PTI warns of lower excise tax collections

MANILA, Philippines - A big group of cigarette manufacturers warned of lower excise tax collections for the  government should it implement an unsolicited proposal to place tax stamps on alcohol and tobacco products.

The Philippine Tobacco Institute (PTI) was reacting to reports that the National  Economic Development Authority (NEDA) had given the Bureau of Internal Revenue (BIR) the go-signal to negotiate with a Switzerlandbased company to bring in tamper

proof stamps.

PTI president Rodolfo Salanga said this costly and cumbersome technology would raise prices of alcohol and cigarette products which can bring down consumption levels,  affecting the government’s excise tax collection. Salanga also expressed surprise over

NEDA’s decision to approve the tax stamp scheme even though its proponent, the SICPA Product Security S.A., is financially inadequate to run such a tax collection system.

“SICPA and the BIR would violate the Build-Operate-Transfer Law should they pursue the project,” Salanga said.

The project has a pre-operation and operational cost of P12.16 billion for seven years. It is projected to raise P13 billion in revenues for SICPA annually.  However, SICPA’s   equity in the project amounts to only P56.35 million as against the project’s initial investment cost of P2 billion.

NEDA said earlier that as a rule of thumb, the minimum equity should be one third of its debt. This means that the maximum debt-to-equity ratio should be 75 to 25 to avoid over-leverage and to ensure that the project’s financial capacity for debt repayment or other investment activities will not be at stake.

Another issue earlier raised by NEDA was SICPA‘s proposal for the government to pay P2 billion for its seven-year operation of the tax collection scheme. NEDA said this clearly violates a BOT provision wherein no direct government guarantee, subsidy or

equity is required for the project.

Still, the NEDA Investment Coordination Committee-Cabinet Committee approved this so-called “integrated solutions technology” to “reduce the illicit trade in the country.”