Record tax settlement: Rody accepts Mighty’s P25-B offer

MANILA, Philippines - The government has accepted Mighty Corp.’s offer to pay P25 billion in tax settlement for its liabilities through the years, President Duterte said yesterday.

Duterte said he accepted the tax settlement from the Bulacan-based tobacco firm without prejudice to the filing of other cases against them. It would also allow government to avoid long years of litigation.

“I have directed the Department of Finance and the Bureau of Internal Revenue (BIR) to accept Mighty Corp.’s offer of P25 billion to settle its tax liabilities,” he said during his second State of the Nation Address (SONA) at the Batasan Pambansa in Quezon City. 

Part of the proceeds, he said, would be used to rehabilitate the cities of Marawi that was attacked by the terrorist Maute group last May 23 and Ormoc that was recently ravaged by earthquake.

“After the tax settlement, Mighty will no longer engage in tobacco business. This will be the biggest tax settlement on record. It will produce a windfall for government which is significant, since we have to face the unexpected cost of rebuilding Marawi and Ormoc,” the President added. 

During his SONA, Duterte revealed that the DOF and BIR are strengthening the campaign against tax evaders.

“Let this be a lesson to others – this administration will spare no one from cheating the government its due,” he stressed.

In a letter to BIR Commissioner Caesar Dulay last July 10, Mighty president and director Oscar Barrientos said the company is willing to offer an amount of P25 billion as settlement for its tax liabilities.

Barrientos said the fund for the settlement would be sourced from an interim loan from JTI Philippines and the proceeds from the sale of Mighty Corp. and its affiliates and assets – including those owned by Wong Chu King Holdings Inc. – to JTI for a total of P45 billion, exclusive of VAT.

According to Barrientos, the P25-billion settlement offer would include P3.5 billion for the deficiency in excise taxes on cigarette products and P21.5 billion for the internal revenue tax liabilities, including income taxes from 2010 until the tax period at the closing of the deal with JTI.

The initial payment of P3.5 billion was made last week, just before Mighty Corp. and JTI signed a memorandum of agreement on the proposed buy-out. The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.

Tax Reform

President Duterte also urged senators to pass the so-called tax reform bill that seeks to impose a P6 tax on diesel, kerosene, cooking gas and fuel oil for electricity, aside from reducing the individual income tax.

Experts said the measure would increase levies on other oil products, including gasoline and aviation gas, lift numerous value added tax (VAT) exemptions and raises taxes on cars.

Finance Secretary Carlos Dominguez III has claimed that the tax reform bill would “shift the tax burden from the poor to the rich.”

Bayan Muna Rep. Carlos Zarate said the claim of Dominguez that the tax proposals would shift the tax burden from the poor to the rich “is obviously not true and is fake news.”

“As has been shown, the new and higher taxes on fuel, expansion of VAT, the new levy on sugar-sweetened drinks will make the majority of our people who are poor poorer and the few who are rich richer,” he said.        

“That is because most Filipinos will pay more taxes with higher prices on food, drinks, liquefied petroleum gas, kerosene, transport fares, electricity, housing and other basic goods and services. Higher taxes and prices will more than offset their gain from lower income tax,” he stressed. – With Jess Diaz