Exercise tax

There is a call in Congress for a review of the “sin tax” law, or RA 10351, imposed on cigarettes and liquor, signed into law by our dear leader Benigno Simeon (aka BS) in December 2012, in effect for just about a year now.

It seems that such a rather early “review” can only serve to muddle the biggest issue so far over the year-old “sin tax” law: the much publicized suspicion of massive tax evasion done by a lone cigarette maker last year.

Well, for one, the call came about mainly as a reaction to reports that Bulacan-based Mighty Corp., owned by the Wongchuking family, got away last year with a P5-billion tax evasion allegation.

Earlier, Finance Secretary Cesar Purisima ordered an investigation of Mighty for manifest smuggling and massive tax evasion, addressing his memo to both the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR).

In full-page paid ads, Mighty nevertheless got back at Purisima with denials of smuggling and tax evasion, noting that it already remitted to the government some P8 billion in excise tax in 2013.

But the BOC answered with its own full-page paid ad, noting prima facie evidence of smuggling against Mighty, indicating that the company abused its privileges in its BOC-accredited bonded warehouse at its factory site in Bulacan.

Incidentally, while the BOC—now under the enlightened leadership of Customs Commissioner John Phillip Sevilla—already acted on the Purisima memo, the BIR still seems to be dragging its feet.

Top BIR officials in fact were put on record in hearings in the House of Representatives, fervently defending the dubious low-priced cigarettes of Mighty, even mouthing the very same PR lines spread around by the company.

Anyway, regarding the call for review of the “sin tax” law, the big players in the tobacco and the liquor industries already accepted the law, even adopting new strategies to cope with its escalating rates.

Thus, the business sector as a whole has nothing against the law, but with the call for its review after only a year of implementation, it is feared that business could again get the media tag of “bad boy” in the frenzy surrounding the review.

In other words, the cause of the ruckus—none other than Mighty—can easily be put in the sidelines. This surely is bad news for Purisima and his people in the Department of Finance (DOF), although it may make certain BIR officials jump for joy.

In a rare move, Congress seems ready to convene the congressional oversight committee, upon the urging of Sen. Pia Cayetano, precisely to investigate whether or not the “sin tax” law is really hitting its targets.

According to reports, total collection of the “sin tax” reached only P90 billion last year, although the target for the year was much higher at more than P105 billion.

For one, the DOF earlier released an updated report on the “sin tax” collection, indicating among others that the Aquino (Part II) administration failed to attain certain objectives of the law, possibly due to violations committed by cigarette and liquor companies.

And so what is the main objective of this exercise called “review” of the excise tax law? Look, boss, the DOF already said that, while the BIR has been trumpeting an increase in its excise tax collection, the government actually missed the target.

In other words, the collection was lower than what the government expected.

Still, over at the House, ways and means committee chair Rep. Romero Quimbo has commenced an investigation of possible tax evasion done by cigarette makers—not only Mighty.

It so happens that Quimbo is the congressman of the 2nd District of Marikina, which is the site of one of the biggest cigarette factories in the country, owned by Philip Morris Fortune Tobacco Corp. (PMFTC).

Surely Quimbo was aware that workers at the Marikina factory of PMFTC already held protest rallies at the Batasan Pambansa, calling for the House to investigate tax evasion in the cigarette industry, claiming that it would cost them their jobs.

From what I gathered, the Marikina factory of PMFTC has already implemented a four-day-work week, instead of six days. This means that, ultimately, the workers would suffer huge cuts in their wages.

Word also goes around that the workers are already preparing for eventual lay-offs at the Marikina plant, and it is now only just a question of how many of them will lose their jobs.

On top of possible labor unrest, the Aquino (Part II) administration must also deal with pressure from some international groups regarding its policy on fair competition.

Word goes around that foreign groups have hounded the administration with requests—both official and informal—to look into the role of the BIR in unfair trade practices.