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Philip Morris: Tax Increases Are Counterproductive

Wed, 05/12/2010 - 12:26pm
Manufacturing.net

RICHMOND, Va. (AP) -- Cigarette maker Philip Morris International Inc. said it\'s seeing signs of recovery in the global economy, but the seller of Marlboro and other brands overseas cautioned that taxes and stringent tobacco regulation remain challenges for future growth.

Chief Executive Louis C. Camilleri told shareholders at its annual meeting in New York on Wednesday that economic recovery is under way in a wide range of markets and said smokers are adjusting to higher prices for its premium brands.

Last year, the company saw its profit fall 8 percent as revenue fell by 3 percent. The company raised prices and has focused on emerging markets for growth as tax hikes, smoking bans, health concerns and social stigma have cut cigarette demand worldwide.

But in the first quarter, Philip Morris said its first-quarter profit rose 15 percent as revenue rose 17 percent. The company also shipped less than 1 percent more than it did a year earlier.

Camilleri said that governments continue to look at ways to increase revenue, particularly with higher taxes on products like tobacco, and cited "abnormal" increases in places like Turkey, Greece and Australia. Japan -- a growing market -- will see tax hikes in October.

"Such disruptively large excise tax increases are generally counterproductive," Camilleri said.

He said that the increases hurt legitimate businesses, spur illicit trade, encourages consumers to buy cheaper products and, in most instances, don\'t generate the amount of money that governments anticipate.

One of Philip Morris\' other challenges remains increased regulation.

Camilleri said that while the company supports certain restrictions aimed at reducing harm, it has opposed -- and will continue to oppose -- moves in some countries to require plain packaging and ban retail displays.

Camilleri sparred with members of anti-tobacco and corporate accountability groups targeting the company\'s marketing efforts and regulatory dealings.

Members of Corporate Accountability International asked Camilleri whether the company would distance itself from the public health policymaking based on conflicts of interest, to which he disagreed.

"Keeping us out of the debate is not very constructive ... We are more friend than foe," Camilleri said. "All you\'re interested in is prohibition, and that we are against."

One of many of the nurses who made comments at the meeting asked whether Philip Morris would reduce harm by stopping all promotion or recalling its products until the product is safe.

"That\'s a rather naive position to take," Camilleri said. "I could shut down all the factories tomorrow, do you think one single person would stop smoking? I mean, think about it, nobody will stop."

Shareholders elected or re-elected 10 directors to the company\'s board, including Jennifer Li, finance chief of Baidu Inc., the largest Internet search engine in China. Li is one of only a handful of Chinese-born executives ever to be appointed to the board of a Standard & Poor\'s 500 company.

Philip Morris International, with offices in New York and Lausanne, Switzerland, was spun off from Richmond, Va.-based Altria, the seller of Marlboro and other Philip Morris brands in the U.S., in March 2008. It is the world\'s largest non-governmental cigarette seller, smaller only than state-controlled China National Tobacco Corp.

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