Gov’t urged to take more action vs cigarette firm

MANILA, Philippines - Philip Morris Fortune Tobacco Corp. (PMFTC) wants the government to take further serious action against Mighty Corp. after the Senate Tax Study and Research Office (STSRO) came out with a report which uncovered “evidence of systematic and endemic fraud” committed by the Bulacan-based cigarette firm.

In a briefing yesterday, PMFTC president Paul Riley said the key findings by the STSRO confirmed suspicions of fraudulent activities made by Mighty.

“A great deal of what we have suspected for a long time now is finally out in the open. The STSRO uncovered several pieces of evidence that shed light on Mighty’s ability to sell all their products below tax and cost for almost 18 months now, while still enabling them to stay afloat,” Riley said.

“This remarkable, and I would contend explosive report, offers what was highlighted by a member of Congress as evidence of systematic and endemic fraud. The evidence may potentially expose Mighty to very serious liabilities as a consequence of the various practices discovered by the STSRO,” Riley added.

Mighty executive vice-president Oscar P. Barrientos refuted the findings, which he said were preliminary and still subject to validation by the Congressional oversight committee.

“It is inaccurate and unfounded. Let’s just wait for the official records and the

truth will set us free.  The committee has asked government agencies like the Bureau of Internal Revenue to submit official data to ensure fairness,” Barrientos said over the phone.

In a report, the STSTRO claimed that Mighty has been undervaluing the cost of tobacco and imported raw materials to evade customs duties and import value added tax. 

According to the STSRO, Mighty has been using imported materials to make products for export but diverting them to the domestic market without paying duties and taxes.

The same report alleged that 99 percent of Mighty’s importation of tobacco leaf and cigarette filter materials were declared for use in the manufacture of cigarettes for export only and virtually nil for domestic use.  This makes Mighty liable for infraction of Sec. 3611 of the Tariff and Customs Code, which sets a fine of five to eight times the revenue loss and imprisonment of two to eight years.

The report also highlighted the alleged massive underpricing of Mighty’s imports of filter material with at least two US-based suppliers confirming they sold to Mighty at a much higher price than what was declared with the Bureau of Customs.

 “What is more alarming is that it seems that this has been going on as early as 2005.  It has definitely raised red flags which merit wider and stricter enforcement action by the government,” Riley said.

Riley also noted the big disparity between Mighty’s market share and excise taxes paid. He said PMFTC, which controls a 71 percent share of the local tobacco market, paid P82.1 billion in excise taxes in the first half of the year while Mighty, which holds   a 23.7 percent market share, only paid P14.1 billion in taxes.

 “The value of 10 percent of excise tax for one year is P10.09 billion. The government cannot afford to be deprived of such massive revenues. This would go a long way in providing health care benefits to the poor,” Riley said.

 “We are a proud long-term investor with more than 6,000 employees in the Philippines. All we want is a fair and level playing field. Everyone should pay their fair share to develop the nation,” Riley said.

 “We expect the government to enforce the full weight of the law given the gravity of the situation and the administration’s efforts to boost revenues and make sure that everyone pays the right taxes,” he added.