PHILLIP MORRIS FORTUNE Tobacco Corp., Inc. (PMFTC) said the tax differential between tobacco products and alternatives such as heated cigarettes and vaping products needs to reflect the varying health risks associated with each product category.
On Friday, PMFTC President Denis Gorkun told reporters that smoke-free cigarettes contain the same amount and type of tobacco leaves but the heating technology poses a lower risk to health by minimizing the volume of chemicals released compared to traditional tobacco products which employ burning.
“The taxation has to be risk-proportionate. This product costs significantly a lot more to manufacture than cigarettes. And of course, they bear much lower risk. That’s why the taxation should be lower than cigarettes. That’s our position,” Mr. Gorkun said on the sidelines of the Bright Leaf Agriculture Journalism Awards on Friday.
He said that even government agencies overseas have certified that new vapor products and e-cigarettes, have a “fraction of the chemicals” compared to traditional cigarettes while the United States Food and Drug Administration has certified IQOS, the Philip Morris group’s smoke-free cigarette product, as “appropriate for protection of public health.”
Last week, President Rodrigo R. Duterte certified “the necessity of the immediate enactment” of Senate Bill No. 1074, which increases the excise tax rates on alcohol and tobacco products, as well as e-cigarettes and vapor products, to generate additional funding for the implementation of Universal Health Care Act next year.
The measure is still pending at the Senate while the House of Representatives approved its own version of the legislation, House Bill No. 1026, on Aug. 20.
Both chambers of Congress will have to harmonize final tax rates in the two bills. Another key issue is whether heated tobacco and vapor products should be taxed at par with traditional tobacco.
Mr. Gorkun said consumption of nicotine and tobacco products should be regulated and taxation is one measure to do it, but the hike in tax rates should be gradual to deter smuggling.
“The key is to is to make sure that the tax increases are in line with GDP (gross domestic product) growth and inflation because otherwise, you have an increase in illicit market and we have seen that before in Philippines in prior history,” he said.
With higher production costs due to new technology, he said that these alternatives are more expensive than traditional smoking products, which will minimize their availability to those below 18 years old.
As PMFTC plans to launch its new “smoke-free” cigarette in the Philippines, he said it will ensure the product is only accessible to adult smokers but not cheap enough to be accessed by “the groups that we don’t want to target.”
Finance Secretary Carlos G. Dominguez III has said that the measure should be approved before the lawmakers go on break on Dec. 21 as the law will be difficult to implement midway into 2020. — Beatrice M. Laforga