Tax bureau pushes project on cigarette security stamp

"We are looking for government printing offices such as the NPO (National Printing Office) and the APO (Asian Productivity Organization)," BIR Commissioner Kim S. Jacinto-Henares said in an interview on Friday. The central bank was one of the earlier options, but it begged off since it wanted to focus on printing currency, she added. The security stamps, to be printed on cigar and cigarette packs, aims to stem the counterfeiting and smuggling of tobacco products and plug the leakage of excise tax in the country.

 The safeguard was required by Republic Act (RA) 8240 in 1997, but it has never been implemented. Switzerland-based Sicpa Products Security SA bagged the security stamp project in a 2010 bidding, but the contract was reversed by the Justice department after a probe found that it didn’t meet government criteria. However, Ms. Henares is determined to get the security stamp tax project off the ground this time. "We will bid and implement the fees on stamps by this year," she said. "This will not depend on the passage of the ‘sin’ tax law," she added, referring to the excise tax reform bill, which aims to raise excise taxes on tobacco and liquor.

 The House of Representatives approved its version of the bill early this month, but deliberations have yet to begin in Senate. Moreover, the BIR is not requiring a particular technology for the security stamps. RA 8240 only stated that stamps could be a "bar code or fuson design" to be "firmly and conspicuously affixed on each pack of cigars and cigarettes(read more: click here)." "There is no preconceived process. The bidders can present their technology and that will be part of the features of their bid," she explained. In a related development, Philip Morris Fortune Tobacco Corp. (PMFTC), which now controls more than 90% of the cigarette industry, offered its expertise for the security stamp tax project.

"We have always tried to work with the BIR in different administrations to improve tax administration. We will continue to do so, and we stand ready to assist," PMFTC President Chris Nelson said. But, the BIR chief reiterated her stance that cigarette companies will not be allowed to join the bid due to a conflict of interest. The Framework Convention on Tobacco Control of the World Health Organization -- of which the Philippines is a signatory -- also prohibits the participation of cigarette companies in regulatory measures, for the same reason. Mr. Nelson said PMFTC still believes security stamps are not integral to better taxation of cigarettes.

"I think they can improve tax administration without stamps, and I think that’s something that they can work on." Ms. Henares stressed that "If they (tobacco firms) want to help, the best way is to cooperate with the government when the fees on stamps are implemented. That is the cooperation we need from them."