House panel stumped by high cost of tax stamp scheme

MANILA, Philippines - Members of the powerful House ways and means committee expressed surprise when Bureau of Internal Revenue (BIR) Deputy Commissioner Lilia Guillermo testified that the proposed plan to put tax stamps on tobacco and alcohol products will cost $394 million (P18 billion), up from $300 million (P14 billion) six months ago.

This drew strong reactions from the committee members, particularly La Union Rep. Victor Franciso Ortega, Manila Rep. Amado Bagatsing, and Cavite Rep. Jesus Crispin Remulla.

Ortega, who represents one of the country’s biggest tobacco producing provinces, said he is baffled at how BIR and SICPA came out with the P18-billion figure. He, together with Remulla, asked BIR to submit documents and its computation on how the cost of the project could shoot up so quickly.

Bagatsing, meanwhile, put on record his reservations in view of the sudden increase in the cost of operating the scheme that is considered inefficient, costly, and not secure in the first place. “Let us be careful with this negotiation,” he cautioned, “as it could be construed as some sort of accommodation.”

Under the SICPA proposal, cigarette manufacturers will shoulder the cost of the project, which will be passed on to consumers in the form of higher prices of cigarettes.

Small cigarette manufacturers represented by the Anglo-American Tobacco Corp. told the committee that the amount being asked for is too much for their company to absorb. In addition, they will have to acquire new machinery that would cost them around P150 million just to accommodate SICPA’s technology.

Blake Clinton Dy, assistant vice-president of Anglo-American, told the committee that their company is small compared to other manufacturers.

 “Given our small size and limited resources, the adoption of this new system, in addition to the impending increase in excise tax as mandated by law, would impose financial burdens that would be punitive in magnitude for us,” he said. He deplored the Department of Finance’s “single minded pursuit” of the proposal, to the detriment of the industry.

Dy explained that because of the recession, his company as well as others, can not pay more taxes because sales have gone down drastically.