Low excise tax for tobacco alternatives pushed

A senior tobacco executive warned that imposing an excise tax indiscriminately on so-called tobacco alternatives such as e-cigarettes would only generate more harm for the government than good.

Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp. (PMFTC) president Dennis Gorkun said while tax increases happen all the time in all countries, their implementation must be phased accordingly and should be risk proportionate.

“Taxation has to be taken with a gradual approach. Taxes increase all the time but the key is to make sure the tax increases are in line with GDP (gross domestic product) growth and inflation. Otherwise, you (will) have an increasing illicit market and we have seen that before,” Gorkun told reporters.

He issued the statement as legislators deliberate how much excise tax has to be levied on tobacco alternatives such as e-cigarettes.

“Our position of course is that the taxation on heated tobacco products, and other innovative products has to be proportionate to the risk. These products cost significantly a lot more to manufacture than cigarettes. And, of course, they bear much lower risks. That’s why the tax should be lower than cigarettes,” he quickly added.

Also, Gorkun said if the government really wants Filipinos to stop smoking, the government “must be open to these alternatives and regulate it appropriately.”

“The key for all nicotine and tobacco products is to be regulated. A good example is United Kingdom. You know, they have no usage issues. Millions of people use these products. Adults switch to them. But they need to be regulated appropriately,” Gorkun said.

“If we want to make Philippines smoke free, we need to make sure that the regulation allows (manufacturers) to talk to adult smokers and to explain the product to them. I think that’s the key,” he added.

Gorkun also said the proposed tax increase should not affect the launch of their new tobacco alternative called the IQOS as the electronic vapor the instrument creates is just a fraction of the proposed measure.

“Absolutely not. We are totally committed to make sure that Philippine consumers have a choice, an access to one of the most successful platforms in the world, which is the IQOS. The IQOS represents significantly lower risks (than other altenatives),” he said.

IQOS is a tobacco heating system developed by PMFTC that merely heats the tobacco and not burn it, resulting ostensibly to more flavorful smoking experience.

Previously, the Department of Finance actively pushed for parity of taxes between the traditional cigarettes and its alternatives. Such parity will bring the current P10 excise rate to P45 per pod or its pack equivalent.