PMFT presses BIR to stop tax evasion by rival tobacco firm

Posted at 06/09/2014 3:56 PM | Updated as of 06/09/2014 6:56 PM

Henares junks PMFT's proposal

MANILA, Philippines – Tobacco giant Philip Morris Fortune Tobacco said alleged tax evasion by its competitor Mighty Corp. can be stopped quickly if the Bureau of Internal Revenue (BIR) puts third-party, 24/7 inspectors in all cigarette manufacturing companies.

Philip Morris has, for months, been saying that Mighty has been producing and selling more cigarettes than it declares, allowing it to undercut Philip Morris on prices and resulting in billions of pesos of lost tax revenue.

"It can be solved next week if there is political will to do so," said Michael Tan, president of LT Group, part owner of Philip Morris Fortune Tobacco, at the LT Group stockholders meeting on Monday.

Tan said while the company understands past tax evasion takes time to investigate, current and future tax evasion can be quickly and vastly reduced with its proposal.

Tan said the Department of Finance has instructed the BIR and Bureau of Customs to take action. The Customs has padlocked a Mighty Corp. warehouse.

BIR Commissioner Kim Henares, meanwhile, said the tax agency has deployed 24/7 inspectors to monitor cigarette firms since last year.

She said the BIR cannot hire third-party inspectors as it will violate the tax code.

“The National Revenue Code said that it’s only the commissioner and the officers who can be involved in excise tax functions and doing functions of surveillance, so we cannot have third party (inspectors),” she told ANC.

Henares said there “are a lot of questions” in the allegations of Philip Morris, noting that the tax agency will not file a case unless it has sufficient evidence.

“Our rule is that we do not go out and falsely accuse people without strong evidence. For example, when I started my position here, what’s the first thing that people told me to do? ‘Go after Lucio Tan and his company.’ But my position is you cannot just go after them without evidence. We have assessments which we cannot tell people, but to file a criminal case, you have to have evidence,” said Henares.

“I do not allow my office to be used as an instrument for another company to compete with another company. My only loyalty is that I should collect the correct tax,” she added. - With report from Coco Alcuaz, ANC