Two members of the House of Representatives have sought the help of the US government in the investigation into the alleged underpayment of excise taxes and other related illegal trade practices of a local cigarette manufacturer.
In separate letters to US embassy officials forwarded to this reporter, Reps. Estrellita Suansing (first district, Nueva Ecija) and Jonathan de la Cruz (Abakada party-list) said information provided by the US government on the importations of Mighty Corp. of tobacco materials from US-based suppliers would aid the House in determining whether the Philippine excise reform tax law was being properly implemented and serving its purpose of increasing revenue collections in the domestic tobacco industry.
Copies of the letters were made available to media over the weekend.
Republic Act 10351, significantly raised excise taxes on alcohol and tobacco, collectively known as “sin products” for a period of five years starting last year.
Suansing and de la Cruz cited that Mighty Corp., is now under investigation by the Bureau of Customs (BOC) for suspected “serious violations of tariff and customs laws.”
De la Cruz noted that Sen. Miriam Defensor Santiago has also called for an inquiry in the Senate.
Mighty, which has manufacturing facilities in Bulacan, is also the subject of an upcoming probe of the House ways and means committee for “alleged fraudulent reporting of volumes of tobacco and cigarette withdrawals.”
In her letter to US Ambassador Philip Goldberg, Suansing asked for data on Mighty’s imports of tobacco and non-tobacco materials from American suppliers “particularly on information pertaining to the import volumes and actual prices of tobacco leaf and acetate tow for the years 2011 thru 2013.”
The US-based suppliers include Golden Leaf Tobacco Co., Lancaster Leaf Tobacco Co., Richloam Tobacco Co., Burley Tobacco Growers Cooperative, Universal Leaf North America, Eastman Chemical Co. and Celanese Acetate LLC.
“Data from your end on import prices or invoice prices from the US is also a key to establishing whether [Mighty] has been truthfully declaring import values for correct payment of duties and taxes,” Suansing said in her letter to Goldberg.
Suansing noted that data cited by the Department of Finance show that Mighty imports different types of tobacco from different countries which are all priced the same at $0.68 per kilogram. The firm also imports acetate tow, a material used in cigarette filters, for only $0.30 per kilogram regardless of its country of origin.
De la Cruz pointed out the same questionable import volumes in his separate letters to Philip Shull and James McCarthy, the agricultural counselor and commercial counselor, respectively, of the US Embassy in Manila.
These prices, Suansing pointed out are only “a fraction of the invoice price of other Philippine importers of both tobacco leaf and acetate tow.”
De la Cruz noted that other tobacco importers declared invoice prices ranging from $3.39 to $6.75 per kg of tobacco leaf and $5.36 to $7.45 per kg for acetate tow.
Suansing also cited reports that Mighty applied in October for an increase in volume of its importable raw materials by 194 percent. In its application before the BOC, Mighty indicated that its current production capacity is at least 378,000 cases per month or 4,536,000 cases annually, equivalent to 2.268 billion packs, Suansing said.
She, however, noted that Mighty paid excise taxes on only 334 million packs in 2011 and only 518 million packs in 2012, showing a huge discrepancy in terms of capacity versus tax-paid volumes.
“The issues against Mighty stem from its alleged under-declaration of cigarettes it manufactures and withdraws from its facilities for which excise taxes are payable to government. If such volumes of withdrawals are wrongfully declared, then it also follows that the value-added tax and income tax payments are also less than what is rightfully due the government,” she said in her letter.
Suansing also pointed to the company’s suspicious low-pricing policy for its discount-priced brands “Mighty” and “Marvels,” which, based on computations, would yield substantial losses and not “low profits” as claimed by its spokesman.
She also said the Embassy might be interested to know “that Mighty together with other Philippine corporations were reported to have been held liable to pay up to $21 million for failing to set aside a portion of their sales in favor of a health fund for smoking victims.”