If there is a sector that is closely linked to taxes, it is the business network around tobacco consumption. So much so that the recent attempt to change the current tax structure through the failed Omnibus Law once again raised wounds and put on the table the sustainability of an industry that has been declining throughout the world but still retains roots among its loyal consumers. He also revealed strong pressures around the tax structure of the tax that falls on the industry, which in our country is concentrated in more than 90% in three players: Massalin Particulares (subsidiary of Philip Morris), Nobleza Piccardo (of BAT) and the local Tabacalera Sarandí. Pablo M. Otero (53), his president, does not avoid the controversy and reaffirms his position regarding this peculiar conflict.
The president of Tabacalera Sarandí, Pablo Otero, denounces what interests of the sector were hidden behind the failed Omnibus Law.News: What is Tabacalera Sarandí?
Pablo Otero: Tabacalera Sarandí is a tobacco manufacturer that has operated since 1998 and represents the fourth family generation of tobacco producers based in the Avellaneda district since 1888. Currently, we employ 350 people directly and more than 2,000 people linked to the commercial activity. We are exclusive distributors of OCB papers (France) and Imperial Brands tobaccos (United Kingdom), among others. In addition, we import and export raw tobacco. Our annual turnover amounts to nearly US$800 million and we contribute more than US$500 million in various taxes annually.
News: Recently there was an attempt, in the fiscal chapter of the so-called Omnibus Law, to reform the tax levied on tobacco activity. What is your position on these proposed changes?
Knoll: The chapter included in the Omnibus Law, known as “Massalin Law Season 3”, represents a common practice carried out by multinationals to monopolize the market. Both BAT and Massalin have established their own rules at least since the 1990s, through Collection Agreements with different governments, which were never fulfilled. In 2009, Massalin introduced the CMV Law to control the market, which forced third-party manufacturers to be taxed as their largest brand sold. Then his brand would no longer be the best seller, so in 2017 his allies in Congress secretly enacted Law 27,430 (minimum tax). The result of this Law would be like forcing Fiat to sell at the price of Mercedes Benz. Tabacalera Sarandí had to decide between closing the company and going to court so that this law did not apply to it and it could sell ad valorem; That is, pay taxes on a free price.
News: What should be, in your opinion, the tax structure for the industry?
Knoll: We advocate for price liberalization, even if it means an increase in taxes. We do not mind sacrificing performance to repeal Law 27430, questioned in court by 100% of the tobacco companies in the country (even incredibly questioned by the creator). However, we strongly oppose a third Massalin Law, designed to concentrate the market for multinationals.
News: Do national companies operate in a low price market to be able to compete with the big brands of international competition?
Knoll: In all markets there are products of different costs. In Argentina, due to the enormous loss of purchasing power, low-cost brands have proliferated. It is a reality that these companies do not want to admit. Not all consumers can afford brands that bear royalty costs; They represent transfers of hundreds of millions of dollars annually abroad.
News: The Supreme Court has to resolve an appeal filed by Massalin on the Chamber’s rulings in favor of Tabacalera Sarandí. What are her expectations?
Knoll: The Supreme Court does not have any file to resolve. Despite Massalin’s attempts to close our company (without luck at the moment) and being the only one heard by the PEN, we have denounced her practices in court for a long list of crimes. We are evaluating extending this cause abroad and informing the relevant organizations to guarantee justice in the stock market.
News: In the industry with probably the greatest tax pressure in the market, the relationship between companies-regulatory entity-Legislative Power has more impact than others. How do you see it in all this time of management and negotiation? What are the limits that a company should respect and which ones should it be able to overcome to remain in the market?
Knoll: The limits have already been widely transgressed, by BAT and Massalin through the law firms Marval, Bomchil and those who drafted the Omnibus Law, which are service providers of these two companies, without maintaining business integrity and seeking a balance between the parties. involved.
News: There is less and less smoking in the world and the tobacco market is slowly but inexorably declining. How does your company deal with this?
Knoll: The decrease in consumption is related to the increase in vaping and nicotine delivery devices. Although we are not interested in entering this market due to its possible health risks, we are committed to maintaining high international quality standards in what we know how to do.
News: How do you see the future of the industry in Argentina and what do you hope will be the role of your company?
Knoll: Despite the decline in tobacco consumption, we aspire to consolidate our company and increase investments in the production of national raw materials.
