Mighty offers ‘a good deal’

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DoF sees P30B revenue, but ‘the proposal requires further study’
The Department of Finance could gain additional revenues of P30 billion from the tax settlement being offered by local cigarette maker Mighty Corp. for its total tax liability, but Secretary Carlos Dominguez 3rd said the offer needs further study.

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Mighty has total tax liabilities of P37.88 billion, but offered to pay P25 billion in a proposed settlement deal. Dominguez said that would also entail value added tax of P5 billion, which would raise the total amount of potential revenue for the government to P30 billion.

Finance Sec. Carlos Dominguez 3rd PHOTO BY RUSSELL PALMA

“The coordination between the Bureau of Customs and the Bureau of Internal Revenue [BIR] has yielded us potentially the largest collection of taxes from any individual at one time ever in Philippine history,” Dominguez told reporters in an interview over the weekend, referring to Mighty Corp.

“Basically, it seems like a good deal. But there is no deadline, they didn’t say ‘oh, we will only give you such time to approve it.’ They didn’t say that in their letter. So we will take our time to study the matter,” Dominguez said.

“If we accept the total tax settlement, it will mean a total take for us of roughly P30 billion, including VAT,” he added.

On top of the P30 billion in potential revenues, the government may also expect an estimated increase in excise tax collection from Mighty every month by a conservative amount of P1 billion after the sale of the local firm to JT International Philippines (JTI).

Three tax cases filed by the BIR against Mighty are pending before the Department of Justice. These cases cover the company’s non-payment of excise taxes due on its cigarette products and the use of counterfeit tax stamps on its cigarette packs, which correspond to excise taxes amounting to P37.88 billion.

Initial payment
Last week, the Finance department accepted Mighty’s initial settlement of P3.44 billion for its tax liabilities, but stressed that such acceptance did not necessarily mean it was agreeing to the company’s total settlement offer.

Dominguez reiterated that even if the government decides to accept Mighty’s settlement offer, such deal should not preclude any criminal charges that the BIR may file against the company in connection with its tax-related cases, as “these cannot be compromised.”

The Finance department said Mighty will have to pay the balance of P21.5 billion on or after the closing of its proposed deal with JTI.

Earlier, Mighty said its settlement offer would be funded by an “interim loan” from JTI and the sale by Mighty and its affiliates of its manufacturing and distribution business and assets, along with the intellectual property rights associated with these assets, “including those owned by the company, Wong Chu King Holdings Inc., and other affiliates, to JTI or any of its affiliates, for a total purchase price of P45 billion exclusive of VAT.”

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