BIR to bid out stamp, bar code for 'sin' products

MANILA, Philippines – The Bureau of Internal Revenue (BIR) is set to bid out a contract for a fuse-on stamp or bar coding technology to ensure the correct payment of taxes for sin products including liquor and cigarettes after calling off talks with Swiss firm SICPA SA that submitted an unsolicited proposal under a build-operate-transfer (BOT) scheme.

BIR assistant secretary James Roldan told members of the ways and means committee of the House of Representatives that the government would no longer pursue the tax stamp proposal submitted by SICPA during the term of former President Arroyo and would instead conduct a public bidding after obtaining an opinion from the Department of Justice (DOJ).

“The BIR will instead provide for another system through public bidding. The SICPA project will no longer be pursued,” Roldan said.

SICPA has offered a technology-driven but expensive track-and-trace system touted to generate up to P70 billion a year in additional revenues from alcohol and cigarette manufacturers.

However, legislators and industry players objected to its multi billion peso price tag, saying it would force the industry to pass on the added burden in the form of price increases to consumers at precisely the time when the economy and consuming power are weak.

Likewise, the justice department also issued an opinon saying that forging a contract with SICPA would violate the BOT law and would usurp the exclusive power of Congress to tax. It cited SICPA’s failure to meet the pre-contract criteria set by the BIR negotiating panel, adding the company is undercapitalized for such a multi-billion undertaking.

With the opinion, the BIR started looking at parallel prosposals that should not only prove superior to the technology-driven proposal from SICPA but costing considerably less than its rivals but without sacrificng the degree of security the government was looking for in an excise collection scheme.

Philip Morris Fortune Tobacco Corp. (PMFTC), on the other hand, proposed an alternative technology that uses bar codes to track and appropriately tax cigarette and alcohol products as they leave the manufacturing plants, plugging a leak that various estimates show ranging in the tens of billions of pesos each year.

For his part, Batangas Rep. Hermilando Mandanas said the shelving of the SICPA tax stamp proposal means there will definitely be no more negotiations with the Switzerland-based company.

Mandanas added it is up to the BIR to make its own judgment if the agency’s public bidding option will stand in the Supreme Court in case legal questions will be raised against it.

“It’s up to the BIR to bring it up or not before the SC, it’s their move. We won’t interpose any objection to their process. Whatever system the BIR will adopt, it is important that the agency should study it well and address any legal question that can be raised against it,” he said.