BIR may close down Mighty factory for tax evasion

The Bureau of Internal Revenue (BIR) is looking at closing down the factory of homegrown cigarette manufacturer Mighty Corp. by next month to penalize the company for evading tax payments through the use of fake tax stamps.

Internal Revenue Commissioner Caesar Dulay told reporters on Monday that the agency was preparing to file at least three more cases against Mighty this month at the earliest for unlawful possession of counterfeit cigarette tax stamps. The BIR slapped a P9.6-billion tax evasion case against the company last month.

Since late 2014, the BIR has been implementing the Internal Revenue Stamps Integrated System on tobacco products. The stamps ensure that the correct excise taxes have been paid.

The law authorizes the BIR to cancel the license to operate of companies that evade tax payments.

Mighty license to operate

Dulay said the BIR was “looking at” and “working on” the possible cancellation of Mighty’s license to operate.

According to Dulay, the BIR will “most likely” cancel Mighty’s license to operate, “maybe it will not go beyond next month.”

Cancellation of the license to operate will lead to the closure of Mighty’s factory.

“If you recall, the Bureau of Customs canceled their (Mighty’s) authority to import, their license to import the raw materials. And you could imagine that within the next two or three months if you don’t have the import license, if you don’t have importation of raw materials, how do you manufacture your cigarettes?” Dulay said.

“To begin with, their warehouse in Bulacan—there was no license. You have to have a license to operate that warehouse. As for manufacturing, we’re firming it [the cancellation of the license] up. We’re firming up our evidence on that,” he said.

Dulay said Mighty’s warehouse in San Ildefonso, Bulacan, last month yielded about 160,000 master cases of cigarette packs that allegedly bore fake stamps.

“In the case we filed involving the warehouse in San Simon, Pampanga, we estimated the [total basic assessment and penalties] at P9 billion. The Bulacan warehouse is three times bigger than the San Simon warehouse, so we’re looking at about P27 billion,” he said.

“Hopefully, within the month or even earlier we can complete the documentation and the gathering of the evidence” against Mighty to file another case, he said.

DOJ’s preliminary probe

Justice Secretary Vitaliano Aguirre II has assigned three state prosecutors to handle the preliminary investigation of the tax evasion case against officials of Mighty.

He named Senior Assistant State Prosecutor Sebastian Caponong Jr. as chair of the panel and Assistant State Prosecutors Ma. Lourdes Uy and Mary Ann Parong as members.

In a text message to reporters, Aguirre on Monday said that the President preferred a compromise agreement with Mighty so that the money to be collected from the Bulacan-based cigarette manufacturer could be immediately allocated to government projects.

“If [there will be] no compromise, [President] Duterte might not be able to use the money since the case will drag on in court,” Aguirre said.

“The President was only asking for P3 billion as compromise tax payment. But [he wants it] fully paid in just one payment,” he added.

Aguirre earlier said Mr. Duterte had spurned an offer from Mighty to settle its tax liabilities to the national government, which could amount to as much as P13 billion.

He said the President did not want staggered payments as proposed by Mighty.

The cigarette manufacturer wanted a compromise agreement with the government to save its owner, Alexander Wongchuking, and three other officials of the company from criminal prosecution after the BIR filed a P9.6-billion tax evasion case against them in the Department of Justice last month.