisposed” because he was actually in another event at the same hotel (the adjacent ballroom, in fact) to watch his good friend, audit veteran Manny Reyes, receive his Asia-Pacific Entrepreneurship Award (unfortunately. Mr. Yasay’s attempt to remain incognito by sitting at the back of the ballroom failed when organizers spotted him and acknowledged him publicly).

Apart from Reyes, there were other equally illustrious recipients of the prestigious recognition for the Asia-Pacific region’s best entrepreneurial minds, not necessarily just entrepreneurs, mind you.

APEA honored lifetime achievement awardees Henry Sy Sr., whose speech was read by his trusted chief financial officer Jose Sio; the now-legendary—despite his young age—Edgar “Injap” Sia II of Double Dragon Properties Corp., and Milagros How of Universal Harvester Inc.

And because of his now famous story of turning a P2-million loan from his father into fast food giant that he sold for a total of P5 billion—first P3 billion for 70 percent in 2010, and then P2 billion for the balance earlier this year—just a few after starting the business.

APEA also honored for their entrepreneurial drive China Bank president Ricardo Chua; Sunlife Philippines president and CEO Riza Mantaring; Philex Mining Corp. president and CEO Eulalio Austin Jr. and SL Agritech chair and CEO Henry Lim Bon Liong, among others.

Along with 12 other awardees, these business leaders will now move to the international arena and compete with other APEA winners from the region for the top plum, being named the Asia-Pacific’s top entrepreneur executive. Best of luck, people. —DAXIM L. LUCAS