Nov. 20, 2009

Remember ‘blue seal’ cigarettes

A SWISS company is proposing to put in place a system where tax stamps will be affixed on every pack of cigarette and every bottle of liquor to raise more revenues for the government.
The company, SICPA, wants to make it appear affixing stamps on highly taxable goods is a fool-proof way of curbing smuggling and tax evasion by manufacturers. The reality is that it is selling a fraudulent bill of goods. 
It’s only about 20 years now that cigarettes and liquor have been free of the green BIR stamp on every pack and bottle (imported liquor still carries the strips). The rationale for doing away with the strips was that they constituted additional cost to consumers and that it was far more simple to just monitor the withdrawals of cigarettes and alcohol products from the manufacturing plants.
Also, tax strips proved to be ineffective in curbing smuggling which the system originally was meant to combat. Remember "blue seal" cigarettes? The term was derived from the color of the manufacturers’ stamps at the top of the pack. Over the manufacturers’ strips, BIR stamps were supposed to be laid to show tax had been paid.
SICPA claims its stamps cannot be counterfeited. In this land of fake peso bills, diplomas, passports and even visas, does SICPA really want us to believe its stamps could not be faked? Even a reasonable facsimile would do as in the previous experience with BIR stamps. The BIR stamps, it will be recalled, were also printed in security paper with watermark. A close look at the genuine BIR stamps and the fakes would show which was which. But to repeat, this did not discourage the smugglers.
But the biggest objection to the SICPA proposal is that it will raise prices by an estimated P1.50 a pack, a cost that will be passed on to consumers. Out of that P1.50, about P1 will go to the government and P0.50 to SICPA.
Given that kind of sharing, why does not the government simply increase the specific tax on cigarettes across-the-board by P1 a pack? The government collects the same revenues. The consumer gets a P0.50 break.
The only loser would be SICPA and, presumably, its sponsors who are ramming the proposal down the throat of the BIR.