Finance Secretary Carlos Dominguez III said the criminal cases against local cigarette manufacturer Mighty Corp. will remain even if the government accepts its offer to settle its tax liabilities.
“[The] criminal cases cannot be compromised,” Dominguez said over the weekend, adding “we have not formally approved [their offer].”
“But of course if somebody will come up and give us P3.44 billion, of course we will not say no,” Dominguez said.
The Finance Department is set to receive an initial payment of P3.5 billion from Mighty, representing a portion of its tax liabilities to the government. The amount would actually come from Japan Tobacco International, which agreed to buy Mighty Corp. and its assets for P45 billion.
“We are studying it. But basically it seems like a good deal…,” Dominguez said. “So we will take our time to study the matter,” he said.
Dominguez said technically speaking, the approval power was with the commissioner of the Bureau of Internal Revenue. Dominguez also said accepting the offer of Mighty would mean raising more than P30 billion inclusive of VAT.
“That’s the calculation… If we accept the total tax it will take around P30 billion, slightly in excess of P30 billion,” he said.
Mighty in a letter to BIR commissioner Caesar Dulay on July 10 offered to settle its tax liabilities for P25 billion by July 20. The amount represents the deficiency excise taxes (P3.5 billion) and the internal revenue taxes of the company and its shareholders (P21.5 billion).
Dominguez said the acceptance would not yet mean the department was agreeing to the company’s settlement offer. He also said even if the government accepted Mighty’s settlement offer, it would not preclude any criminal charges that the Bureau of Internal Revenue might file against the company in connection with its tax-related cases, as these could not be compromised. Julito G. Rada
The letter signed by Mighty president and director Oscar Barrientos said that it was confirming “the company’s willingness to settle all such excise and tax issues and respectfully offer as settlement of the company’s shareholders’ and its officers’ liability in this regard the total sum of P25 billion.”
Barrientos said in his letter that this settlement sum would be funded by means of an “interim loan” from global cigarette manufacturer JT International Philippines 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.”
Three tax cases filed by the BIR against Mighty Corp. are now pending before the Department of Justice. These 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.