BOT mode for PPPs not apt for Sicpa’s cigarette tax stamp scheme

While the preferred mode of implementing long-gestation projects under the Public-Private-Partnership (PPP) agreements will be carried out under the build-operate-transfer scheme (BOT), the BOT program has been ruled out in current plans to reform the excise-tax system, the Bureau of Internal Revenue (BIR) said on Wednesday.

In a telephone interview, BIR chief Kim Henares said BOT schemes—as those proposed by a Swiss company for cigarette manufacturers—were abandoned to pave the way for the direct-procurement process instead.

“There will no longer be a BOT project. The law mandates us to use the fused-on stamp or bar-code technology on tobacco products. We are required by law to implement the same,” Henares said.

“And we will do this via a straight-procurement process and anyone who is qualified can bid for it,” she quickly added.

Henares explained that the BOT scheme remains the favored choice in pursuing infrastructure and other growth-enhancing projects submitted under the PPP but not in the excise-tax area, where players continue to pay tax on the basis of legislation that has yet to run the full course.

“This is only for the BIR as far as the fused-one stamp and bar-code requirement is concerned. The BOT is still being used for the PPP projects,” she said. The straight-procurement mode effectively ruled out the participation of the Swiss firm Sicpa Security Products SA, which submitted a BOT proposal seen eventually would cost cigarette consumers to pay an additional 20 centavos per pack when implemented.

Sicpa will initially run the supposedly high-security printing and affixing of holographic excise stamps for a number of years to allow the proponent to recoup its investments before turning it over to the government.

Henares earlier said the BIR was looking at parallel proposals that should not only prove superior to the technology-driven Sicpa proposal but costing considerably less than its rivals but without sacrificing the degree of security the government was looking for in an excise-collection scheme.

“There is a new search for a more appropriate technology whose capabilities are more to scale and certainly not expensive,” Henares had said.

Other proponents, such as Philip Morris Fortune Tobacco Corp. (PMFTC) under Chris Nelson, 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.

PMFTC has been criticized for offering a system that effectively “puts in charge the fox in the chicken house.”


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