Home / Top News / Mighty Corp. settlement to boost sin tax takes—DoF

Mighty Corp. settlement to boost sin tax takes—DoF

The Department of Finance (DoF) estimates that government revenues will increase almost P40 billion from excise tax on tobacco products starting in 2018, following the move by Mighty Corp, to settle its tax liabilities and sell its assets to Japan Tobacco Inc. (JTI).

Finance Secretary Carlos Dominguez III said preliminary computations done by the DoF and the Bureau of Internal Revenue (BIR) show that JTI will pay a minimum of P3.1 billion a month starting January 2018, which is about P2 billion more per month than what Mighty Corp. had previously been paying.

Last Oct. 6, The Department of Justice (DOJ) has dismissed the tax evasion complaint filed by the BIR against Mighty Corporation after the DOJ granted on October 2 the BIR motion to withdraw the three tax complaints it filed on September 26, 2017 against the cigarette firm.

“The motion of Mighty, dated July 20, 2017, praying for remand and re-investigation of the instant cases are hereby rendered moot and academic by the instant motion to withdraw. Complainant BIR’s motion dated September 26 is hereby granted. The complaints in the instant cases are hereby withdrawn,” read the two-page resolution.

The cases cover the firm’s non-payment of excise taxes due its cigarette products and use of counterfeit tax stamps on its cigarette packs, which correspond to excise taxes valued by the BIR at a combined P37.88 billion.

Previously, Mighty Corp. offered to settle its tax liabilities forP25 billion. Justice Secretary Vitaliano Aguirre II earlier said the payment would be used for the construction of hospitals in Basilan province and Jolo, Sulu and the improvement of the Mary Johnston Hospital in Manila.

“For Fiscal Year 2018, JTI is expected to pay almost P40 billion out of the estimated P118 billion in total excise tax collections on tobacco products,” Dominguez said.

The amount represents a third of the total revenue collections from the excise tax on cigarettes.

Mighty Corp. which had faced a string of criminal complaints filed by the BIR before the Department of Justice (DOJ) for its use of counterfeit tax stamps, offered last July to settle its tax liabilities for P25 billion and shutter its business.

The Bulacan-based cigarette manufacturer sold its assets to JTI to be able to pay off its tax dues.

With the approval of Mr. Duterte, the DOF and BIR had accepted the P25-billion settlement offer, which represented the firm’s tax deficiencies.

Dominguez has said that the total amount the government would be getting from the tax settlement—the largest ever from a single taxpayers in the country’s history—is beyond P25 billion and could reach over P30 billion with the value-added tax (VAT) and other fees factored in the settlement and sale of Mighty’s assets to JTI.

He said the settlement of Mighty’s tax obligations will significantly boost the national coffers at a time when the government is meeting the unexpected costs of several calamities.

The increased “sin” tax collections will, on the other hand, help improve health care facilities and enable the Department of Health (DOH) to procure additional medicines and provide services that will help prevent and control the deadly diseases caused by tobacco use, Dominguez noted. RIZA LOZADA

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