BIR probes cigarette maker Mighty

MANILA, Philippines - The Bureau of Internal Revenue (BIR), the government’s main revenue agency, is looking into the tax payments of local cigarette company Mighty Corp.

BIR Commissioner Kim Henares, however, said the results of the investigation are confidential.

“All investigations and their results are confidential under the Tax Code and any unlawful disclosure is subject to criminal liability,” Henares said yesterday.

She also declined to comment if the investigation has been concluded.

Earlier, the Bureau of Customs (BOC) also demanded payment amounting to P852.9 million for the importation of raw materials, which Mighty Corp. had settled in February.

“BOC undertook an initial re-assessment of duties and taxes of entries covered by Mighty’s CBW (Customs Bonded Warehouse) privilege and demanded payment of P852,904,552.09. Mighty paid the amount on 14 February 2014,” the BOC said.

Payment was made after the BOC ordered the shutdown of Mighty’s CBW.

The move bars Mighty from re-channeling duty-free cigarettes-for-export to domestic distribution and consumption.

However, Mighty has said the company has not been using the warehouse anymore as it has long been focused on the domestic market.

Since last year, the Department of Finance has been looking into Mighty’s operations, which authorities said might have resulted in the non-collection of P4.4 billion in excise taxes.

In an initial review of the import entries covering 2011 and 2012, BOC earlier discovered that Mighty imported tobacco regardless of type and country of origin at $0.68 per kilo, while other high-volume tobacco importers paid a range of $3 to $8 per kilo, based on data supplied by the National Tobacco Administration (NTA).

Also, Mighty imported acetate tow, the raw material used for filters, at $0.30 to $0.32 per kilo. Other importers declared amounts ranging from $4.93 to $7.45 per kilo.

Mighty claimed that most of their tobacco leaf and acetate tow imports are intended for export.

But the BOC Task Force discovered the “unauthorized” use of bonded raw materials intended for export for domestic production without proper payment of customs duties.

Based on the export commodity clearance issued by the NTA, the imported raw materials do not match the volume of finished goods actually exported.

“Simply put, there is significant unaccounted tobacco leaf and acetate tow that have not yet been exported by Mighty within the allowable period,” the Task Force said in its report.

The Task Force was created under Customs Special Order (CSO) No. 60-2013 dated Nov. 6, 2013, pursuant to the memorandum issued by Finance Secretary Cesar Purisima on Aug. 15, 2013.