Mighty Kim

I got a call from former BIR commissioner Kim Henares last Monday. She said she didn’t want to react to an item in my column, but former DOF Sec. Cesar Purisima insisted that she clarify things with me.

In my column last Monday, I wondered, in the light of Mighty Corporation’s P25 billion compromise offer to current DOF Sec. Sonny Dominguez, what will be her and former DOF Sec. Cesar Purisima’s excuse(s) for treating Mighty as a sacred cow during their watch.

Kim said I was wrong to think such. Indeed, Kim asserts that Sonny Dominguez should thank her for setting the conditions to catch Mighty in the act. She said it was she who introduced innovations, including a new stamp tax design and installation of CCTV cameras in the factories where they attach the BIR stamp.

Besides, she said, Mighty was afraid of her and so they behaved during her watch. They got careless and greedy when the new administration took over, she said.

Here is how Kim explained it:

“Philip Morris Fortune Tobacco Corporation (PMFTC) was complaining about losing market share to Mighty and complaining about Mighty withdrawing cigarettes without paying the right excise tax, and they were presenting Nielsen market studies to support their allegation.  And I did say that I am wary of companies using BIR to fight their competitor. 

 “When we passed the Sin Tax law, movement in market shares is expected as the law not only increased the excise tax rate on sin products, but it also leveled the playing field – does not make a distinction as to the brand.  The movement of market shares would not have been that drastic if the law provided for a single tier tax rate, rather than a two tier tax rate. 

“And at that time, the World Bank also conducted a regular survey to show the presence of tax stamp on cigarettes, and it was going up, even reaching almost 100 percent.

 “In reply to your article, we would like to point out we implemented the tax stamp which allowed the monitoring of whether excise taxes are properly paid. This has been mandated by law since 1998, but it was only under our administration this was implemented. 

 “Without it, Mighty would not have been caught. If you will look at the evidence being presented, it is based on the tax stamp system we implemented. Without it, the present government does not have a case against Mighty. 

“Check when the warehouses where the fake cigarettes were caught were rented and utilized. These were rented only in the second half of 2016 when we were no longer in government. 

 “Furthermore, please note the product life of cigarettes is six months. Based on the fact that the cigarettes were caught in 2017, the manufacturing was done only in the 2nd half of 2016 – taking advantage of the transition.

“When complaints were made by competitors, we have to be very careful that government is not being used to fight competition.  The only evidence being pointed out by the competitor is the Nielsen report, which the government was never given a copy by Nielsen.  We even asked to buy a copy of the report, but we were refused. 

“If we were to present in court the copy of the complaint of the competitor based on a hearsay – since the report was never obtained directly by us from Nielsen, the case will be dismissed. Then people will accuse the government of deliberately filing a losing case.  Do you think the DOJ will file a case against Mighty based on such evidence?  We have so many cases with stronger evidence that remain pending with the DOJ. 

“We conducted raids, in cooperation with the cigarette industry, on establishments selling counterfeit cigarette products, and cigarettes smuggled/or without tax stamp.  In fact, if you will review some news articles, Mighty conducted their own raids on establishments supposedly selling counterfeit Mighty cigarettes. 

“When we received the complaint, we implemented the following:

“(A) We installed a CCTV in the premises of Mighty – the only establishment we placed such a surveillance, and we did not see any evidence that showed they were printing fake stamps. 

“(B) All cigarette manufacturing companies have revenue officers on premises (ROOPs), and no cigarettes may be withdrawn without their approval. And approval is granted only upon proof proper excise taxes have been paid and tax stamps attached. In this regard we increased the number of ROOPs in Mighty and placed in three shifts, and

“(C) We undertook an inventory of their raw material, goods in process, and finished products, and assessed them for deficiency taxes of P500 million.

“People will ask why we only collected P500 million vis a vis P25 billion being collected now. The P500 million was for the discrepancy between the raw material against their finished product, and not for use of fake stamp as we did not catch any fake stamps on their cigarettes. 

“The reason why the amount went up to P25 billion is because under the Sin Tax Law, affixing fake stamp or no stamp, incurred a liability of 10 times the excise tax due.  So if you are assessing P25 billion, the excise tax due is around P2.27 billion (P25 billion /11).

“In the first half of 2016, despite having no evidence that will allow us to go against Mighty but as a safeguard measure, we changed the design of the tax stamp for implementation in the 3rd quarter of 2016.  We have, in fact, agreed with APO on the design. 

“This is in recognition of the fact that no matter how good a security system you have, it is always subject to being counterfeited, so you have to continuously change the design, to be one step ahead of everyone.  However, even at the height of the seizure of the cigarettes with fake stamp, they did not implement the change of design.  

“We discussed with the industry that we will mandate the installation of CCTV in all production lines, in the area where you attached the stamp for implementation by the start of January 2017. BIR has to procure the infrastructure to bring in the signal to the BIR national office.”

So there… Kim thinks if it were not for the steps she took during her watch, Mighty would still be in business.

Well, folks, draw your own conclusions.

Waste of funds

Two weeks ago, a high official of BCDA made a presentation before the Foundation for Economic Freedom. Among others he mentioned that in the interest of efficiency and saving public funds, as ordered by the President, they are abolishing dormant subsidiaries. One of those is NorthRail.

Now we get news that President Duterte appointed Isko Moreno to the board (and chairman?) of the long useless corporation. It isn’t as if Isko can revive the company derailed by the corruption controversy with China during Ate Glue’s watch.

We are still facing an arbitration case filed by China on NorthRail which could set us back by a few hundred million dollars. That NorthRail company is totally malas for the Filipino people. And now comes Isko…

Indeed, the new railroad being built along the same line will be done by Japan, not China. The old NorthRail company to which Moreno was appointed has nothing to do with it.

It is so obvious Isko Moreno is only after the allowances and perks. He also has no expertise in building railroads, whether real or the congressional variety. Why is the President wasting funds for a clear political accommodation to a failed senatorial candidate?

Change is coming, diba? In our dreams, it seems… since it is bad old politics as usual. As the President would put it, P----- I-- talaga!

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco.