Lawmakers score Teves on Sicpa tax stamps

MANILA, Philippines - Senior administration congressmen HAVE warned Finance Secretary Margarito Teves that he could face graft charges if he proceeded to award a contract worth P18 billion to Swiss firm Sicpa Product Security SA.

The lawmakers issued the warning in reaction to Teves’ statement that those opposed to the Sicpa contract should go to the Supreme Court.

The finance secretary’s statement indicated that his department and the Bureau of Internal Revenue are proceeding with the award of the contract.

Baguio City Rep. Mauricio Domogan said Teves should not ignore the finding of the House ways and means committee that he would run afoul of the law if he accepts Sicpa’s proposal to install high-tech, tamper-proof strip stamps on cigarettes.

 “I don’t find any justifiable reason for them to ignore us. They might be liable for graft. We will study this (possibility of filing a case),” he said.        

He said Sicpa’s proposal is a form of taxation that only Congress can enforce through legislation since it would effectively increase the excise tax on cigarettes.

The strip stamps project aims to reduce tax evasion, smuggling and counterfeiting. Its cost would be borne by cigarette manufacturers, who have estimated that prices could go up by 50 centavos to P1 per pack.

It is projected to bring in P29 billion in additional revenues over a seven-year period. Of that amount, P18 billion would be paid to Sicpa.

Deputy Speaker Eric Singson supported Domogan’s warning to Teves.

“The strip stamps project calls for the imposition of an additional tax on consumers and should thus be legislated,” Singson said.

He said if Congress does not stop the plan, no one could prevent the finance department and the BIR from imposing additional taxes without the required legislation.

In at least two hearings on the Sicpa project, Antique Rep. Exequiel Javier, ways and means committee chairman, shared the view that the cost of security stamps on cigarettes is a form of tax that only Congress can impose.

For his part, opposition Rep. Rufus Rodriguez of Cagayan de Oro City said he could not understand why Teves and BIR officials are bent on proceeding with the Sicpa contract.

He said it would better for them to leave the project with the next administration lest they be suspected of entering into a “midnight” deal.

“Why are they rushing it when it would burden our people with at least P18 billion in payments to a foreign contractor?” he asked.

Cigarette producers have aired their opposition to the Sicpa proposal in hearings of the Javier committee.

Chris Nelson of Philip Morris said the cost would initially be borne by manufacturers but would eventually be passed on to consumers.

“This translates to around P.50-P1 increase in cost per pack across the board for all brands – an amount higher than the excise tax increases in 2007, 2009 and 2011 for low, medium and high tax categories,” he said.

Nelson said for Philip Morris, the cost of the stamps “translates to around P564 million to P1.1 billion a year.”

“For our bigger competitor, Fortune Tobacco, the figure is between P1.6 billion and P3.2 billion a year,” he said.

“It is a big blow to companies like ours still reeling from the effects of global recession. More so to the small players,” he added.