BUSINESS and advocacy groups lauded the Bureau of Custom’s decision to close down the customs bonded warehouse (CBW) of Mighty Corp., the seller of lower priced cigarettes at almost dumping rates to the detriment of local tobacco farmers and cigarette makers.
Jesus Lim Arranza, chairman of the 800-strong Federation of Philippine Industries, along with anti-tobacco groups, praised the BoC for closing Mighty’s CBW pending full audit investigation.
The Customs bureau, which headed the special Department of Finance Task investigating Mighty Corp., ordered the shutdown of the importation warehouse of Mighty for “serious violations of the Tariff and Customs Code.”
The move bars Mighty Corp. from rechanneling duty-free cigarettes-for-export for domestic distribution and consumption.
Civil society groups, which lobbied for the passage of the new sin tax reform law, lauded Customs Commissioner John Philip Sevilla, saying that Mighty has caused a shift in consumption from higher-priced cigarettes to the “artificially low prices of its cigarettes.”
In a joint statement, the Action for Economic Reforms (AER), FCTC Alliance of the Philippines (FCAP), Philippine College of Physicians (PCP) and Woman–Health Philippines also said that Mighty has been accused of engaging in technical smuggling and downshifting consumption, which “does not align with the Sin Tax Law’s objective of discouraging smoking.”
Arranza, meanwhile, asked BoC to closely monitor 24/7 the operation and trading practices of Mighty Corp.
From being a small manufacturer of cigarettes with a mere 3-percent share in 2012, Mighty Corp. last year snatched a 25-percent share of the multi- billion Philippine tobacco market with extraordinarily low-priced cigarettes.
Initial review of the import entries covering 2011 and 2012, BOC discovered that Mighty imported tobacco regardless of type and country of origin at 68 cents a kilo where other high-volume tobacco importers paid a range of $3 to $8, based on data supplied by the National Tobacco Administration (NTA).
Also, Mighty imported acetate tow, the raw material used for filters, at 30 cents to .32 cents a kilo. Other importers declared amounts ranging from $4.93 to $7.45.
Mighty claims that most of its tobacco leaf and acetate tow imports are intended for export.
But the task force discovered the “unauthorized” use of bonded raw materials intended for exports for domestic production without proper payment of customs duties.
Based on the export commodity clearance issued by the National Tobacco Administration (NTA), the imported raw materials do not match the volume of finished goods actually exported.
“Simply put, there is significant unaccounted tobacco leaf and acetate tow that have not yet been exported by Mighty within the allowable period,” the task force said in its report.
The task force was created under Customs Special Order (CSO) 60-2013 dated November 6, 2013, pursuant to the memorandum issued by Finance Secretary Cesar Purisima on August 15, 2013.
New Customs Commissioner John Phillip Sevilla ordered the suspension based on the recommendation of the task force, which conducted an investigation on the alleged illicit importation activities of the company.
“I approved the recommendation of the task force to suspend the license to operate a Customs Bonded Warehouse under CBW M-1718 of Mighty Corp.,” Sevilla said in a memorandum addressed to the district collector of the Port of Manila dated January 17.
Sevilla added, “Initial report of the task force reveals that Mighty Corp. committed serious violations of Tariff and Customs laws, rules and regulations resulting to huge revenue losses for the government. Consequently, there is a need to suspend the operations of the Customs Bonded Warehouse of Mighty Corp. to prevent revenue leakages while further investigations are being conducted.”
In a related development, Congress is preparing to hold its own investigation on the alleged smuggling and tax evasion in relation to payment of sin taxes on cigarettes.
Rep. Paolo Javier has filed the resolution in the House calling for an inquiry while Sen. Miriam Defensor Santiago filed a similar measure in the Senate.
Party-list Rep. Jonathan dela Cruz specifically asked the House Ways and Means Committee to investigate the alleged questionable business practices of Mighty which he said may have resulted in the noncollection of at least P4.4 billion in excise taxes last year.