Philippines: Cigarette Firm Defies BOC Order

Source from:  Business Insight 01/07/2014

Mighty Corp., a local cigarette maker has ignored the request of the Bureau of Customs to explain why it is able to import tobacco at about 85 per cent lower than its competitors. 

The Banayoyo Reforestation and Tobacco Growers Cooperative based in Ilocos Sur, yesterday said the "post audit entry group" of the Bureau of Customs  sent Mighty a letter asking to explain what the group considers as anomaly.

Up to this writing, the cigarette maker has not filed a reply, the cooperative said.

Business Insight has repeatedly claimed that the evidence of what appears to be technical smuggling is in the records of  Customs but none of its officials seem to have taken notice of it.

The farmers also asked what has happened with the probe being conducted by the Bureau of Customs (BOC) and the Bureau of Internal revenue (BIR) on Mighty's alleged under-declaration of its imported tobacco leaf and acetate tow, a raw material for cigarette filters.

Franciso Gamboa, president of the cooperative, said he  doubts the truth of  Mighty's statement saying  "we will buy more next year from local farmers".  Instead of buying local leaf Mighty imports unprocessed leaf at only 15 per cent of average world price. 

That, Gamboa said, may well be the reason why Mighty is not buying that much of local leaf .  Even small purchases are underpriced to the tune of 90 per cent, meaning Mighty pays only 10 per cent of the average local price.

"How can Mighty make good on its promise to buy more from tobacco farmers next year if the imported price of their tobacco is cheaper than even the rejects or floor sweepings sold here? " Gamboa asked.

Both the BOC and BIR told the House committee on ways and means chaired by Marikina Rep. Miro Quimbo on October 22, 2013  that they have  initiated  an investigation on the complaints against Mighty Corp.

Documents submitted by Mighty Corp. to the BOC show that it had imported tobacco leaf at  only $0.68 per kilo (equivalent to only P29.24) in 2011 and 2012.

Finance Secretary Cesar Purisima has ordered the BOC and BIR to investigate the alleged under-declaration of Mighty's imports.  BOC records show that the cheapest imported tobacco in 2011 was $3.39 per kilo, way above the $0.68 per kilo importation of Mighty.

"As far as we know, the deadline has lapsed. We hope the Department of Finance would make public the results of its investigation)," Gamboa  said.   

Gamboa said the DA and the Tariff Commission should initiate a probe on Mighty's dumping practices, which are hurting local farmers and could soon drive them out of business.

"We never saw or heard Mighty or the Wongchungking family buying from farmers in the North. The government should immediately investigate this company to protect the welfare of farmers," Gamboa said.

He recalled that the government-mandated floor price in 2011 was P58.69 per kilo for flue-cured tobacco and P38.42 for burley. For 2012, the floor price was P75 for flue-cured and P61 for Burley.

Mighty imported at a price equivalent to only a little less than P30 a kilo during these periods. 

Isabel Jimeno of the Samahan ng Magtatabako ng Kanlurang Mindoro said "our industry will wiped out with nary a whimper".

Mighty's imported tobacco is even cheaper than the price of rejects at P43 per kilo last year. How did that happen?  Mighty is openly and consistently violating the law but manages to evade punishment," Jimeno noted.

Gamboa and Jimeno also urged the House Ways and Means Committee to dig deeper into allegations Mighty declares only 41 per cent of its production to the BIR for tax purpose and evades excise tax liabilities on the rest of the 51 per cent production.

The committee is set to conduct the probe upon a resolution filed by Rep. Pablo Javier, who wanted to know how Mighty managed to pay less taxes even though it imported more tobacco than one of its competitors.

Aside from tobacco leaf, Mighty reportedly imported acetate tow, the raw material used for cigarette filter at $0.30 per kilo. The cheapest tow imported in 2011 and 2012 was at $5.26 per kilo. Enditem