February 14, 2014

Philip Morris International accuses local rival of tax dodging

News portal interaksyon.com today reported that Philip Morris International, a partner of the Lucio Tan Group (LTG) through Philip Morris Fortune Tobacco Corp (PMFTC), accused its local competitor Mighty Corp actually declaring only half of its output and allegedly evade payment of excise taxes. This has enabled the latter to keep its selling prices low and gain market share.

Our Take: Other organizations supporting the Sin Tax law has earlier made similar allegations, leading to a closer scrutiny by tax officials of Mighty’s operations. This prompted the latter to raise prices on its Mighty brand but kept the prices of its Marvel brand which continued to gain market share amid downshifting by consumers.

At any rate, this has eased the market pressures on PMFTC and has spurred positive sentiment on LTG shares. Any further price hikes by Mighty on its lower-end brands should enable PMFTC to recover market share and will bode well for LTG. – WealthSec