MIGHTY Corp. (MC), the country’s oldest cigarette manufacturer effectively fighting competition against a monopolistic multinational, on Wednesday found itself strangely at the receiving end despite laudable efforts spearheading the campaign against smuggling, manufacturing and marketing of fake cigarettes and fake stamps.
“This situation is unusual and highly suspicious for MC to be at the receiving end, because our operation is transparent and closely monitored by revenue authorities from sourcing of raw materials to manufacturing and withdrawals of cigarettes,” said retired regional court judge Oscar P. Barrientos, MC executive vice president and spokesman. Barrientos was reacting to a headline story in the business section of a newspaper (not the BusinessMirror) that “the BIR [Bureau of Internal Revenue] is investigating homegrown cigarette manufacturer Mighty Corp. for allegedly using fake tax stamps on its products.”
“In fact,” he said, “our company’s operation is the only one monitored by close-circuit cameras required by the BIR and it’s also on record that MC has spearheaded the campaign all over the country against the proliferation of fake cigarettes using fake stamps.”
Barrientos said as of Wednesday MC has not received any notice of investigation by the BIR, and if ever there will be, “we are prepared for it as our records are always open for scrutiny by the BIR.”
“We are hoping that if ever this is done, the BIR should include in its investigation not only local manufacturers, but also multinational companies and their local partners who are known for importing large quantities of raw materials without paying the correct taxes to the prejudice of our local farmers,” Barrientos said.
“It’s on record that as early as two years ago, Mighty has coordinated with the BIR, Bureau of Customs, the police and the National Bureau of Investigation in the seizure of fake Mighty cigarettes and other brands and the arrest and indictment of persons involved in the smuggling, manufacturing and marketing of contraband cigarettes,” Barrientos added.
According to Barrientos, Mighty has been subjected to unfair competition by its rivals after its products, known for their smooth and superior blending, started eating a large share of their market in the low-priced category once dominated by multinational rivals who remit abroad a large part of their income to the prejudice of the Philippine economy.
Two years ago, a ranking member of Congress had requested then-Customs Commission John P. Sevilla to look into the highly irregular release of 500 containers of raw materials for the manufacturing of cigarettes from the customs zone in Manila. The investigation, involving a multinational company, was never heard of again.
Meanwhile, former National Economic and Development Authority Director General Romulo Neri debunked arguments that a two-tier excise tax system proposed under House Bill 4144 is an antihealth measure.
Pro-health advocates are arguing against the proposed amendment noting that smokers’ projected downshifting will negatively impact the bill’s intention to curb smoking prevalence.
According to Neri, a noted economist, “while some downshifting from premium brands to cheaper ones is expected to happen under a nonunitary tax system, this is limited in quantity and, therefore, has little detrimental effect on overall health. Downshifting to lower priced brands is an absolute economic right of consumers.”
He added that pro-health advocates might also be missing the point that a unitary tax system, likewise, encourages consumers of cheaper brands to upshift to premium ones, since the resulting marginal difference in price will be negligible, especially when sold by tingi (per piece).
House Bill (HB) 4144, authored by Party-list Rep. Eugene Michael de Vera of ABS Partylist, proposes a two-tier tax system, nonpremium brands at P32 per pack and premium brands at P36 per pack plus an annual increase of 5 percent on these rates.
Neri said ensuring the fairness of a tax system is a paramount social goal, pointing out that administrative ease of collection should not be an excuse for enacting a regressive tax system that will result by imposing a unitary specific tax.
“The claim of using tobacco taxes to benefit the health of the poor is a tenuous argument. The poor will immediately feel the impact of the high tobacco tax draining their pocket while the benefit of government spending on their health is a highly uncertain future event. If the tobacco tax revenue is spent in general health services and not targeted directly, the poor smoker may end up subsidizing the health care of nonsmokers, making the situation even worse for the poor smoker,” Neri concluded.
According to earlier reports, lawmakers, particularly Ways and Means Committee Chairman Rep. Dakila Carlo E. Cua of the Lone District of Quirino noted that the higher prices proposed in HB 4144 is more discouraging to the smoking public than the original schedule of P30.
He also said that among the main reasons in approving HB 4144 were to instill offsetting measures to the foreseen effects of the Duterte administration’s main objective to lower personal income tax to ease overburdened taxpayers.
To reach the writer, e-mail cecilio.arillo@gmail.com.
3 comments
Mighty dominated the market after they found ways to technically smuggle tobacco which enabled them to sell at a very low price. If you do the math, it is quite impossible to sell cheap because of the tax hike, it is just not possible. Of course they were never investigated given that the previous administration was to lazy to lift a finger. But things have changed. The Mighty will soon fall.
Smoke and mirrors. THrough the years, Mighty has been known to avoid paying the correct taxes and they have been really creative, and successful in their efforts. but with this crackdown on corruption, I doubt they could continue to rob us honest taxpayers and fool the government. About time!
With the new administration, hopefully Mighty’s illegal business practices should be stop!