Mighty Corp. not yet free from charges despite settlement offer

Finance Secretary Carlos Dominguez III on Thursday said that Mighty Corporation is not yet free from legal liabilities even if the government accepts the tobacco manufacturer's settlement offer.

In a statement, Dominguez said the Department of Finance (DOF) will receive the initial payment of  P3.5 billion representing a portion of Mighty's tax liabilities.

“We will accept the initial payment,” the Finance chief said.

However, he emphasized that the payment will not eliminate any criminal charges that the Bureau of Internal Revenue (BIR) may file against the company in relation to its tax-related cases, which cannot be compromised.

In its letter to BIR Commissioner Caesar Dulay dated July 10, Mighty offered to settle its tax liabilities for P25 billion by today, July 20.

The said amount represents the deficiency excise taxes worth P3.5 billion and the internal revenue taxes of the company and its shareholders of P21.5 billion.

The letter, signed by Mighty's president and director Oscar Barrientos, said that the settlement  would be funded by means of an “interim loan” from JT International Philippines (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 value added tax.

The DOF said it was informed that a manager’s check amounting to P3.44 billion—covering Mighty’s excise tax liabilities—will be issued on July 20 by JTI and deposited at the SSS branch of the Land Bank of the Philippines in Quezon City.

Barrientos said in his letter that the initial payment of P3.5 billion will be paid by the company on the company’s behalf 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 said.

The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.

Three tax cases filed by the BIR against Mighty are now pending before the Department of Justice (DOJ).

The cases cover the company's non-payment of excise taxes due its cigarette products and use of counterfeit tax stamps on its cigarette packs, which correspond to excise taxes valued by the BIR at a combined P37.88 billion.

Barrientos also requested the BIR in its letter for a re-investigation of its pending criminal complaints before the DOJ following the initial payment of the P3.5 billion, along with a certificate of payment.

“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,” Barrientos said.

The company official also committed to retire the operations of Mighty Corp. following the conclusion of its deal with JTI. — BM, GMA News