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Biz Buzz: BIR rift catches Duterte’s attention

/ 05:22 AM July 26, 2017

Now it can be told. The P45-billion deal to sell homegrown cigarette maker Mighty Corp. to Japan Tobacco Inc. nearly collapsed due to infighting at the Bureau of Internal Revenue (BIR).

You see, there are two factions at the government’s top revenue agency right now and these factions have been in place since the start of the Duterte administration.

Biz Buzz has been told by friends of both camps that the issue isn’t really about any disagreement over how best to collect more taxes to finance the government’s massive infrastructure buildup program. Instead, the disagreement is over whether the leaders of either faction are qualified for the job or not — the job at the bureau, apparently.

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On one hand is the leader of “Team D” who, despite being of the legal profession, has relatively less background in tax administration than most employees at the agency. On the other hand is the head of “Team A,” an industry veteran who is viewed by people in and out of the bureau with a mix of respect by friends and caution by enemies because of his tax expertise.

In any case, the friction between Team D and Team A was getting so bad that the much-awaited settlement deal on the Mighty Corp. tax issue was about to fall apart.

The deal, of course, was for Mighty to be sold to Japan Tobacco for a substantial sum of money, part of which would be used to settle the Bulacan-based firm’s liabilities to the government, estimated at P25 billion. The balance of the proceeds would go to the selling Wongchuking family in exchange for a so-called “non-compete agreement” that would see them exiting the cigarette manufacturing industry for good—not a bad deal, industry observers said. In fact, the deal had the support of no less than Finance Secretary Carlos Dominguez III.

And since Dominguez backed it, it was backed by Team D as well.

But word on the street is that Team A had different ideas. For reasons yet unknown, he seemed opposed to the deal and was, according to insiders, more in favor of supporting Mighty’s sale to another industry giant, British American Tobacco, which was friendlier to the selling shareholders. The only hitch was that BAT was only offering P30 billion for Mighty and that was a nonstarter for Dominguez, given that the extent of the firm’s tax liability has yet to be fully determined.

So a meeting was called recently by Dominguez between the leaders of Team D and Team A. And most importantly, no less than President Duterte’s right hand man— Secretary Christopher “Bong” Go—came to the meeting, acting as the Chief Executive’s personal emissary.

Disagreements immediately ensued, with Team A’s chief being especially impassioned about his policy recommendation. When we say “impassioned,” we mean that emotions were high and voices along with them. This prompted the normally soft-spoken Dominguez to raise his own voice a few notches and tell Team A’s man to back down by lowering his voice.

And then the coup de grace: Go closed the meeting by laying down the law and underlining how important this deal was for revenue collections, it being the biggest tax settlement deal in Philippine history.

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And then Go added ominously: “The President is monitoring the developments on this every day. If this deal collapses, I know whom to blame.”

Silence ensued.

The rest is history. Last Friday, the Department of Finance announced the preliminary payment for the sale of Mighty to Japan Tobacco, to everyone’s benefit—except perhaps to the Team A guys.

So kudos to the Duterte administration, the Department of Finance and the BIR. Sometimes, one just has to put one’s foot down to get things done. —DAXIM L. LUCAS

Speaking of which…

The Duterte administration has taken a strong stance against corruption in any shape or form. It’s too bad someone in the Department of Finance failed to get the memo.

Word is spreading that a certain DOF director very recently managed to celebrate a birthday in a swanky hotel in Mandaluyong City, unfortunately, at the expense of a multilateral institution.

This tale starts, oddly enough, in a technical workshop for DOF staffers in the Shangri-La Edsa. These are important events, helping train employees on the importance of being able to effectively communicate highly technical concepts.

It seems the Asian Development Bank agreed to fund the workshop, but the lender — if our sources are to be believed — paid for so much more.

We heard this director managed to include the cost of the birthday celebration in the budget, officially putting the expense down as a dinner for workshop participants.

As you have correctly guessed, that dinner included way more than the workshop participants but officials from other agencies and even former DOF employees. There were even some props in that bash, apparently to celebrate a milestone birthday for this director, as pictures on social media showed.

We’ve heard this ranking official is used to tapping multilateral organizations for raffle prizes and sponsorships, especially during the Christmas holidays.

It seems the recent celebration was simply too high profile an event for government staffers to ignore. Perhaps this director should have instead wished for more discretion before blowing out that birthday candle. —MIGUEL R. CAMUS

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TAGS: Biz Buzz, Bureau of Internal Revenue (BIR), Duterte Administration, Japan Tobacco Inc., Mighty Corp., P45-billion deal
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