Sad turn of events

The “witch hunt” launched by Senator Jinggoy Estrada in the guise of investigations on the plea-bargaining agreement between former military comptroller Carlos Garcia and the Ombudsman took a very sad turn and claimed its first victim when AFP chief of staff Angelo Reyes took his own life yesterday.

Unseen hands were obviously working with known critics of Reyes to turn him into a scapegoat, according to retired commodore and former Reform the Armed Forces (RAM) leader Rex Robles.

Robles said the “diversion” of the investigations on Garcia, who is charged with stealing P303 million in AFP funds during his stint as military comptroller, can be traced to Parañaque Rep. Roilo Golez.

He added that Golez has been protecting Garcia as early as 2004 when as the head of the House defense committee then looking into Garcia’s corruption charges, Golez disregarded further leads on Garcia’s questionable activities.

He said that in 2004, Golez intentionally ignored him and his information that Garcia may be a citizen of the United States facing four money laundering and racketeering charges before the US Attorney General’s Office.

Why the house committee under Golez refused to dig deep into Garcia’s activities, as alleged by Robles, is a big mystery.

At the very least, Golez and the members of his committee in 2004 should be investigated too for the imputation of possible involvement in covering up the manipulation of AFP funds.

Robles noted with suspicion that Golez, in his statement last Jan. 15, was the first to assert that Reyes is the “powerful man” behind Garcia, weeks before retired Lt. Col. George Rabusa testified at the Senate and before Senator Antonio Trillanes IV joined the fray by echoing Golez’s claim.

But the claim of Golez and Trillanes that Reyes is behind Garcia rings hollow because Reyes neither appointed Garcia as AFP comptroller nor did Garcia serve as comptroller under Reyes as AFP chief.

Sure, Senator Miriam Defensor-Santiago has made the expected call for her brother, former AFP chief of staff Benjamin Defensor, to come clean on the P50 million missing United Nations fund. But where is Defensor? Has he even been summoned?

The congressmen themselves identified Defensor as the retiring AFP chief at the time the P50 million went missing.

Why did Reyes kill himself? Some say he could not handle his guilt. Others say that he could no longer take the attacks on his integrity.

Let us all hope that his death could put some sense into this circus. It’s about time that somebody reminded our legislators that trial by publicity has no place in our democracy.

On excise taxes

In 2004, Congress passed a law—Republic Act 9334—mandating an increase in the excise taxes slapped on alcohol and tobacco products. For cigars and cigarettes, the law provides for an increase in the tax rates every two years starting Jan. 1, 2007 and ending Jan.1, 2011.

A bill is now pending in Congress, authored by Antique Rep. Paolo Javier, calling on the government to retain this excise tax system and increase the rates by adjusting them to inflation starting Jan. 2012 until Jan. 1, 2016.

But of course, if revenues from the tobacco industry drop at a rate higher than the increase in tax rates, then government won’t see any additional money going into its coffers.

There are those who are pushing for the implementation of the stamp trace system in order to plug loopholes in the collection of excise taxes. One is Swiss company Sicpa Security Solutions SA which has recommended the use of a technology that will electronically track the domestic production and sale of cigar and cigarette products.

According to the Sicpa proposal, this electronic tracking system will raise a projected P100 billion in additional tax revenues for the government over the proposed seven-year lifespan of this project, a lion’s share of which can be funneled into an array of projects that will benefit the poor.

Sicpa claims to have successfully implemented this system in California, Brazil and Turkey. It quoted executive director Dennis Loper of the California Distributors Association as saying that California distributors now enjoy an additional $500 million in annual revenues; Mehmet Kilci, director of the Treasury Department in the Turkish Ministry of Finance as attesting to the fact that revenues from the Special Consumption Tax have “significantly increased” following the implementation of the Labelled Productions Inspection System using Sicpa technology; and Secretary Otacillo Cartaxo of the Brazilian Federal Tax Authority as saying that “tax collection in the beverage industry increased considerably with this more advanced approach to monitoring production, known as Sicobe and that in the tax arena, certain tax avoidance tactics exist that efficient measures, like this system, eliminate.”

The company also quoted Finance Undersecretary Gil Beltran who said before Congress that excise tax collections hit P26.2 billion in 2006, but subsequently fell 13 percent to only P23.2 billion the following year when the first of the biennial increases was imposed under a four-tier rate schedule.

Beltran also noted that in 2008 when there was no scheduled excise-tax hike, collections from tobacco products reached P27.3 billion. But the following year, when another excise tax hike took effect, the collections plunged by 14.2 percent to only P23.9 billion.

For 2010 the latest data show that actual collections amounted to P24.9 billion as against a projected collection of P25.8 billion. Fiscal planners are projecting this year’s collections to reach no more than P23.5 billion, or, about a 10 percent decline.

Sicpa’s proposed security project involves the use of strip stamps in all cigarette and cigar packs and non-intrusive sensors in tobacco factories plus the relay of such information to a centralized Data Management System (DMS) for real-time monitoring and tracking of tobacco production and distribution in the country.

According to the company, this effective monitoring method will enable the Philippine government to assess the exact amount of taxes that tobacco companies are supposed to pay to the BIR, which can run up to tens of billions of pesos yearly.

But Sicpa’s proposal has experienced severe attacks from a number of quarters, which question among other criticisms, the basis for the company’s P100-billion projection of additional revenues for the government.

Sicpa argues that such estimates, which could reach P116 billion if imported tobacco products are covered by the project, were actually based on a number of studies on tax leakages in the Philippines and the rest of the world, including a joint report done by the Bill and Melinda Gates Foundation and Bloomberg Philanthropies and two Manila-based studies by Dr. Emilio Antonio Jr. and by Euromonitor.

The Gates and Bloomberg report, for instance, listed the Philippines as No. 6 in the 2007 list of Top 10 countries with the greatest illicit trade of tobacco, estimating the local illicit market at 19.4 percent of legal sales amounting to P18.5 billion during the previous year alone.   These figures were presented by Sicpa during last year’s hearings by the House ways and means committee on the issue.

As for the claim that the use of the strip stamps was a form of excise taxation that can only be imposed through a law passed by Congress, Sicpa noted that the cost of the strip stamps to be paid by the tobacco companies is not a tax but a regulation fee that the BIR can charge in line with its mandate.

Moreover, the BIR, as approved by the DOF has long ordered tobacco firms to place internal revenue stamps in each cigar and cigarette pack in keeping with Section 8 of the Tax Reform Act of 1997, it added.

For comments, e-mail at mailto:[email protected]