Action for Economic Reforms (AER) urges President Rodrigo Duterte to implement existing law in dealing with Mighty Corporation’s tax evasion case instead of unlawfully settling with a measly P3 billion.

“We welcome efforts of the government to charge Mighty Corp. for tax evasion. The company must be made to face the court and if found guilty, should be made to pay the fines imposed for the unlawful act of using fake stamps on cigarette packs and evading payment of the tobacco excise tax. Amnesty is bad policy. It will send a wrong signal and encourage bad behavior, not only to Philip Morris and other tobacco companies, but also among other corporations and taxpayers,” said Jo-Ann Diosana, AER senior economist and trustee.

Diosana said the President may be inviting far worse consequences of his attempt to resolve the conflict instead of letting the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) implement the rule of the existing law.

“If the law is followed, Mighty must pay as much as P15 billion in taxes and fines which can build and repair even more hospitals nationwide for the impoverished Filipinos. The compromise amount is way below P15 billion,” said Diosana.

Section 263 of the National Internal Revenue Code stipulates, “Any manufacturer, owner or person in charge of any article subject to excise tax who removes or allows or causes the unlawful removal of any such articles from the place of production or bonded warehouse, upon which the excise tax has not been paid at the time and in the manner required, and any person who knowingly aids or abets in the removal of such articles as aforesaid, or conceals the same after illegal removal shall, for the first offense, be punished with a fine of not less than ten (10) times the amount of excise tax due on the articles but not less than One thousand pesos (P1,000) and suffer imprisonment of not less than one (1) year but not more than two (2) years.”

The assessed value of seized cigarettes containing fake stamps is reported at P1.5 billion. The President reportedly agreed to a settlement of P3 billion or double the assessed value of which P1 billion will be allotted each for the repair of hospitals in Basilan, Sulu, and Mary Johnston in Tondo, Manila.

“We hope that this track record of Mighty Corp. will lead President Duterte to reject its low two-tiered tax proposal and support the bill for a single cigarette tax rate of P40, higher than the current tax of P30. A higher unitary rate is better because it will generate even more government resources to fund hospitals and better healthcare for the people,” added Diosana.

AER’s study shows that the P40 single-tax rate is projected to generate revenues of P145 billion or P20 billion more than the proposal of Mighty Corp.

House Bill 4144, which adopts Mighty Corporation’s proposal of a tax rate of P32 for low-priced cigarettes and P36 for high-priced cigarettes, was passed in blitzkrieg fashion by the House of Representatives in 2016 and is now pending in the Senate Committee on Ways and Means. This bill was opposed by the DOF, the Department of Health, AER, business chambers, and other economic and health groups for being anti-health, anti-poor, anti-efficiency, and anti-competition. (end)