Tobacco war spreads into BIR, House

MANILA, Philippines—The Bureau of Internal Revenue (BIR) has placed the factory and warehouses of the Mighty Corp. cigarette company under 24/7 surveillance in response to allegations that the manufacturer is a smuggler and a tax evader.

The BIR was complying with a directive from its parent agency, the Department of Finance, which has received complaints against Mighty’s allegedly illegal activities from its competitors.

“We have already taken action on the complaints. The investigation of Mighty is now ongoing, and we have ordered a 24/7 surveillance [of its factory and warehouses],” said BIR Deputy Commissioner Estela Sales.

The company, which manufactures the popular low-priced brands Mighty Filter Kings and Mighty Menthol, is accused of   illegally importing tobacco leaf and nonpayment of proper excise taxes. Mighty’s factory and warehouses are located in Malolos, Bulacan.

All cigarette firms

Internal Revenue Commissioner Kim Henares clarified on Thursday that under BIR regulations, all cigarette companies are monitored for eight hours every day. But only Mighty is under 24-hour surveillance, she said.

Henares also said that the complaints against Mighty came from a rival cigarette manufacturer, Philip Morris.

Sales said it would be difficult to make any conclusions at this point about the accuracy of the complaints raised against Mighty.

She said the BIR actually collected significantly higher taxes from all cigarette companies last year, and so relying on tax collection figures alone would not be enough to prove tax evasion.

“We have to investigate further in order to determine whether the complaints are true or not,” Sales said.

She said the BIR, with its strengthened antitax evasion drive, would thoroughly evaluate the operations of Mighty.

But she also said no penalties would be imposed on the cigarette company unless the allegations against it are backed by substantial evidence.

The sin tax reform law took effect in January last year, which imposed higher taxes on all cigarette makers. The tax rate increases every year by specified margins until 2017.

The government aimed to collect P33.9 billion in additional taxes last year from the implementation of the sin tax reform law.

The actual incremental revenues collected, however, exceeded expectations, hitting P55.1 billion.

With the higher tax rates, competition in the cigarette industry is said to have become tougher.

Amid the tightening competition, Mighty’s move to sell cheap cigarettes elicited complaints from competitors.

Mighty is accused of smuggling raw materials and evading payment of the proper excise tax. Nonpayment of proper taxes and duties is alleged to be the reason why Mighty is able to sell cigarettes at “absurdly low” prices even after the rise in tax rates.

Solons weigh in

In an earlier statement, however, Mighty said the allegations against it were part of a smear campaign by competitors who are losing market share.

Meanwhile, party-list lawmakers have called for caution in investigating the operations of the Filipino-owned Mighty, saying the House of Representatives should not be used as a venue for “bullying and monopolistic schemes,” according to a press statement sent to the Inquirer by Mighty Corp.

Kabataan party-list member Terry Ridon accused the multinational cigarette maker Philip Morris of using the Congress to undermine its rival and other local tobacco producers.

He said Philip Morris and its local partner Fortune Tobacco Corp. should not be allowed to use the Congress as a venue for their “monopolistic and bullying schemes to control the country’s multibillion-peso tobacco industry.”

Ridon said the House ways and means committee should instead look into reports that Philip Morris was selling low-priced Marlboro cigarettes in Mindanao and the Visayas despite the fact that Marlboro is a premium brand.

Philip Morris earlier released a Marlboro Flavor Code low-priced variant in the Visayas and Mindanao after getting approval from the BIR. It later asked to be allowed to sell four other additional low-priced Marlboro brands to cover its huge losses, but the BIR reportedly rejected the request.

Batangas Rep. Raneo E. Abu, chair of the ways and means committee, noted that House Resolution 425 that prompted the probe at the House, had called for an investigation of all tobacco companies, not just one.

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