JT-Mighty to generate additional P24B from better tax compliance

THE Japan Tobacco (JT)-Mighty Corp. takeover deal will add at least P24 billion annually in sin tax revenue due to improved tax compliance, on top of the onetime take from Mighty’s tax bill settlement.

The Department of Finance estimated that it can raise P2 billion per month in cigarette excise taxes, now that the Japan Tobacco- owned Mighty brands are more compliant with tax rules.

This is double the P1 billion earlier estimate last August.

“It looks like from their initial loan estimates we are going to get another P24 billion a year, at least. And that’s every year assuming that the demand is just steady. So not a bad deal,” Finance Secretary Carlos G. Dominguez III told reporters last week.

Nevertheless, Mr. Dominguez said that the tax take could rise further if Mighty Corp.’s new owners sell more aggressively.

“Obviously the new owners of the brand and the new manufacturers have not yet geared up their marketing, so if they are able to sell more of course that amount will increase,” he said.

Mighty settled its tax obligation for P30 billion as part of a P45-billion buyout by JT.

Mighty was found to have had fake internal revenue stamps on its products in three separate raids conducted by the Bureau of Internal Revenue (BIR) and the Bureau of Customs. The agencies then filed tax evasion charges with the Justice department, claiming P37.88 billion in arrears.

The government has said that the additional revenue will help fund the rehabilitation of Marawi city, and the government’s infrastructure program.

It will also help the BIR meet its P1.829- trillion collection target. As of August, the tax bureau has collected P1.157 trillion, which is equivalent to 63.26% of the target.

Moreover, Mr. Dominguez also noted that the sin tax law has proven successful, as reflected by the rise in cigarette prices.

“We’ve noticed when you break down the inflation, it’s alcohol and cigarettes that have gone up the highest. So that means to say what we did is working, that the change in ownership between Mighty and JT has really benefited the government and has achieved the goals of the sin tax which is to raise the price of products that affect your health badly,” he said.

In September, the Philippine Statistics Authority said that inflation for alcohol and tobacco products was 6.4% year on year.

“So we just hope that demand will also go down because the prices are up,” added Mr. Dominguez. —