This article first appeared in The Edge Financial Daily on September 14, 2018

KUALA LUMPUR: Philip Morris (M) Sdn Bhd, which has the least increment on selling price, has denied absorbing any sales tax that is effective this month. The tobacco maker said that the company has fully passed down the sales tax to consumers, without any form of discounts in line with its cost structure.

In response to the government’s introduction of the sales and service tax (SST) at 10% for cigarettes which replaced the goods and services tax (GST) at 6%, on Sept 1, its managing director Kang Tae Koo stressed that Philip Morris Malaysia has adjusted the prices of all of its products in accordance with local regulations and requirements.

“As such, we would like to emphasise that we did not absorb some or any of the sales tax which resulted in price differences with other manufacturers in the market,” Kang said in a statement yesterday.

Notably, across all segments, cigarette prices of Philip Morris Malaysia’s brands are up by 20 sen (1.18% to 1.67%), while both British American Tobacco (M) Bhd (BAT) and JT International Bhd’s cigarette prices went up by 50 sen (2.94% to 4.35%).

The difference in price increments among three tobacco manufacturers prompt consumers to ponder the possible reasons of it.  

Nonetheless, it is worth to point out that the difference in cigarette price hike might possibly be due to the manufacturing cost of the tobacco companies. Philip Morris Malaysia is the smallest company between the three tobacco companies.

According to the new SST, manufactured tobacco and spirits is subject to a 10% sales tax. But, with the previously imposed 6% GST, the differential is an additional 4% tax.