MANILA, Philippines – The Department of Finance (DOF) received a P25-billion offer from tobacco firm Mighty Corporation to settle its tax disputes with the government before the month ends, to be funded by a P45-billion sale of its assets to JT International Philippines (JTI).
“We are studying the offer,” Finance Secretary Carlos Dominguez III said in a statement on Wednesday, July 12, referring to a settlement proposal sent by Mighty Corporation to Bureau of Internal Revenue (BIR) Commissioner Caesar Dulay through a letter dated July 10, 2017.
The tobacco firm is facing 3 tax cases before the Department of Justice (DOJ), totaling P37.88 billion.
The letter signed by Mighty Corporation president and director Oscar Barrientos said the company was expressing “willingness to settle all such excise and tax issues and respectfully offer as settlement … the total sum of P25 billion.”
Barrientos further explained that JTI would buy Mighty Corporation’s manufacturing and distribution business and assets, along with the intellectual property rights associated with these assets.
The sale would include “those owned by the company, Wong Chu King Holdings Incorporated, and other affiliates to JTI or any of its affiliates for a total purchase price of P45 billion exclusive of value added tax.”
JTI is the global tobacco firm behind the brands Mevius (previously Mild Seven), American Spirit, and Winston, among others.
Dominguez noted, however, that Mighty Corporation’s settlement offer for its tax deficiencies is separate from criminal charges that might be filed in court by the BIR against the company.
Mighty Corporation’s offer is broken down as follows:
- P3.5 billion for deficiency excise taxes on its cigarette products that are now the subject of the 3 tax cases pending before the DOJ
- P21.5 billion representing the liabilities of the company and its shareholders, as well as the company officers, for all internal revenue taxes including income tax from 2010 to 2016 and the tax period up to the closing of the proposed transaction with JTI, and all transaction taxes related to the deal with JTI
“The initial payment of P3.5 billion will be paid by the company … on or before July 20, 2017. A binding Memorandum of Agreement in relation to the Proposed Transaction [with JTI] will be concluded shortly (and prior to July 20, 2017) subject to finalizing terms with JTI and JTI completing its due diligence,” Barrientos’ letter read.
Mighty Corporation said the balance of P21.5 billion will be paid upon or after the closing of the planned deal with JTI.
In the letter, Barrientos also asked that the BIR issue a final tax assessment and clearance for Mighty Corporation if the settlement is accepted.
“We also respectfully request the BIR to issue to the Company and its shareholders and officers following closing of the proposed transaction (with JTI) and the payment of the P21.5 billion the relevant Certificate of Availment of Compromise, a final tax assessment for all the Company’s excise and other tax issues described above, and relevant tax clearances to the Company, its shareholders, and officers,” he said.
Barrientos added that Mighty Corporation’s operations would be halted once the JTI deal is sealed. – Rappler.com