DOF says JTI take-over to raise sin tax by P40B

The government stands to gain almost P40 billion in additional revenues from the “sin” tax on tobacco products starting  in 2018, following the move by Mighty Corp, to settle its tax liabilities and sell its assets to Japan Tobacco Inc. (JTI), according to Finance Secretary Carlos Dominguez III.

Dominguez said preliminary computations done by the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) show that JTI 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.

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 for P25 billion and shutter its business.

The Bulacan-based cigarette manufacturer sold its assets to JTI to be able to pay off its tax dues.

With the approval of President Duterte, the DOF and BIR had accepted the P25-billion settlement offer, which represented the firm’s tax deficiencies.

Dominguez has said that the total amount the government would be getting from the tax settlement—the largest ever from a single taxpayers in the country’s history—is beyond P25 billion and could reach over P30 billion with the value-added tax (VAT) and other fees factored in the settlement and sale of Mighty’s assets to JTI.

He said the settlement of Mighty’s tax obligations will significantly boost the national coffers at a time when the government is meeting the unexpected costs of several calamities.

The increased “sin” tax collections will, on the other hand, 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 noted.

Mighty’s settlement sum was funded by means of an “interim loan” from JTI and the sale by Mighty and its affiliates of its manufacturing and distribution business and assets, along with the intellectual property rights associated with these assets, “including those owned by the company, Wong Chu King Holdings Inc., and other affiliates to JTI or any of its affiliates for a total purchase price of P45 billion exclusive of VAT.”

The balance of P21.5 billion was paid after the closing of the proposed deal with JTI. (DOF)