BIR chief weighs in on Philip Morris-Mighty trade war

Posted at 02/14/2014 6:25 PM

MANILA, Philippines – The Bureau of Internal Revenue (BIR) is urging Philip Morris International (PMI) to prove its allegations that local cigarette manufacturer Mighty Corporation is producing more than what it declares to the government.

BIR Commissioner Kim Jacinto-Henares said that while the tax agency will not take sides in the dispute, the burden of proof rests on PMI and its local unit PMFTC Incorporation.

“The burden of proof rests on PMI and PMFTC, they should prove that Mighty has evaded the government. If they cannot prove their allegation, then they may be liable for libel or slander,” Henares said.

She added that if only PMFTC agreed to the government’s proposal of adopting a unitary tax system, then PMI could have avoided its current difficulties in the Philippine market.

PMI has accused Bulacan-based firm Mighty of unfair business practice by producing about double the volume that it declares to the BIR, which resulted in tax revenue losses for the government.

PMI chief executive Andre Calantzopoulos said this practice has prevented PMFTC to operate on a level playing field.

But Mighty executive vice president Oscar Barrientos dismissed PMI’s allegation as part of a “smear campaign.”

“Mighty has proven that even a small local company can go toe to toe with a giant monopoly like PMFTC. Their smear campaign [is] really just their way of dealing with their failures in the market,” he said.

Barrientos is calling for vigilance amid calls to review Republic Act 10351, the law which reformed the excise tax system.
 
“There may be a bigger agenda behind the anti-Mighty smear campaign. Reforms in the excise tax system have obviously dealt a heavy blow to PMFTC,” he said.

Amid the ongoing row, Calantzopoulos stressed that PMI, along with its local partner Lucio Tan Group, will defend their position in the Philippine cigarette market.

"We continue to hold a clear leading share in a market where annual adult consumption is estimated at around 100 billion units and we have the brand portfolio and the national distribution to take advantage of the planned future tax equalization," he said.