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JTI acquiring Mighty for P45b — Dominguez

Local cigarette manufacturer Mighty Corp. offered to settle P25 billion worth of tax liabilities with the government upon the completion of a P45-billion deal with Japan Tobacco International Inc., the Finance Department announced Wednesday.

JTI could not immediately confirm the acquisition of Mighty, but the global tobacco company behind the brands Winston, Camel and Mevius said it would soon issue a press statement to clarify the Finance Department’s announcement.

Finance Secretary Carlos Dominguez III said the government was now studying the offer of Mighty to settle its tax liabilities amounting to P25 billion, covering the deficiency excise taxes and internal revenue taxes of the company and its shareholders. Mighty, which employs thousands in its Bulacan factory, is owned by the Wongchuking family.

Finance Secretary Carlos Dominguez III
Dominguez said the settlement offer of Mighty Corp. for its tax deficiencies was separate from the criminal charges that might be filed in court by the Bureau of Internal Revenue.

The BIR filed cases against Mighty Corp. for alleged non-payment of excise taxes and use of counterfeit tax stamps on its cigarette packs.

“We are studying the offer,” Dominguez said, referring to the written settlement proposal sent by Mighty Corp. to BIR commissioner Caesar Dulay in a letter dated July 10, 2017.

The letter signed by Mighty president and director Oscar Barrientos said 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 the settlement sum  would be funded by means of an “interim loan” from 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.”

Based on its settlement offer, the total amount that Mighty Corp. would remit to the government include P3.5 billion in deficiency excise taxes on its cigarette products that are now the subject of the three tax cases pending before the DoJ.

It also covers P21.5 billion representing the liabilities of the company and its shareholders, as well as the company officers for all internal revenue taxes, including income tax from 2010 to 2016 and the tax period up to the closing of the proposed transaction with JTI, and all transaction taxes related to the agreement with JTI.

“The initial payment of P3.5 billion will be paid by the company on the company’s behalf on or before July 20, 2017. A binding memorandum of agreement in relation to the proposed transaction [with JTI] will be concluded shortly [and prior to July 20, 2017] subject to finalizing terms with JTI and JTI completing its due diligence,” the letter read.

The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.

Barrientos said the operations of Mighty Corp. would be retired following the conclusion of its deal with JTI.

Topics: Japan Tobacco International Inc. , Mighty Corp. , tax liabilities , Finance Secretary Carlos Dominguez III
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