EXCLUSIVE

Justice dept junks tax raps vs Mighty after BIR backtracks

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The Department of Justice (DoJ) on Thursday junked the tax evasion complaint filed against Mighty Corp., the country’s second biggest cigarette manufacturer whose troubles with the Duterte administration forced it to sell out to Japan Tobacco International.

The Bureau of Internal Revenue (BIR) backtracked from the case after President Rodrigo Duterte announced a
multi-million-peso compromise deal with Mighty, owned by businessman Alexander Wongchuking.

In a two-page resolution, a copy of which was obtained by The Manila Times, the DoJ granted the BIR’s motion to withdraw dated September 26.

The resolution, dated October 2, was signed by investigating prosecutors Sebastian Caponong Jr., Ma.
Lourdes Uy and Mary Ann Parong, and was approved by Officer in Charge-Senior Deputy State Prosecutor Emilie Fe de los Santos and Acting Prosecutor General Jorge Catalan Jr.


In the ruling, the DoJ said the July 20 motion of Mighty seeking to remand and reinvestigate its cases were “rendered moot and academic by the instant motion to withdraw.”

The BIR invoked Section 204 of the National Internal Revenue Code, which allows the commissioner to enter into compromise deals as well as abate, refund and credit taxes.

“It behooves this Office to grant the motion if only to promote the greater interest of the parties involved,” the DoJ said.

‘Economic sabotage’

The President early this year accused Mighty of economic sabotage for smuggling cigarettes and evading taxes by using fake cigarette stamps.

In March, the BIR conducted an on-the-spot surveillance operation to look for untaxed cigarette products in four of Mighty’s leased warehouses inside San Simon Industrial Park in San Isidro, Pampanga.

Mighty stored 66,281 master cases containing 33.1 million packs of cigarettes in its warehouses, 87.5 percent of which were found to have fake internal revenue stamps.

The cigarette maker also failed to produce official delivery receipts, which meant that the products stored in the Pampanga warehouses did not come from the company’s Tikay, Malolos manufacturing plant.

The BIR then filed three criminal complaints against Mighty for tax evasion. Tagged as respondents were former Armed Forces deputy chief of staff Edilberto Adan, president; retired trial court Judge Oscar Barrientos, executive vice president; Alexander Wongchuking, assistant corporate secretary; and Ernesto Victa, treasurer.

In July, the company offered to pay P25 billion to settle the case, to be funded by the sale of its assets to Japan Tobacco.

Mighty remitted an initial tranche of P3.44 billion to the government in July. The government has touted the settlement as the biggest on record and said it expected to earn another P5 billion in value-added taxes from the Japan Tobacco-Mighty deal.

P45-B deal

Japan Tobacco — whose brands include Winston and Camel — bought Mighty for P45 billion from Wong Chu King Holdings, Inc., named after Mighty’s founder.

Under the deal, Japan Tobacco would end up owning Mighty’s inventories, manufacturing facilities and equipment, and sales and distribution network. Affiliate Japan Tobacco International SA will own the trademarks and associated intellectual property of Mighty and Wong Chu King Holdings.

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