BIR probes cigarette maker Mighty Corp

By Iris C. Gonzales, The Philippine Star

Posted at Oct 25 2013 08:11 AM | Updated as of Oct 25 2013 04:11 PM

MANILA - The Bureau of Internal Revenue (BIR) is looking into reports of under-declaration by cigarette maker Mighty Corp., a Filipino-owned company which sells the one-peso-per stick cigarette brand of the same name.

A BIR official told The STAR that the BIR is looking into the matter following complaints from other cigarette industry players.

“We are looking into it,” said the source.

The source said the BIR has sent teams to Mighty’s warehouses to check on the volume and declarations made by the company.

On the other hand, cigarettes sold by PMFTC and Japan Tobacco Inc. usually sell at P5 per stick.

Officials from Mighty Corp. could not immediately be reached for comment.

The implementation of Republic Act 10351 or the Sin Tax Law has allowed the re-entry of players such as Mighty Corp. and British American Tobacco.

Cigarette consumption in the Philippines has shifted to the cheap P1 per stick brands, an unexpected offshoot of the implementation of the sin tax law.

According to industry estimates, 25 percent of premium and sub-premium smokers have switched to one-peso brands since the law took effect last year.

Industry sources said producers of one-peso brands may be resorting to under-declaration given the lower prices.

“If the assumption is correct, government incurs an additional loss of P600-million in excise taxes for every one billion sticks of under-declared cigarettes,” the industry source said.

Furthermore, tobacco industry players said the law may also be failing to discourage smoking, especially among adolescents who resort to cheaper cigarette brands.

Industry estimates show that the average daily consumption grew to 14.13 sticks per smoker in the second quarter of the year from 13.53 sticks per smoker in the first quarter.

“The increase is ironic because government has packaged the new sin tax law as a smoking reduction measure,” the source said.

The Sin Taw Law, implemented last year, raised taxes on alcohol and cigarettes. For 2013, the government expects to raise an estimated P51.6-billion excise taxes from cigarette products; P6.2-billion from VAT, and P6.7-billion from corporate income tax for a total of P64.5-billion from the tobacco industry alone.