THE Department of Finance (DOF) estimates government revenues in the form of sin tax from the acquisition of Japan Tobacco International Inc. (JTI) of Mighty Corp. can reach P24 billion per year, assuming that cigarette demand remains constant.
Finance Secretary Carlos G. Dominguez III said an estimated P24 billion per year can be remitted to the government from the operations of JTI after its acquisition of Mighty Corp.
Earlier, the government agreed to accept the tax-settlement offer of Mighty Corp. amounting to P30 billion, including value-added tax (VAT).
From a series of raids earlier in the year, the government discovered fake tax stamps on a ton of cigarette packs bearing the logo of Mighty Corp. Some of the warehouses where the cigarette packs were found were leased to Mighty Corp.
“So, in effect, what did the government gain when we went after Mighty cigarette? No. 1, we gained a onetime collection of P30 billion, including the VAT. Second, it looks like from their initial estimates, we are going to get another P24 billion a year, at least, and that’s every year assuming that the demand is just steady,” Dominguez told financial reporters.
The finance chief added that if JTI sells more cigarettes, the amount will also increase. But he pointed out the company might still be in the planning stage in terms of its marketing campaign.
The Mighty case proves that the Duterte administration’s efforts to go after tax evaders are getting dividends.
“The change in ownership between Mighty and JTI has really benefited the government and has achieved the goals of the sin tax, which is to raise the price of products that affect your health badly. So we just hope that the demand will also go down because the prices are up,” Dominguez added.
According to Bureau of Internal Revenue (BIR) Assistant Commissioner Teresita M. Angeles, the latest discussion with JTI bared that the company will be paying at least P40 million per week to the Philippine government.
“During the last discussion with the JTI group, they mentioned that they will be paying an amount of P40 million per week, so we are expecting the collection more or less to increase to P2 billion per month,” Angeles said.
In September the Philippine Competition Commission approved the sale of Mighty Corp. to JTI, with its settlement sum of around P21 billion having been remitted to the BIR in the same month.
The BIR has already received the first tranche of Mighty Corp.’s settlement offer of P3.44 billion on July 20, pointing out that the acceptance of the settlement does not preclude criminal charges the BIR may file against the homegrown tobacco firm as criminal cases cannot be compromised.
Dominguez added the windfall will significantly boost the national coffers at a time when the government has to find the resources to meet the unexpected costs arising from calamities and natural disasters.