Philippines: NGO Backs House Move to Investigate Alleged Tax Evasion by Homegrown Cigarette Maker

Source from:  InterAksyon.com 11/08/2013

A key non-government ally of the Department of Finance in its push for excise tax reform today said a House move to investigate allegations of tax evasion by a local tobacco company would strengthen implementation of the Sin Tax Law.

"AER is pleased that government is addressing the problem brought about by the serious allegation that Mighty is engaged in illicit trade practices," Action for Economic Reform coordinator Filomeno Sta. Ana III said in a statement.

"If this is not checked, the strategy will set a dangerous precedent that other manufacturers will follow to protect their market share, further undermining the hard-won benefits of the Sin Tax Law," he said.

The non-government organization is referring to House Resolution No. 425, which calls for an investigation into Mighty Corp, a homegrown manufacturer of low-priced cigarettes that has been accused of evading taxes.

"We at AER welcome this new effort of the policymakers in the committee and the upright public officials such as BIR Commissioner Kim Henares to scrutinize Mighty's rumored tax evasion practices," said Jo-Ann L. Diosana, senior economist of AER.

"Along with the ongoing investigation of the company by the BIR, we regard this initiative as a timely, essential step in guaranteeing a beneficial climate of tax and customs compliance among tobacco companies, so that the complete health and revenue benefits of the Sin Tax Law can be reaped," she said.

According to AER, Mighty sells cigarettes at a price -- P1 per stick as against P5 for rival Marlboro -- below the cost of producing them.

"The consequences of the alleged mis-declaration of Mighty cigarettes threaten to undermine the Sin Tax Law," Diosana said.

AER said the underpricing has encouraged Filipinos to shift to the cheaper cigarettes instead of cutting their consumption, which was the objective of the law.

The NGO said Mighty's failure to pay proper taxes cost the government between P2.54-4.4 billion in foregone revenues.

AER proposed additional measures to protect the gains of Republic Act No. 10351.

"This is an especially opportune time for the government to adopt a tracking and tracing system that will enable close monitoring of tobacco products and curb the risk of smuggling," Sta. Ana said.

"It will ensure that the present momentum for progressive health, tax and governance reforms will be sustained into the future," he added.

Citing data from the Bureau of Internal Revenue, Sta. Ana said the law has led to the 43 percent drop in the volume of cigarettes and alcoholic products sold in the first half of this year. Enditem