THE deal to settle Mighty Corp.’s P25-billion tax liability, accompanied by a takeover of the company by JT International (Philippines), Inc., may require approval from the Philippine Competition Commission (PCC), the Finance department said.
“This will be the largest sum of taxes collected ever from a single taxpayer in Philippine history. The date of full collection will depend on how fast the Philippine Competition Commission approves the sale of Mighty’s assets to the Japan Tobacco International whose largest shareholder, incidentally, is the Japanese government. Mighty will be out of the cigarette manufacturing business from now on,” Finance Secretary Carlos G. Dominguez III said in a speech at the Davao Investment Conference over the weekend.
According to the Implementing Rules and Regulations (IRR) of the Philippine Competition Act, parties to any merger or acquisition involving transactions exceeding P1 billion are required to notify and seek approval from the anti-trust body.
The Department of Finance (DoF) said previously that Mighty Corp.’s assets to be sold to JTI (Philippines) are valued at P45 billion.
PCC Chairman Arsenio M. Balisacan said that the commission has yet to receive a notification from the two parties.
“We proceed with the review as soon as notification requirements are fully complied with,” Mr. Balisacan told BusinessWorld in a mobile phone message.
“Once they file and are in full compliance with the requirements, the review periods under the law and IRR will apply,” he added.
According to the IRR, the Commission shall undertake an initial review upon receipt of the notification, before commencing with the 30-day phase one review. If the Commission flags a potential harmful effect on market competition, it may call for a comprehensive 60-day phase two review.
On Thursday, the government accepted an initial P3.44 billion payment from JTI (Philippines) on behalf of Mighty Corp.
Mr. Dominguez however said the settlement as proposed seems like “a good deal,” as it would give the government around P30 billion inclusive of value-added tax and around P1 billion a month in additional excise taxes. He added however that the DoF has yet to formally approve of the settlement offer.
President Rodrigo R. Duterte, in his second State of the Nation Address, said that he had directed the DoF and the Bureau of Internal Revenue (BIR) to accept the deal.
“I have directed the Department of Finance and the BIR to accept Mighty Corporation’s offer of P25 billion, to settle its tax liabilities. After the settlement, Mighty will no longer engage in tobacco business. This will be the biggest tax settlement on record,” he said yesterday.
The P3.44 billion payment is the first tranche of the P25 billion proposed settlement, which represents unpaid excise tax liabilities on Mighty’s cigarettes.
The remaining P21.5 billion — which represents the income tax deficiencies of the firm’s officers from 2010 to 2016 — will be paid upon completion of the acquisition deal between the two firms.
The deal however does not relieve Mighty Corp. of its three tax evasion charges involving P37.88 billion filed before the Justice department and does not preclude any charges that may be filed in the future. — Elijah Joseph C. Tubayan
