Sin tax collections improve in September

The Department of Finance (DOF) reported that sin tax collections increased in September this year while excise tax payments by homegrown cigarette-manufacturer Mighty Corp. jumped by nearly threefold during the month.

Based on the report submitted by the Bureau of Internal Revenue (BIR) to the DOF, total excise taxes paid by the tobacco and alcoholic beverage manufacturers reached R 17.66 billion in September, an increase of 12 percent from R15.7 billion in the previous year.

Of that total amount, more than three-fifths came from cigarette excise taxes, equivalent to R11.07 billion, up by 14 percent year-onyear from R9.67 billion.

But Finance Undersecretary Antoinette C. Tionko said that what is particularly notable during the September period was the payment made by Japan Tobacco International (JTI) Philippines for its newly acquired Mighty cigarettes.

“Total excise tax collections from JTI/Mighty Corp. accounted for R4.57 billion of the September 2017 collections, which represents a 281 percent hike compared to the same period last year when collections reached R1.2 billion,” Tionko told reporters.

Following the significant rise in collections last month, Tionko remains confident that revenues from Mighty cigarettes would sustain its robust increase in the coming months due to better tax compliance.

“I am happy with R3.3 billion increase but I think it will grow because you have an international company that is eager to compete in this market,” Tionko said, referring to JTI Philippines, the group that acquired Mighty for R45 billion.

For his part, Finance Secretary Carlos G. Dominguez said that Mighty “is the gift that keeps on giving” revenues to the national government.

Earlier, Dominguez raised his expected additional revenue from the new owners of Mighty brand cigarettes starting next year.

Based on DOF estimates, the government stands to gain almost R40 billion in additional revenues from “sin” tax on tobacco products starting 2018. Dominguez said the additional revenues will come from the local unit of JTI.

Based on DOF and Bureau of the Internal Revenue’s preliminary estimates, JTI will pay a minimum of R3.1 billion per month starting January, which is about R2 billion more per month than what Mighty Corp. had previously been paying.

“For Fiscal Year 2018, JTI is expected to pay almost R40 billion out of the estimated R118 billion in total excise tax collections on tobacco products,” Dominguez said, representing a third of the total revenue collections from the excise tax on cigarettes.

Mighty Corp. which had faced a string of criminal complaints filed by the BIR before the Department of Justice (DOJ) for its use of counterfeit tax stamps, offered last July to settle its tax liabilities for R25 billion and shutter its business.

The Bulacan-based cigarette manufacturer sold its assets to JTI to be able to pay off its tax dues.

With the approval of President Duterte, the DOF and BIR had accepted the R25-billion settlement offer, which represented the firm’s tax deficiencies.

Dominguez said that the total amount the government would be getting from the tax settlement — the largest ever from a single taxpayer in the country’s history — is beyond R25 billion and could reach over R30 billion with the value-added tax (VAT) and other fees.