BIR to bid out excise-tax stamp on cigarettes

By VG Cabuag, Business Mirror

Posted at Oct 28 2010 01:14 AM | Updated as of Oct 28 2010 06:30 PM

MANILA, Philippines - Bureau of Internal Revenue (BIR)  Commissioner Kim Henares said the government will bid out the contract that aims to monitor the payment of local cigarette manufacturers’ excise tax, instead of accepting the unsolicited offers by at least three companies.

“We’re no longer talking about build-operate transfer, we’re no longer talking about any of these things [unsolicited proposals]. It will be a straight procurement,” Henares said in an interview, referring to the contract of excise-tax monitoring.

“They will compete on the best technology and the best price,” she added.

Henares, however, said at the moment, the agency cannot move on the measure as it is still waiting for Justice Secretary Leila de Lima to overturn the decision of her predecessor, former Justice secretary Alberto Agra.

Agra’s decision released in June states that the BIR plan requires a legislative act as it imposes a fee and charges, which, in turn, becomes a revenue measure for the agency.

Henares said the BIR has already filed a motion for reconsideration that questions Agra’s decision.

The BIR so far has received at least three unsolicited offers from companies, the latest of which came from Chinese firm Huagong Tech Co. Ltd.  The company made its presentation to the government in August.

The other two came from Swiss firm Sicpa Products Security SA and Philip Morris and Fortune Tobacco Corp. (PMFTC), a company that corners about 95% of the local market.

PMFTC represents the merged entities Philipp Morris Philippines and Fortune Tobacco, owned by Lucio Tan.

Henares said the government has not gone into the nitty-gritty of the measure as it still awaits the decision of the Department of Justice, but the agency still entertains proposals or presentation from companies that want the contract but no deal will be made.

She said the BIR also has not gone into discussions as to who will be qualified to join the open bid.

“Up to now, I am not thinking of who is qualified and who is disqualified. But we will develop terms of reference if the DOJ rules in our favor,” Henares said, adding that the terms will also include some risk analysis on the deal.

PMFTC has openly criticized the unsolicited proposal of Sicpa, saying the proposal was too expensive for the government of about P.62 per pack of cigarettes. PMFTC then announced that it is willing to offer a technology that uses a numeric bar-code system that costs P.10 per pack. The said proposal, some BIR officials said, generally involves self-monitoring since the company corners most of the market.

“We will take whatever points, including the fact that if a company controls 95% of the market, so how can somebody monitor himself. All of those things will be taken into consideration. All of that inputs will be placed in the terms of reference,” Henares said.