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Mighty’s P30-B settlement to wipe out revenue shortfall

6-month budget deficit hits P154.5B, or 7% wider than P143.8-B target
By: - Reporter / @bendeveraINQ
/ 05:11 AM July 25, 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 would collect from cigarette manufacturer Mighty Corp.’s proposed tax settlement to help “wipe out” the government’s below-target revenue collections.

Also, Finance Secretary Carlos G. Dominguez III said in a statement yesterday that the government’s full collection of Mighty’s civil settlement of its tax liabilities would depend on how swiftly the Philippine Competition Commission (PCC) could 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. 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,” Dominguez said.

As such, Mighty would be out of the cigarette manufacturing business from now on, the finance chief added.

The BIR has filed at 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 the alleged use of fake tax stamps.

Last Friday, Dominguez said the DOF has yet to formally approve Mighty’s proposed tax settlement amounting to P25 billion, which would be partly funded by the P45-billion sale of its assets and distribution network to JTI Philippines, but he conceded that “it seems like a good deal.”

For the part of the PCC, its chair, Arsenio M. Balisacan, told the Inquirer yesterday that Mighty and JTI Philippines “have talked with our 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 Republic Act (RA) No. 10667, the country’s anti-trust law. Under the guidelines of RA 10667, if the submission of documents were in order, the antitrust body has 30 days to issue a decision on whether the concerned transaction is against the competition law or up to 90 days if there were 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 expected 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.

Also, we are expecting P30 billion (including value-added tax) from Mighty, which will wipe out the P16.6-billion under-collection during the first six months, Dominguez pointed out.


The latest national government cash operations report released by the Bureau of the Treasury Monday showed that while combined tax and nontax revenues from January to June grew 7 percent year-on-year to P1.176 trillion, the government missed by 1 percent the revenue target of P1.193 trillion for the six-month period.

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 tenth 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 end-June deficit of P154.5 billion exceeded by 7 percent the P143.8-billion shortfall target.

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.”

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

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TAGS: Bureau of Internal Revenue, Business, Carlos G. Dominguez, Department of Finance
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