Biz buzz: Cigarette crackdown

Taipan Lucio Tan-led conglomerate LTG Inc. saw its shares rise by 9.4 percent last week to close on Friday at P13.26 each on indication that the Duterte administration was more hell-bent on eradicating illicit trading of cigarettes, which has for years gnawed on the business of Philip Morris Fortune Tobacco Corp. Inc. (PMFTC). The cigarette business, after all, accounts for about 40 percent of LTG’s net asset value.

On a macro note, excise taxes on cigarettes—which amount to P100 billion a year—subsidize the country’s universal healthcare system under Philhealth. Its tax administration deserves greater attention from the authorities.

Apart from the crackdown on the use of fraudulent tax stamps and the shutdown of some manufacturers of counterfeit cigarettes, the new administration also seems to be more receptive to long-standing proposals to subject cigarette manufacturers to third-party auditing. This is deemed as the cheapest yet most effective solution to determine whether cigarette manufacturers are paying the correct amount of taxes and tariffs.

In the past, we heard that the Bureau of Internal Revenue (BIR) wasn’t too keen on subjecting cigarette manufacturers to independent audit for various reasons such as lack of manpower and concern that its people will be demoralized. It instead sanctioned the use of tax stamps and CCTVs but existing measures didn’t prove sufficient to curb illicit trading.

Hiring independent auditors—a common practice to ensure better risk management in big banks as well as in evaluating projects of other government agencies—is now something that the new BIR leadership is considering. Since there aren’t too many cigarette factories and too many players, doing the independent audit on all players isn’t an impossible task for the government.

Meanwhile, the bill to revert to the two-tier tax system for tobacco is one key risk for LTG’s business. But apart from finding allies in most economists who see the unitary excise tax system as a more efficient way of collecting sin taxes, several influential political allies of President Duterte (including one from the country’s tobacco-producing region) don’t buy the argument that reverting to the old system would be beneficial to tobacco farmers. The departments of Finance and of Health have both urged the congressional oversight committee on the Sin Tax Reform Act to fully implement the sin tax law and let it run its course.

So while the House bill seeking to revert to the two-tier system had been hastily passed in Congress and will soon be tackled in the Senate, at the end of the day, Mr. Duterte has the option to veto this controversial legislation. —DORIS DUMLAO-ABADILLA

Ms. Universe freeloaders beware

It costs a whole lot of money to bring the Miss Universe Pageant to the Philippines, so the group of businessman-politician Luis “Chavit” Singson wasn’t about to let anyone—least of all a well-heeled telco—get a free pass at promoting the event.

This was the gist of a less-than-delicate message Singson’s LCS Holdings Inc. directed its legal representative, Puyat Jacinto and Santos Law, to relay to Globe Telecom.

The law office’s letter, obtained by Biz Buzz, was quite direct in its opening line: “Cease and desist: Unauthorized display of Miss Universe Promotional Materials.”

The letter said that LCS, the official host of the pageant in the Philippines, held the “exclusive right to broadcast, exhibit, distribute, advertise, publicize, promote, use or otherwise exploit by such means and for such purposes the said event.”

In other words, if you want to promote the Miss Universe contest here, you go through Singson.

Apparently, LCS got wind of Globe promoting the event in its own way. This included welcome banners strung along roads with the Globe name and logo.

Singson, who spent a small fortune to make this event a reality, would have none of it. Adding fuel to the fire, Globe’s rival, Smart Communications, was the official exclusive telco services provider for the event.

Globe was told to immediately remove all welcome banners that included its name and logo, pull out all similar promotional materials and refrain from using any ads in relation to the event.

Not satisfied with this, the letter added that Globe’s acts were in “gross violation” of exclusive rights granted to LCS and Smart. Globe’s failure to comply would result in “legal action,” it added.

We heard Globe immediately complied and the banners were taken down—a wise move, when a personality like Singson starts sending a correspondence such as this.

Combing through social media, meanwhile, will show other brands committing their own “gross violations.” Are these folks unaware of the law? Or maybe it’s just a case of clever and cost-efficient marketing. —MIGUEL R. CAMUS

‘Gaming for good’

The Philippine Offshore Gaming Operators (Pogo) have joined hands with the state-owned Philippine Amusement and Gaming Corp. (Pagcor) in the ongoing relief efforts for thousands of victims of typhoon “Nina.”

The Pogo Group led by committee chair Jose Tria donated 40,000 galvanized iron sheets and more than 40,000 food packs to Albay, Camarines Sur and Catanduanes—provinces that suffered the most damage from the super typhoon.

Pogo members are Pagcor-licensed entities offering online games of chance via the internet exclusively to registered offshore players, excluding Filipinos here and abroad.

So far, Pagcor has issued about 35 offshore gaming licenses, earning for the government close to P1 billion in license fees alone. And so far, it looks like the faith of Pagcor chair Andrea Domingo in this newly created gaming subcategory is paying off, both for the government’s coffers and the country’s needier citizens.

Can Pogo keep up the good work? Time will tell. —DAXIM L. LUCAS