The Finance Department is set to receive an initial payment of P3.5 billion from local cigarette manufacturer Mighty Corp., representing a portion of its tax liabilities to the government, Secretary Carlos Dominguez III said Thursday.
The amount would actually come from Japan Tobacco International, which agreed to buy Mighty Corp. and its assets for P45 billion.
Dominguez said the acceptance of the money would not mean the department was agreeing to the Mighty’s settlement offer of its tax liabilities.
He said even if the government accepted Mighty’s settlement offer, it would not preclude the company from any criminal charges that the Bureau of Internal Revenue might file against it in connection with its tax-related cases.
“We will accept the initial payment,” Dominguez said in a statement.
Mighty Corp. 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).
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 [Japan Tobacco Internetional] or any of its affiliates for a total purchase price of P45 billion exclusive of VAT.”
“The DOF was informed that a manager’s check amounting to P3.44 billion, covering Mighty’s excise tax liabilities, will be issued today [Thursday] by JTI and deposited at the SSS branch of the Land Bank of the Philippines in Quezon City,” the Finance Department said.
The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.
Three tax cases filed by the BIR against Mighty Corp. are now pending before the Justice Department, covering 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.
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