Better tax administration to help cut smuggling of tobacco products

FTER the government banned cigarette manufacturers from joining in the bidding process, PMFTC Corp. said there is no need for a stamp tax technology to combat smuggling of tobacco products as the government can implement better tax-administration measures. PMFTC President Chris Nelson said tax administration can be improved even without the aid of any technology that would ensure payment of excise tax on so-called sin tax products, such as cigarettes. “You can improve tax administration today without that [system]. I think that’s an area that needs to be focused on even without any type of bidding,”

Nelson told a press briefing last week. Internal Revenue Commissioner Kim Henares earlier said cigarette companies are disqualified from participating in the bidding of a security stamp tax or similar technology on cigarette products. PMFTC, the combined firms of Philip Morris Philippines and Lucio Tan’s Fortune Tobacco, also earlier offered its own security version of the stamp-tax technology known as “Codentify.”

 It said its technology, which uses a numeric bar-code system, costs only 10 centavos per pack or less than the 62 centavos-a-pack unsolicited offer of Swiss product security firm SICPA Product Security SA. China’s Huagong Tech Co. Ltd. submitted a similar proposal at P0.52 centavos a pack. PMFTC controls over 95 percent of the Philippine tobacco market, which consumes about 100 billion to 150 billion sticks of cigarette a year. Nelson said PMFTC will still review the legal grounds invoked by the Bureau of Internal Revenue in disqualifying them. “We will study the matter carefully.

I think that the PMFTC has always tried to work with the BIR and the Department of Finance [DOF] in improving tax administration. We will continue to do so, and we stand ready to assist,” he added. “[The government needs to] decide what system will truly benefit the government, not just something that could be counterfeited easily,” Nelson said. Henares also earlier said BIR will cite the World Health Organization’s Framework Convention on Tobacco Control, to which the country is a signatory, as legal basis for the disqualification of the cigarette manufacturers. The BIR said it hopes to complete the bidding process for the stamp-tax technology by the end of the year but the terms of reference of the measure still have to be published.