Nov 232013

Both the Bureau of Internal Revenue and the Bureau of Customs are after a local cigarette maker that is allegedly engaged in technical smuggling and tax evasion.

But instead of addressing the issues being raised against it squarely, Mighty Corp. has instead opted to play the underdog card, claiming it is a simple case of a purely Filipino company being bullied by multinational giants.

But how can a company that is claimed to have resorted to illicit trade practices to dodge paying taxes amounting to P4.9 billion in the first six months of 2013 alone possibly convince Filipinos to be nationalistic and take Mighty’s side?

Government is investigating reports that Mighty has been under-reporting its sales, grossly undervaluing its imports and making illegal withdrawals from its bonded warehouses to evade the payment of the correct amount of taxes and duties to the government.

The taxes which should have been collected from Mighty from January to June this year is estimated at close to P5 billion, an amount that could go a long way in aiding the calamity victims.

Even anti-tobacco groups are not buying Mighty’s spin.

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Groups like the Action for Economic Reforms, the Framework Convention on Tobacco Control Alliance, Medical Action Group, Philippine College of Physicians, and WomanHealth Philippines have lauded and supported the investigation launched by BIR commissioner Kim Henares against Mighty. They agree the accusation that Mighty Corp. has not been paying the proper taxes is credible since its products are sold at a very cheap and artificial price that is below production costs.

Even lawmakers want to investigate Mighty. A resolution was recently filed in the House of Representatives seeking an inquiry into Mighty’s business method. Rep. Karlo Alexei Nograles wants to know how the firm was able to pay only $4.78 million for importing seven million kilos of tobacco, while another company had to cough up $4.9 million for importing a little over one million kilos.

Here are the other questions that are begging for from answers from Mighty.

First, how was it able to import tobacco leaf in 2011 and 2012 at $0.68 per kilogram, and acetate tow for the same years at $0.30 per kg when records from the Customs bureau and the National Tobacco Administration, as verified by the Department of Finance,  show that the cheapest imported tobacco leaf bought in 2011 and 2012 cost $3.39 per kilo.

Second, how was it able to acquire acetate tow, which is not available from any local supplier, at the rock bottom price of $0.30 per kg  when official records show that the cheapest price of this raw material in 2011 and 2012 was $5.26 per kg?

If Mighty has been selling its brands at P14.70 per pack, allowing it to sell cigarettes at P1 per stick, minus the taxes totaling P13.58 per pack (P12 for the excise tax and P1.58 for VAT), the company is left with only P1.12.  If it is not selling at a loss, how much is Mighty’s margin per pack?

In its press statement, Mighty claimed that since its importations were not questioned in 2011 and 2012 and were shipped out of Customs, there is a presumption of regularity on these actions.

But this is a rebuttable, not a conclusive presumption. Import documents of Mighty filed with the Bureau of Customs show that the company imported tobacco leaf at $0.68 per kilo regardless of origin (Brazil, India, South Africa, Vietnam, China, Argentina and Indonesia) and regardless of variety (Grade A, B or even rejects). But how can imported tobacco leaf cost the same regardless of their quality and where it came from? Isn’t that enough to rebut the presumption of regularity?

Not so hidden agenda

Security Bank’s Tacloban branch begins full operations Nov. 25.  The bank has also announced it would temporarily waive ATM fees on all their clients’ ATM transactions in both Tacloban and Ormoc. The bank’s branches in the swath of central Visayas affected by Super Typhoon Yolanda have been reported to be fully operational and serving the public.  These branches include: Ormoc (Leyte), Tagbilaran (Bohol), Roxas City (Capiz) Cebu in Cebu Business Park, Mandaue, Mandaue North Road, Juan Luna, Lapu-Lapu and Osmena, Dumaguete (Negros Oriental), Bacolod and Bacolod-Rizal (Negros Occidental), Iloilo City and Iloilo – Iznart (Iloilo), Catarman (Samar), Puerto Princesa (Palawan), and Calapan (Mindoro).

Security Bank ATM services in the areas mentioned have been operational for cash withdrawals and other client transactions. For further assistance and inquiries, please call the Security Bank Customer Service Helpline at 88-791-88, 09178864429 and 09209748647.

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