Cigarette tax claim is 'hot air'.

[Admin]

Cigarette tax claim is 'hot air'
PM denies meddling in Philip Morris imports
Published: 7/03/2011 at 12:00 AM
Bangkok Post: Newspaper section: News
 
The Democrat Party has dismissed as baseless opposition party allegations that the prime minister interfered with the justice system and allowed Philip Morris (Thailand) to get away with false reporting of cigarette imports.

It is among a long list of allegations the Puea Thai Party is expected to file against the government in the censure debate later this month.

Puea Thai deputy spokesman Yutthapong Jarasthien said yesterday the alleged interference has cost the country 68 billion baht in lost customs tax.

He claimed a government insider was instrumental in enabling the company to allegedly file false reports.

Mr Yutthapong has produced what he claimed were documents underpinning the alleged interference.

He said one document dated Sept2, 2009, was a copy of an indictment statement issued by the Department of Special Investigation against Philip Morris (Thailand). The department accuses the company of paying 68 billion baht less customs tax than it should have.

Mr Yutthapong said DSI chief Tharit Pengdit had recommended the indictment of company executives to the Office of the Attorney-General.

However, the prosecution dropped the case on Jan13.

A second document dated Sept6, last year was a copy of an urgent letter from the Prime Minister's Secretariat Office instructing related agencies such as the DSI, the Customs Department, the Revenue Department, and the Office of the Attorney-General Office to assess any impact of the case on Thailand's image and the country's relations with the Philippines.

Philip Morris reportedly exports 30% of its Philippine-made cigarettes to Thailand.

The letter, signed by acting prime minister's secretary-general Pongsak Semsan, made it clear Kiat Sitthi-amorn, chief of the Thailand Trade Representative Office, must be informed of the findings of the assessment, Mr Yutthapong said.

Mr Yutthapong said the prime minister had no business ordering the assessment when the case had reached the prosecution.

He insisted the prime minister had interfered with the justice system, which violates Section 255 of the constitution.

Democrat spokesman Buranat Samuttarak has denied the Puea Thai allegations and said the opposition party had no evidence to back its claim.

He said the prime minister had no involvement in the case, nor did he order any government insider to meddle with justice. The premier is planning to sue anyone who implicates him in the allegation, the spokesman said.

Mr Tharit said the DSI is studying ways to re-submit the case for the prosecution's consideration. Meanwhile, Mr Kiat said he will hold a press conference to explain the issue today.

[boloa]

Cigarette tax claim is 'hot air'..

There's no smoke without fire 

[Admin]

David could lose in case against tobacco Goliath
By Achara Deboonme
The Nation
2011-03-09

The Department of Special Investigation (DSI) made headlines in September 2009 when it launched a "David's move" against Goliath - or Philip Morris (Thailand) - a subsidiary of US-based Philip Morris International, for understating import prices.

The case made headlines again with the refusal in January by prosecutors for special cases to proceed with it, convincing the Opposition that some influential figure close to the ruling Democrat Party was pulling the strings. The public will hear in detail during the coming no-confidence debate whether the allegation of political intervention has substance.

With or without such figures, it is worth considering what is the future of the case if prosecuted, considering there's a dispute between Thailand and the Philippines at the World Trade Organisation (WTO).

In its case, the DSI accused 14 parties in PM Thailand, the distributor of Marlboro and L&M cigarettes, of deception from 2003-2007, causing a loss of Bt69 billion in taxes. The DSI said PM Thailand understated the cost, insurance and freight price of the products imported from the Philippines. By doing this, it evaded taxes, the agency said.

The best way to answer whether these parties understated the price of the cigarettes produced and exported by Philip Morris Philippines Manufacturing to study the WTO dispute in detail.

The dispute between the two countries over differing views on valuation methods goes back years. The case started in 2006 when the Philippines filed a complaint against Thailand before the WTO dispute settlement body. The case was docketed DS371. The Philippines accused Thailand of violating the GATT 1994 regarding the valuation methods of customs and value-added tax on imported cigarettes from the Philippines.

Both countries had held negotiations on these issues in many occasions, including two rounds of formal consultations under the WTO Dispute Settlement Understanding in the period of 2006 to September 2008.

The DSI was assigned to the case in 2006. Three years later, the Thai agency announced the case contained some grounds for action. However, a year before that, on September 29, 2008, the Philippines requested the establishment of a panel to decide on the dispute.

The Philippines is the home of Philip Morris Philippines Manufacturing (PMPMI), established in 2003 ahead of the Asean Free Trade Agreement. Before January 1, 2010, the company's exports - mainly Marlboro and L&M brands - to Thailand were subject to a 5-per-cent import tariff. This was reduced to zero after the FTA took effect.

Manila's claim to the WTO concerns Thailand's customs and fiscal measures on cigarettes imported from the Philippines.

On customs, Thailand during the period levied an import tariff according to the transaction value. But while PM Thailand declared a transaction value, another value was applied to customs calculations based on the import price of another importer, presumably King Power International - the operator of Duty Free, the Philippines said.

The Philippines said that PM Thailand imported the cigarettes for domestic reselling, while King Power imported the products for sale in the duty free shops. As such, it said it was inappropriate to apply one importer's transaction value to another importer.

According to a source in the industry, custom taxes are based on the CIF price - cost, insurance and freight. However, with higher costs reported, the taxes would be higher too.

The Philippines reasoned that although Thailand disclosed it had used a deductive method for such valuation, Thailand did not disclose the starting point of the deductive calculations, the nature or amount of the deductions made, the data sources used, and how the deductive method differed from deductive valuation.

"Thailand acknowledged that PM Thailand's declared transaction values were the 'price paid or payable', but it rejected PM Thailand's declared transaction value for two reasons - the importer and exporter are related and another, unspecified importer imports 'the same type of goods' at 'three to four times' the value of PM Thailand's declared transaction value," the Philippines said.

It said that the relationship of PM Thailand and Philip Morris Philippines Manufacturing was known years before the Thai authorities began rejecting PM Thailand's declared transaction values.

"Thailand's second reason - that another, unspecified importer imports 'the same type of goods' at 'three to four times' higher prices - is also flawed. The price declared by one importer cannot, in itself, be the grounds for rejecting the declared transaction value of another importer.

"Thailand's reliance on this benchmark is also logically inconsistent, because Thailand relied on the other operator's prices to reject PM Thailand's declared transaction value, but then assessed PM Thailand's customs value at a much lower value than the other operator's prices," it added.

In the DSI cases, Bangkok Airways and King Power were named as "other importers".

On the VAT calculation method, it is generally known that the 7-per-cent rate is on top of the reselling price. In the Philippines' claim, while the actual reselling prices of domestic cigarettes are applied for VAT calculation, imported cigarettes including Marlboro and L&M are subject to "maximum reselling prices" (MRPs).

The landmark verdict by the WTO was handed down on November 15, 2010, when Thailand was held guilty of protecting domestic cigarettes. On February 22 this year, Thailand filed for partial appeal. Without the appeal, the WTO's ruling would have been effective on February 24 and Thailand would have had to conform to the rules of the multilateral trading body.

If Thailand loses the appeal, it will need to adopt a similar calculation method. Given that the import tariff is zero, much of that would cover VAT. Significantly, Thailand would lose all the reasons to back its case in Thailand, if the case against PM Thailand goes to court.

Worse, the source in the industry said earlier that PM Thailand might consider a counter-lawsuit, claiming compensation for defamation. Goliath's punch would be more disastrous than David's.

All eyes are now on the appeal, and during this period it is wise for Thailand to delay the case, with or without any party pulling the strings behind it.

[Admin]

Cigarette tax scandal blown out of proportion
By The Nation
2011-03-15

In the censure debate, the opposition will try to hammer the govt on an old tax controversy, but is this really Thailand's most pressing problem?

When the opposition Pheu Thai Party takes the government to task for its mishandling of the Bt68-billion cigarette tax issue this week, the public will likely hear charges of the government's tweaking of the legal process to end disputes with US tobacco giant Philip Morris. The no-confidence debate starts today and runs until Friday.

The cigarette tax story started in 2006 when Thailand's Department of Special Investigation (DSI) was told to examine an allegation that Philip Morris had under-declared the value of its products imported into Thailand. According to King Power, the Thai duty-free retail operator, the price of its Philip Morris cigarettes was about Bt27 per pack, but another importer, a unit of Philip Morris, declared similar products at a price of only about Bt7 per pack. In other words, there was a value discrepancy of around Bt20 per pack, prompting the Thai authorities to accuse the US firm of massively under-declaring the value of its products to evade taxes.

But there was an explanation that the price of around Bt27 per pack was based on supplies from Malaysia, while the latter price of about Bt7 was based on supplies from the Philippines. One was a retail price and the other was wholesale. Yet, Thai authorities came up with the figure of Bt68 billion by multiplying Bt20 by the number of cigarette packs imported into the country by Philip Morris at the time.

While the case was still pending, Philip Morris placed a guarantee of around Bt2 billion with Thai customs authorities in order to get its products released from warehouses for domestic sale. This sum has already been returned to Philip Morris, according to a Thai official.

However, the case is still not closed and might be further complicated by this week's censure debate. On the one hand, the DSI earlier attempted to charge the US firm with falsely stating the value of its imports, thus causing damage to Thailand. On the other, Thailand recently lost a case against the Philippines at the World Trade Organisation regarding the valuation of cigarette imports for tax purposes. Thailand is meanwhile lodging an appeal with the WTO.

In the Thai taxation court, Philip Morris also filed a lawsuit against the Thai Excise Department, which is responsible for collecting excise taxes on cigarettes and other special products. The court acquitted the Excise Department, but Philip Morris has since lodged an appeal, which is pending.

The DSI has not decided whether it will pursue further legal action against Philip Morris by itself, after public prosecutors in January this year said they had dropped the charges against the US tobacco firm.

Given this, the opposition has accused Prime Minister Abhisit Vejjajiva and Kiat Sithi-amorn, the president of the Office of Thai Trade Representatives, of interfering with the legal process via public prosecutors to aid the US firm.

Besides the alleged government interference issue, the opposition will also have to convince the public during the censure debate in Parliament that the Bt68-billion in damages allegedly caused by import undervaluation is really the big issue. At face value it may look like the government has lost a huge amount in tax revenue, but the tax calculation method may still be open to question.

More importantly, the credibility of both Prime Minister Abhisit and chief Thai trade representative Kiat - who allegedly has played a leading behind-the-scenes role in ending some of the disputes between Thailand and the US tobacco giant in return for some unspecified favours - is at stake.

In addition, Philip Morris has threatened to file counter-suits against Thai authorities for causing damage to its reputation.

As far as the pricing of cigarettes is concerned (Bt7 per pack at wholesale prices), the country's anti-smoking lobby should also take a close look at this issue.

[nookiebear]

Still smouldering!!

[boloa]

Someone has made a packet out of this !!!!

[mxyzptlk]

This is becoming a drag.....

[boloa]

This is becoming a drag.....

Perhaps Admin can filter these corny post's 

[Admin]

Chalerm hits PM over cigarette 'tax evasion'
By The Nation
2011-03-19

Opposition MP Chalerm Yoobamrung, chairman of Pheu Thai Party MPs, yesterday accused the government of helping US tobacco giant Philip Morris evade tens of billion baht in import and other taxes in Thailand.

During the no-confidence debate, Chalerm alleged that Prime Minister Abhisit Vejjajiva had instructed Kiat Sitthiamorn, president of the Office of Thailand Trade Representative, to facilitate the evasion in October 2009.

Citing an official document that he presented in Parliament, Chalerm accused the premier and Kiat of interfering in the investigation into alleged tax evasion by Philip Morris Thailand (PMT).

PMT earlier faced possible tax liability of as much as Bt68 billion for under-declaring the value of its imported cigarettes under the brand names Marlboro and LM.

While the investigation was underway, Chalerm said Kiat chaired meetings of top officials from the Customs, Excise and Revenue departments as well as the Department of Special Investigation and the Office of the Attorney General in late 2009 to help PMT, resulting in the public prosecutors' decision not to press charges against the US firm.

According to the opposition MP, the government's actions came ahead of a World Trade Organisation (WTO) decision on August 4, 2010, which said Thailand's tax-calculation method in the PMT case ran counter to its rules.

Thailand recently lodged an appeal with the WTO.

Chalerm said it was unconstitutional for the prime minister to interfere in the investigation and justice process involving a potential tax liability of Bt68 billion.

Chalerm also alleged this was evident when the Office of the Attorney General was asked to review its decision on the case.

He said the potential liability could exceed Bt100 billion when other fines were included, with the government allegedly helping foreign companies to dump cheap cigarettes into the Thai market.

PMT's products have a market share of as much as 30 per cent in Thailand but they have not been taxed properly, Chalerm said.

Government officials said earlier that the Bt68-billion figure was based on multiplying the number of cigarette packs imported by PMT in 2006 by Bt20. The latter figure came from the price difference between cigarette packs imported by duty-free firm King Power and the prices declared by PMT.