Compared to the same period in the previous year, cigarettes bearing the brands sold by Mighty Corporation yielded roughly P4 billion more in monthly excise taxes over the September-December 2017 period, or when Japan Tobacco Inc. fully took over the operations of the company, according to data from the Bureau of Internal Revenue (BIR).
In his report to Finance Secretary Carlos Dominguez III, BIR Commissioner Caesar Dulay said this increase in excise tax payments on Mighty brands totaling P20.22 billion from September to December 2017 represent a 262 percent improvement or P14.65 billion more from the collection of P5.57 billion for the same period in 2016, when Mighty was still controlled by its previous owners.
Dulay, in his report during a recent Executive Committee meeting of the Department of Finance, said total excise tax collections for September to December 2017 amounted to P71.24 billion or a 26.68 percent hike over the collections in 2016 of P56.24 billion for the same period.
Excise tax collections from the tobacco industry comprised 57.4 percent of the total excise tax collections for September to December 2017, contributing P40.91 billion that year, Dulay said.
“What stands out there is the Mighty-JTI improvement in collections as they represented 262-percent improvement from September to December,” Dulay said.
Mighty Corp. a cigarette manufacturer based in Bulacan, had offered to settle its tax liabilities last July for P25 billion and sell its business to JTI after agents of the Bureaus of Customs and BIR raided the company’s warehouses in Pampanga, Bulacan, General Santos City and other parts of the country and uncovered Mighty’s widescale use of counterfeit tax stamps.
The BIR later filed before the Department of Justice three criminal complaints against Mighty for its use of counterfeit revenue stamps and non-payment of excise taxes.
From the tax settlement and the sale of Mighty’s assets to JTI, the government has so far collected about P30 billion, which is the largest sum of taxes ever collected from a single corporate entity.
Finance Assistant Secretary Mark Dennis Joven of the DOF’s Corporate Affairs Group said even when you take into account the slight differences in the periods cited for comparison, the excise tax payments from Mighty brands under JTI management would still be around P13 billion more during the months from September to December 2017 compared to the same period last year.
“That’s still about P4 billion a month more,” said Dominguez.
Dominguez noted, however, that JTI might have been frontloading stocks of Mighty brands during the September-December period in anticipation of the increase in excise tax payments on so-called “sin” products in 2018.
The government is now implementing higher tobacco excise taxes as provided under the Tax Reform for Acceleration and Inclusion Act (TRAIN).
But preliminary computations by the BIR and DOF show that after the frontloading period ends, the government would still be able to collect about P2 billion more per month in excise tax payments on JTI-Mighty brands.
A total of 239,724 mastercases or close to 120 million packs of cigarettes bearing the Mighty brands were seized by the BIR and BOC last year in several operations which included smaller hauls in the cities of Tacloban and Cebu.
On top of Mighty’s P25-billion tax settlement, the government was able to collect another P5.4 billion from the value-added tax and other fees from the sale of Mighty’s assets to JTI or a total of P30.4 billion (roughly equivalent to $600 million).
Last December, Dominguez led the destruction in Bulacan of some P3.316 billion-worth of Mighty and Marvel cigarettes bearing fake tax stamps.
A total of 229,428 mastercases or 114,714,000 cigarette packs were destroyed over a period of several days inside the compound of the Holcim Philippines Geocycle in Norzagaray through a method called “co-processing.”
The “co-processing” method pioneered by Holcim Geocycle ensures the total thermal destruction of waste materials, while reducing toxic gas emissions and land and groundwater pollution.
According to the BIR, the P3.316 billion worth of cigarettes that were destroyed consisted of 66,245 mastercases valued at P869 million that were confiscated in Pampanga and another 163,183 mastercases estimated to cost P2.44 billion that were seized in Bulacan.
BIR estimates show that excise tax liabilities, including penalties, arising from the use of counterfeit tax stamps on these cigarettes amount to P9.564 billion from the Pampanga raid and another P26.29 billion from the operation in Bulacan.
Earlier in November, representatives from the BIR and other government agencies witnessed the destruction in Davao City of some five million packs of cigarettes worth an estimated P142.44 million, all bearing the brands sold by Mighty Corp. that were seized earlier this year in Mindanao for having counterfeit tax stamps.
According to the BIR, the estimated deficiency excise tax liability, including penalties, of these cigarettes seized last March 6 in General Santos City would have amounted to P1.39 billion.