Mighty’s P30B tax to wipe out revenue under-collection in 1st half of 2017

By: - Reporter / @bendeveraINQ
/ 04:42 PM July 24, 2017
Carlos G. Dominguez III

Finance Secretary Carlos G. Dominguez III (File photo from the Philippine Daily Inquirer)

The Department of Finance expects the P30 billion that the Bureau of Internal Revenue (BIR) would collect from cigarette manufacturer Mighty Corp.’s proposed tax settlement to help “wipe out” by yearend the government’s below-target revenue collection in the first half of 2017.

In a statement issued on Monday, Finance Secretary Carlos G. Dominguez III said “the government’s full collection of Mighty’s civil settlement of its tax liabilities will depend on how swiftly the Philippine Competition Commission (PCC) can approve the sale of the homegrown cigarette company’s assets to Japan Tobacco International (JTI).”


“This will be the largest sum of taxes collected ever from a single taxpayer in Philippine history,” Dominguez said. “The date of full collection will depend on how fast the PCC approves the sale of Mighty’s assets to JTI, whose largest shareholder, incidentally, is the Japanese government.”

“Mighty will be out of the cigarette manufacturing business from now on,” the finance secretary added.


Earlier in the year, the BIR filed before the Department of Justice three tax evasion cases against Mighty and its top executives for a total of P37.9 billion in unpaid excise taxes due to alleged use of fake tax stamps.

As of last Friday, Dominguez said the DOF had not formally approved Mighty’s proposed tax settlement amounting to P25 billion, which will be partly funded by the P45-billion sale of its assets and distribution network to JTI Philippines. But he conceded that it seemed like “a good deal.”

On Monday, PCC Chairman Arsenio M. Balisacan told the Inquirer that Mighty and JTI Philippines had talked with his staff “for pre-notification consultation” but there was “no submission of notification requirements yet.”

“But once they file, the periods under the law and the implementing rules and regulations will apply,” Balisacan said, referring to the Philippine Competition Act (Republic Act No. 10667), which is the country’s anti-trust law.

Under the guidelines of that law, if the submission of documents are in order, the anti-trust body has 30 days to issue a decision on whether the concerned transaction is against the competition law – or it can take up to 90 days if there are some issues with the papers submitted.

The PCC is mandated to review and approve merger and acquisition transactions worth P1 billion and above.

Separately, Dominguez said he would expect the BIR and the Bureau of Customs, the country’s two biggest tax collection agencies, to “certainly make up” for the deficit in first-half tax collections.


“We are expecting P30 billion from Mighty, which will wipe out the P16.6-billion under-collection,” Dominguez added.

According to the latest national government cash operations report released by the Bureau of the Treasury on Monday, combined tax and non-tax revenues from January to June grew 7 percent year-on-year to P1.176 trillion, but the government missed by 1 percent the revenue target of P1.193 trillion for first six months of the year.

In terms of tax revenues alone, these increased by 9 percent year-on-year to P1.069 trillion as of end-June, although 3-percent below the P1.108-trillion goal.

The BIR’s end-June tax take rose 8 percent year-on-year to P848 billion, albeit 4-percent lower than the P881.7-billion target.

The BOC also missed its six-month goal of P217.7 billion by 3 percent, although the P210.3 billion in import duties and other taxes it collected during the period were a 10th more than a year ago.

As government spending on public goods and services in the first six months jumped by a faster 9 percent to P1.331 trillion, the nominal end-June deficit of P154.5 billion exceeded by 7 percent the P143.8-billion deficit program.

Budget Secretary Benjamin E. Diokno blamed the wider-than-programmed first-half deficit to the under-collection in tax revenues, but said the higher budget gap “should not be a cause for concern.”

“Expenditures are on the dot,” Diokno said, as the government only missed the end-June disbursements target of P1.337 trillion by a mere P5.9 billion.

“Underspending, the plague of the previous administration, appears to be a thing of the past,” the budget secretary added. /atm

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TAGS: 2017 revenue under-collection, Benjamin E. Diokno, BIR, Carlos G. Dominguez III, JTI Philippines, Might Corp.
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