Tax bureau duns Mighty for P9.56 billion

THE BUREAU of Internal Revenue (BIR) has taken a step towards haling Mighty Corp. to court, filing a criminal complaint with the Justice department against the local cigarette maker for allegedly evading some P9.564 billion in excise tax.

In a statement, the BIR said it filed the complaint yesterday against Mighty — including against company President Edilberto P. Adan, Executive VicePresident Oscar P. Barrientos, External Affairs Vice-President and Assistant Corporate Secretary Alexander D. Wongchuking as well as Treasurer Ernesto A. Victa — “for unlawful possession of articles subject to excise tax without payment of the tax and for possessing false, counterfeit, restored or altered stamps in violation of Sections 263 and 265(c) of the National Internal Revenue Code of 1997, as amended.”

Mighty — which makes cigarettes under the Mighty Menthol 100’s, Mighty Full Flavor, Marvel’s Menthol and Marvel’s Menthol 100’s brands in its factory on a nine-hectare property in Barangay Tikay, Malolos Bulacan — yesterday signaled it was ready to do legal battle, with counsel Philip Sigfrid A. Fortun saying in a mobile phone message: “The company welcomes the filing by the BIR of the complaint as it provides us an opportunity to clear our names and show we violated no tax laws.”

At the same time, Mr. Fortun said Mighty “will continue to cooperate with government in its continuing effort at tax collection.”

In its statement, the BIR recalled that “[ t] he respondent corporation was the subject of an on- the- spot surveillance operation of untaxed cigarette products conducted [ last March 1]… in San Simon Industrial Park ( SSIP), San Isidro, Pampanga” and that random checks on 10 master cases of cigarettes in four warehouses in the economic zone that were leased by Mighty showed that internal revenue stamps affixed on the cigarette packs “were fake”.

Subsequent inventory of all cigarette packs in the warehouses concerned showed that Mighty stored there 66,281 master cases with 33,140,500 cigarette packs.

“The investigation further showed that 87.5% of the said packs bore fake internal revenue stamps,” the BIR said.

“The stamps are fake since they did not contain one of the multi-layered security features of a valid internal revenue stamp.”

Mighty had earlier questioned the reliability of the findings, arguing that some Taggant readers used to check the tax stamps were found to be defective.

Moreover, BIR said, the company was not able to present official delivery receipts for the SSIP warehouses, which the bureau took to mean that the stamps were not affixed at Mighty’s Bulacan plant, as required by law.

“Such failure to present the official delivery receipts showed that the cigarette packs in the SSIP warehouses did not come from the manufacturing plant in Barangay Tikay where such stamps should have been affixed,” the bureau explained.

“It should be noted that the warehouses in SSIP are not registered with the BIR as certified by the Excise Large Taxpayer Regulatory Division,” it added.

“Thus, Mighty Corp. cannot legally remove these packs of cigarettes from its only plant in Tikay, Bulacan for delivery to the said unregistered warehouses.”

The bureau added that mere possession of cigarette packs with fake tax stamps is illegal.

“As a consequence of its acts and omissions, Mighty Corp., together with its responsible corporate officers, is liable to pay an estimated aggregate deficiency excise tax liability in the total amount of P9.564 billion,” the BIR said in its statement.

Finance Secretary Carlos G. Dominguez III — who had ordered both the BIR and the Bureau of Customs to gather evidence for “an airtight case against Mighty Corp. for tax evasion and other possible charges” — told reporters last March 15 that while an out-of-court settlement was not out of the question, “the government will file a court case first.”

President Rodrigo R. Duterte had earlier given a much-smaller P1.5- billion initial estimate of Mighty’s tax liability and said the government might settle for double that amount.

Justice Secretary Vitaliano N. Aguirre II told reporters separately last March 15 that Mighty’s Mr. Wongchuking had expressed openness to such a settlement, provided the company first pay P1 billion and then settle the balance in tranches.

The complaint against Mighty is the ninth filed under the Run After Tax Evaders program under Internal Revenue Commissioner Caesar R. Dulay.

The BIR aims to collect P1.829trillion this year after missing its downward- adjusted P1.62- trillion 2016 goal by three percent at P1.567 trillion. —