Government may appeal DOJ legal opinion on Sicpa stamp tax proposal

MANILA, Philippines - The government may appeal the legal opinion issued by the Department of Justice (DOJ) on the controversial security stamp tax proposal of Switzerland-based Sicpa Security if necessary, Finance Secretary Margarito Teves said during the weekend.

“Like any process, you have to determine if there is room for a motion for reconsideration,” Teves said.

The DOJ, in an opinion issued last June 1 but made public only last week, thumbed down Sicpa’s proposal because of questionable provisions.

For one, the DOJ said the proposed SICPA system partakes of a tax. “Thus, it cannot be imposed by the BIR without encroaching upon the exclusive authority of Congress to enact revenue measures. In the end, the additional burden passed on to consumers takes the form of an indirect tax which the BIR cannot impose,” the DOJ said.

Teves said that the department and the BIR have yet to look into the legal opinion issued by the DOJ and see whether there is a need to appeal it.

“Whether it is ripe for a motion for reconsideration, we will see first,” he said.

Teves stressed that the government is after the technology proposed by Sicpa and not after the company itself.

Sicpa, a company that provides security stamp tax services to various governments across th globe, earlier submitted an unsolicited proposal to the BIR to provide security stamps on cigarettes.

The BIR sought a legal opinion from the Justice department after lawmakers and tobacco manufacturers have opposed the project, saying that the negotiations with Sicpa lack transparency and are illegal.

Under Sicpa’s proposal, stamps shall be affixed on each pack of domestically produced cigars and cigarettes. The project consists of a track and trace system which combines proprietary security and tracking technologies for a complete and integrated security solution for anti-counterfeiting, production monitoring, distribution control and inventory taking for tax administration purposes.

In its opinion, the Justice department said the Sicpa trace proposal violates the prohibition by the build-operate-transfer law against direct government guarantee.

“In case the minimum number of strip stamps per month or per year is not met or the equivalent amount deposited is not sufficient to cover the monthly payment, the government shall be required to deposit such amount in an escrow account sufficient to pay for the shortage to ensure that the proponent (SICPA) receives the total amount due for the period. The DOJ opinion believes that the take-or-pay scheme as used in the Sicpatrace proposal is tantamount to a direct government guarantee, subsidy or equity that is prohibited under the BOT law,” the Justice department said.

The Philippine Tobacco Institute welcomed the opinion issued by Justice Secretary Alberto Agra.

“We commend Secretary Agra on his ruling against SICPA. His opinion is based on solid grounds,” said Rodolfo Salanga, president of the PTI.

Salanga said the opinion is consistent with the report issued by the ways and means committee of the House of Representatives which found the costly tax stamp deal violative of legal requirements and full of anomalies.