BOC slaps additional P853-M duties on Mighty

The Bureau of Customs has slapped Mighty Tobacco an additional P853 million in duties for imported cigarette raw materials found inside the customs bonded warehouse the BOC earlier padlocked for serious violations of tariff laws.

In a report to the Senate Tax Study and Research Office, Customs Commissioner John Sevilla said the BOC undertook an initial re-assessment of duties and taxes following the suspension of Mighty’s license to operate a custom bonded warehouse and demanded payment of P852.9 million for importation of tobacco and acetate tow, the raw material for cigarette filter.

Last Jan. 17, the BOC padlocked Mighty’s customs bonded warehouse following initial probe findings showing the company “committed serious violations of Tariff and Customs laws, rules and regulations resulting in huge revenue losses for the government.”

The Department of Finance, which instructed the BOC and the Bureau of Internal Revenue to investigate the questionable business practices of Mighty, has estimated the initial loss on excise tax payments at P4.4 billion for the first half of 2013 alone.

In his report to the Senate, Sevilla indicated that Mighty did not contest the assessment and paid the amount on Feb. 14.

“At present, the BOC’s audit and investigation on Mighty continue and these could lead to findings of more tax liabilities of Mighty,” Sevilla said.

“An initial check of the customs values used in the declaration in the covering import entries shows that the same may not be in accordance with the transaction value system,” Sevilla added.

BOC is looking into alleged irregular importation practices of Mighty while the BIR is looking at possible under-declaration of sales volume following huge discrepancies between tax-paid volumes and retail trade surveys from AC Nielsen.

Mighty came under scrutiny for selling brands at very low prices despite the sharp increase in “sin” taxes last year.

Official receipts from the BIR showed that Mighty sold at P14.70 a pack in 2013. The excise tax was P12 while VAT was P1.58 a pack, leaving the company with an improbable P1.12 to cover for its manufacturing and distribution costs, as well as margins.

Several senators and congressmen have filed resolution calling for an investigation into the questionable business practices of Mighty.

The Joint Senate-House oversight committee was convened in March. The BIR and BOC were asked to submit to the committee the results of their investigation with both agencies claiming their probes are still ongoing.