BAT-man and 'robins'

DIE HARD III

Herman Tiu Laurel

10/22/2012

Department of Finance Secretary Purisima is pushing to raise P40 billion by raising the excise tax on domestic, Filipino-made and produced tobacco and cigarette products by five times while leaving taxes on luxury and imported brands practically untouched. The real backer of the "Purisima Sin Tax" bill, is the British American Tobacco (BAT) Corp. Here's a headline from Philippine Star, Oct. 15 by Iris Gonzales: "Brit-Am Tobacco backs House version of sin tax bill… In a position paper, BAT asked lawmakers to pass a bill that would level the playing field in the industry…" Leveling can be read to mean "bulldozing" the Philippine tobacco industry. As a sales pitch, BAT promises to invest in a $200-million cigarette plant in the Philippines, but what need would BAT have of a plant if the taxes of tobacco products produced in the Philippines already increase by five times?

It is vital to take the warnings that tobacco smuggling will ensue massively if the "Purisima Sin Tax," the BAT-man, is approved. Here is a British House of Commons presentation in 2000, "Note of Evidence by Duncan Campbell in respect of Planning, Organization and Management of Cigarette Smuggling by British American Tobacco, PLC and related issues …. the activities of British American Tobacco PLC ('BAT') and its predecessor, subsidiary and group companies during the period from 1970 to date. It is based on enquiries made by the author and others as part of an international investigation conducted during 1999 by the International Consortium of Investigative Journalists, a project of the Center for Public Integrity ('CPI')… a Washington based public interest research group… The major issues … are: A) Smuggling … the deliberate smuggling of BAT products evolved from an ad hoc activity into an organized and centrally managed system of lawbreaking..."

The House of Commons report continues: "Support for criminal activity is endemic among BAT senior managers … in planning, organizing or managing criminal activity, and/or have knowingly consented to the deliberate smuggling of contraband BAT tobacco products around the world. A very substantial part of the company's revenues derives from this … BAT has provided support to narcotics traffickers and other organized crime… supported the smuggling of narcotics (cocaine, crack and heroin) by providing tobacco products with which value may be returned to producer countries. This is particularly so where international controls have been developed to restrict money-laundering of the proceeds of narcotics sales… A... consequence of the company's actions is and has been to remove billions of pounds annually from the income of governments … around the world…."

In 2005 Jamie Doward of The Observer reported, "'Smuggling claims hit tobacco giant'… Fresh allegations rock BAT as six-year investigation by the Mounties leads to publication of secret letters… it had colluded in a multimillion-pound smuggling operation. " Among its references is a research paper entitled 'Complicity in contraband: British American Tobacco and cigarette smuggling in Asia … Objectives': To examine the complicity of British American Tobacco (BAT) in cigarette smuggling in Asia, and … centrality of illicit trade to regional corporate strategy … Results: BAT documents demonstrate the strategic importance of smuggling across global, regional, national and local levels. Particularly important in Asia, contraband enabled access to closed markets, created pressure for market opening and was highly profitable…."

In the heat of the "Purisima Sin Tax" bill debate the head of the Presidential Legislative Liaison Office (PLLO) Manuel Mamba alleged that the "bribe" money had circulated in the Philippine Senate to water down the radical "Purisima Sin Tax." Sen. Ralph Recto felt alluded to and resigned his post as head of the ways and means committee handling the "sin tax" proposal. I don't think Recto is that thin skinned to resign over such simple allegations, most of these politicians are inured to such charges as lobby money is a regular mode of transaction among them as Recto knows from the VAT on fuel taxes which he allowed to be passed on. A threat more serious than mere allegations of "bribery" must have forced Recto's resignation, something like an Amla violation (as in Corona's case), paving the way for takeover by a pliant Drilon.

"Robin" in the urban dictionary means "nice person," BAT cultivates such "robins" or lobbyists. From Wikipedia for example, "British American Tobacco spent more than 700,000 euros lobbying the European Union in 2008, up to four times as much as the company declared on the EU's register of interest representatives, according to a report by Corporate Europe Observatory." There are other insidious lobbies, such as Bloomberg's Tobacco Control Grants masked under "smoke free" campaigns. On Scott.net on the Internet Mayor Bloomberg of New York City, leading the Bloomberg Foundations, is quoted saying "We want to get governments to raise taxes…" some Philippine recipients: $255,626 for Action for Economic Reforms, $300,960 for "HealthJustice" Foundation, $234,794 for UP College of Law, among a list of over 20 local NGOs and institutions.

(Watch Destiny Cable GNN's HTL edition Channel 8, Saturdays, 8:15 to 9 p.m., replay 11:15 p.m. and Sunday, and on www.gnntv-asia.com: this week "Bangsamoro ap-piece-ment" with lawyers Bono Adaza and Alan Paguia; tune to 1098AM radio Tuesday to Friday 5 to 6 p.m. http://newkatipunan.blogspot.com)

Meralco's 'bilk' deposit

DIE HARD III

Herman Tiu Laurel

10/19/2012

It took every Meralco watcher a day or two before the "bill deposit" the power distribution utility company wanted to raise, could be figured out. The "bill deposit" was Greek to most people and nobody recalled it existed until it was raised two weeks ago because Meralco wanted to raise it. The "bill deposit" is a "security deposit" listed among "customer protection" in a "Magna Carta for Residential Electricity Consumers, one-month estimated consumption of the Manila Electric Co. (Meralco) customer held by the company and forfeited in case of non-payment of bills. On its face the deposit seems simple and fair, but the devil for Meralco and the saving grace for consumers are in the details. We're glad Meralco opened this Pandora's box and a chest full of rectifications consumers must demand.

Power crusader Butch Junia set us a comprehensive paper on the Magna Carta based on , Section 31 of ... 9136 (Epira), adopted by the ERC on June 9, 2004: the "bill deposit" is defined as "the deposit required from customers by distribution utilities (DU) of new and/or additional service equivalent to the estimated billing for one month to guarantee the payment of the bills." Among the basic rights of consumers there are: "quality, reliable, affordable, safe and regular supply of power"; and a most notable provisions is Article 7 of chapter II, Consumer Rights which says, "A customer who has paid his electricity bill on or before its due date for three (3) consecutive years may, however, demand full refund of the deposit even prior to the termination of his service. An application for this purpose shall be filed with the concerned distribution utility which must refund the deposit within one month from receipt of such application."

Butch Junia cites a most vital provision: "Distribution utilities (DU) shall pay interest on bill deposits equivalent to the interest incorporated in the calculation of their Weighted Average Capital Cost (WACC), otherwise the deposit shall earn an interest per annum in accordance with the prevailing interest for savings deposit as approved by the Bangko Sentral ng Pilipinas (BSP). The interest shall be credited yearly to the bills of the registered customer." To sum up these three provisions mentioned here: 1) electricity customers have a right to "affordable" electricity; 2) a customer who pays his bill on time unerringly for three (3) years can demand a refund of the "bill deposit"; 3) the DUs should pay interest on the "bill deposit" equivalent to the DUs' interest on its WACC as approved by ERC in the current "regulatory period" of 14.75 percent or the prevailing savings deposit rates.

The amount of "bill deposits" Meralco accumulated based on its 2011 sales of P 256 billion is about P 25.6 billion. Junia's writes: "Meralco's 1st VP Ivanna de la Peña … confirmed that 90,000 of their customers were sent the notice of increase for the month of October, … other batches for every month will be receiving the same kind of notice. These were the disconnected customers or those who received three disconnection notices within the year, ... about 1.2 million customers in one year, or roughly 20 percent of its five (5) million customer base. By a straightforward analysis … of the P26.4 billion cash pile, about P5.2 billion would be adequate to answer for the problem accounts and the rest, the P21.12 billion should already be returned to the customers … The provision for bad debts (incorporated in our bills — htl) is almost P700 million; the Working Capital is P1.156 billion (consumers also provide — htl) … are substantial buffers … Why then, should the rest of Meralco's captive customers — 75 percent of its customer base — be penalized."

Now, the great swindle coverts the "bill deposit" to a "bilk deposit": "ERC has given Meralco a WACC of 14.75 percent, resulting in Meralco's return on capital of P19.77 billion for RY 2013. In arriving at the WACC, Meralco's cost of debt was benchmarked to a low of 10.8 percent, ... and high of 13.7percent. That is the cost of Meralco's borrowings and … recovered from us (consumers)… but in November, 2010, ERC un-coupled the interest from WACC and pegged it to the Land Bank rate at the start of the year which is 0.5 percent in 2011, 0.75 percent in 2010." So now, all the 5-million Meralco customers are losing at least 14 percent in interest earning from the "bill deposit" which Meralco is now keeping as part of its profits. This amendment happened in 2010 under the watch of ERC chairman Zenaida Ducut, with commissioners Rauf Tan, Alejandro Barin, Ma. Teresa Castañeda and Jose Reyes.

The millions of electricity consumers all over the country are victimized by ERC's gross failure to disseminate information needed by consumers; and manipulations of the Magna Carta and the Epira by elements in the ERC and Meralco. It is clear consumers are being bilked of billions more in this "bill deposit" hike. We will bring these to the Ombudsman, but the ultimate protection of consumers is awareness, vigilance and militancy. It's time all consumers act as one.

(Watch Destiny Cable GNN's HTL edition channel 8, Saturdays, 8:15 to 9 p.m., replay 11:15 p.m. and Sunday, and on www.gnntv-asia.com: this week "Meralco's 'Bilk' Deposit'"; tune to 1098AM radio Tuesday to Friday 5 to 6 p.m. http://newkatipunan.blogspot.com)

Moneymen awards

DIE HARD III

Herman Tiu Laurel

10/15/2012

Are readers more impressed now with the Department of Finance secretary with this headline last Sunday: "Purisima gets global award for 'unforgiving' campaign vs tax evasion" coming from Euromoney magazine, a publication for international bankers and money-men. Anything described as "global" should be impressive, with dramatic emphasis on "unforgiving campaign" against pernicious "tax evasion" even. If I hadn't an inkling of Euromoney's awards record I too would be very impressed with Purisima's accolades, but I remember Euromoney in 1995 awarding Bobby de Ocampo "Best Finance Minister" who was caught clueless during the 1997 Asian Financial Crisis which saw a 40 percent plunge in the peso. Today, Euromoney shows its checkered ratings, awarding Barclays Bank "Best Investment Bank" despite its central role in the "biggest banking scam ever" of the Libor scandal.

A few months ago we wrote in this column about "Lie-bor and our labors," on how the banks concentrated in the City of London (a one-square mile where the world's major banks are located) regularly manipulated global interest rates that invariably steal the value of the hard works of nations like our overseas Filipino workers. The Libor rate is used to set the price of around £223 trillion of lending and derivatives. Barclays was at the center of the Libor (London Inter-Bank Offered Rate) scandal and its chairman, CEO and COO were forced to resign because of the scandal. Yet Euromoney has just given not only one award as I mentioned above, but two more for Excellence 2012 including the "Best Global Debt" and "Best Global Flow House." Apparently, the Euromoney board sees the world, money and people differently from the rest of us ordinary folks, and fraudsters are heroes so long as they earn money for the banks.

The "prestigious magazine" Euromoney lauds Purisima for unleashing "an unforgiving strategy to combat tax evasion and maximize revenue from corporates without introducing any new taxes or reforms." Jus to show the ironies: the VAT on toll fees were deemed by the DoF as an "old tax" despite being imposed only now in the time of Purisima. Seventy percent of the economy is really the underground economy, which technically all consists of tax evaders. Euromoney adds, "Purisima has worked closely with President Aquino to champion the idea that 'good governance is good economics.' Bankers in the country say he has stuck to his guns, and the country is reaping the rewards." Like sticking to increasing Philippines debt despite the Philippines' GIR (gross international reserves) at $ 83 billion enjoys $20-billion surplus over the $ 63-billion foreign debt and P 1.7 trillion in SDA (special deposit account) lying idle costing taxpayers four-percent interest. The country's reward is annual $ 200-billion debt payments.

Special praise for Purisima was also heaped for his campaign to raise "sin" taxes on domestic tobacco and cigarette products to the same level as foreign and luxury brands. This campaign has been masked by appeals to "health" but the underlying objective is really to price local tobacco and cigarettes out of the market in favor of foreign and luxury brands, at the same time favoring foreign tobacco and cigarette companies again that would find an expanded market for the inevitably and massively cheaper smuggled tobacco products they can bring in. Purisima was informed of the award while in Tokyo for the International Monetary Fund-World Bank meetings, and put on a show of modesty saying "I'd like to especially recognize Internal Revenue Commissioner Kim Henares … as well as Budget Secretary Butch Abad," both of whom are key allies in the "sin tax" campaign to favor foreign tobacco producers.

Tax collector Purisima is the idol of the bankers and money men, but he's a bane on the taxpaying people. Mark Twain asks: "What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin." Of course, we recall that wonderful song from the Beatles: "Let me tell you how it will be; There's one for you, nineteen for me; 'Cause I'm the taxman, yeah, I'm the taxman/ Should five per cent appear too small; Be thankful I don't take it all; 'Cause I'm the taxman, yeah I'm the taxman/ If you drive a car, I'll tax the street, If you try to sit, I'll tax your seat./ If you get too cold I'll tax the heat, If you take a walk, I'll tax your feet./Don't ask me what I want it for/ If you don't want to pay some more; 'Cause I'm the taxman, yeah, I'm the taxman/ Now my advice for those who die, Declare the pennies on your eyes, 'Cause I'm the taxman, yeah, I'm the taxman/ And you're working for no one but me."

(Watch Destiny Cable GNN's HTL edition channel 8, Saturdays, 8:15 to 9 p.m., replay 11:15 p.m. and Sunday, and on www.gnntv-asia.com: this week "People's Power Struggle"; tune to 1098AM radio Tuesday to Friday 5 to 6 p.m. http://newkatipunan.blogspot.com)