Finance Secretary Carlos Dominguez III said President Duterte’s acceptance of Mighty Corporation’s offer to settle its civil tax liabilities provides the Bureaus of Customs (BOC) and of Internal Revenue (BIR) a strong impetus to run after other big fishes that continue to cheat the government of billions of pesos in taxes.
At the same time, Dominguez welcomed the President’s statement that the acceptance of the settlement “does not preclude other criminal charges” against Mighty that the BIR may decide to file against it.
“As the President has pointed out, the civil settlement will spare us a long-drawn out court battle that could take years to resolve,” Dominguez said.
Dominguez has said that as a result of the close coordination between the BIR and the BOC, the government was able to nail down what he described as “potentially the biggest collection of taxes” ever from a single entity at one time in the country’s tax history, Dominguez said.
After three criminal complaints filed by the BIR against it for non-payment of excise taxes and possession of counterfeit cigarette tax stamps, Mighty, a local cigarette manufacturer, has offered to shutter its business and pay the government a total of P25 billion as settlement of its deficiency excise and income taxes.
Dominguez said the total tax take of the government could reach P30 billion when the VAT and other fees are included in the computations of Mighty’s tax liabilities.
In his SONA, President Duterte noted that the settlement of Mighty’s tax liabilities “will be the biggest settlement on record” that will “produce a windfall for the government, which is significant, since we have to face the unexpected costs of rebuilding Marawi and Ormoc.
Mr. Duterte said the case of Mighty should serve as a “lesson to others” that his “administration will spare no one found cheating the government of its due.”
Dominguez has cited the substantial improvements in tax administration, as evidenced by the crackdown against suspected tax cheats like Mighty Corporation, as among the key accomplishments of the Department of Finance in the first year of the Duterte administration.
Mighty’s settlement sum was funded by means of an “interim loan” from Japan Tobacco International Philippines (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.”
A manager’s check amounting to P3.44 billion, covering Mighty’s excise tax liabilities, was issued last July 20 by JTI and deposited at the SSS branch of the Land Bank of the Philippines in Quezon City. The amount represented the initial tranche of Mighty’s settlement offer.
The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.