JT buyout of Mighty yields huge payments

The takeover by Japan Tobacco Inc. of Mighty Corporation has led to a 2o0 percent increase in the excise tax payments for the September-October period alone for this cigarette manufacturer compared to the same period last year, according to the Department of Finance (DOF). 

Based on DOF data, Mighty Corp.  paid P1.002 billion in excise taxes for September 2016 and another P1.069 billion in October of the same year, or a total of P2.071 billion for this two-month period. 

For the same two-month period this year, the amount of excise tax payments from Mighty Corp. increased to P6.2 billion, representing a 2o0 percent hike in sin tax collections from the firm.  

Earlier, Dominguez said preliminary computations done by the DOF and the BIR show that the Japan Tobacco will pay a minimum of P3.1 billion a month starting January 2018, which is about P2 billion more per month than what Mighty Corp. had previously been paying. 

"For Fiscal Year 2018, JTI is expected to pay almost P40 billion out of the estimated P118 billion in total excise tax collections on tobacco products," Dominguez said. 

The amount represents a third of the total revenue collections from the excise tax on cigarettes. 

Japan Tobacco completely took over the operations of Mighty Corp. in September after the latter sold its manufacturing assets and other properties to the Japan-based cigarette manufacturing company to be able to settle its tax liabilities with the government in the amount of P25 billion. 

Dominguez said the government stands to gain P30 billion from the settlement once the value-added tax and other fees from the sale are included. 

This amount represents the biggest tax settlement ever from a single corporate entity in the country’s history. 

Mighty Corp.  which had faced a string of criminal complaints filed by the BIR before the Department of Justice (DOJ) for its use of counterfeit tax stamps, offered last July to settle its tax liabilities and shutter its business. 

The increased “sin” tax collections, Dominguez said, will help improve health care facilities and enable the Department of Health (DOH) to procure additional medicines and provide services that will help prevent and control the deadly diseases caused by tobacco use. 

Dominguez recalled that in 2011, “sin” taxes from tobacco and alcohol products brought in revenues equivalent only to 0.5 percent of gross domestic product (GDP).

He said after the new excise tax schedule was enacted into law in 2012, revenues from “sin” taxes doubled to about 1.0 percent of GDP in the succeeding years, but dropped in 2016 to a 0.01 percentage point as share of GDP, owing mainly to the proliferation of fake stamps and implementation of graphic health warnings on cigarettes. (DOF/Paola Alvarez)