Cigarette Makers Buck SICPA Proposal

Source from:  The Philippine Star 11/12/2009

Cigarette manufacturers opposed yesterday the $300-million proposal of Swiss firm SICPA Product Security SA to affix a high-tech, tamper-proof strip stamps on every pack of locally made cigarettes. Chris Nelson of Philip Morris told the House ways and means committee that the proposal's cost would be borne initially by manufacturers and eventually 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. He 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 the global recession. More so the small players," he added. Nelson also expressed surprise over the increase in the cost of SICPA's proposal, saying the initial estimate was only $266 million over seven years. Deputy Commissioner Lilia Guillermo of the Bureau of Internal Revenue (BIR) informed the ways and means committee that the project would cost smokers P18 billion over the proposed seven-year engagement period. La Union Rep. Victor Ortega, a member of the committee, questioned the huge cost, saying BIR officials gave an initial estimate of P12 billion in a previous briefing when the proposal was presented in 2007. Guillermo said the increase of P6 billion was primarily due to inflation. "A 50-percent inflation since 2007?" Ortega asked. The BIR official said she would just submit to the committee a written report on how the cost increased by P6 billion. She also said "there is nothing definite or final yet on the SICPA BOT (build-operate-transfer) project." She said the project aims to enhance the collection of excise taxes on cigarettes and would result in a 15-percent efficiency in BIR's monitoring of the production and sales of cigarettes. Susan Resurreccion of La Suerte said at present, the BIR assigns personnel in the plants of each cigarette manufacturer to monitor "removals" or withdrawal of cigarettes. "I couldn't believe that the BIR does not trust its own personnel and seeks the help of a Swiss company to improve its efficiency at the expense of manufacturers," she said. Antique Rep. Exequiel Javier, ways and means committee chairman, said the SICPA-BIR project would in effect increase the excise tax on cigarettes. "That is the effect, and I don't think you can do that. Only Congress can increase the rate," he told Guillermo. The strip stamps project has reportedly been approved by the National Economic Development Authority investment coordinating committee. Enditem