President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad

To FINEX members and friends,

To FINEX members and friends, PRESIDENT’S REPORT April 2017 Issue The first quarter of 2017 has been very busy for our organization. Our organization has been very active in various advocacy programs especially participating in various consultative meetings on tax reform. On top of that, we have also conducted several activities for the professional development of our members.

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Collateral damage
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J. Albert GamboaBy J. Albert Gamboa

BUSINESS WORLD(FINEX Folio)
April 7, 2017

Collateral damage

FINEX Folio is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Friday in BusinessWorld, opinion section.

Caught in the crossfire between the Bureau of Internal Revenue (BIR) and Mighty Corp. are thousands of legitimate retailers nationwide whose businesses are getting affected by the fake tax stamp scam embroiling the Bulacan-based cigarette manufacturer.

BIR Commissioner Caesar R. Dulay said the revenue agency will prioritize the filing of charges against Mighty, and any compromise settlement is still far from the BIR’s mind as cases are still being built up based on multiple raids conducted over the past two months.

The country’s chief revenue official explained that separate cases have to be filed following the series of raids, given the fact that each raid entailed different circumstances. He said: “You cannot compromise without a tax case, as far as the BIR is concerned.”

So far the only tax evasion case filed by the government’s top revenue generator with the Department of Justice involves a recent raid at Mighty’s warehouse in San Simon, Pampanga to the tune of P9.56 billion. According to Mr. Dulay, another raid in San Ildefonso, Bulacan yielded three times more confiscated cigarette packs and on the basis of that alone, they might file a P27 billion to P30 billion case.

Earlier raids in the cities of Zamboanga, Cebu, General Santos, and Tacloban also found counterfeit stamps affixed on Mighty’s products. All these have caused serious concerns among retailers, who are getting wary of accepting stocks since they may be prosecuted should they be caught with fake stamps.

Mere possession of items with counterfeit tax stamps is punishable under the law, and three retailers have reportedly been charged. For this reason, some sellers have started to refuse accepting products from the embattled firm. This is their only option left when in doubt about the cigarette packs, unless they want to get into trouble with the BIR.

In fairness to Mighty’s sales managers, they are now issuing certifications to individual retailers attesting to the authenticity of the products they distribute. The long arm of the law has finally caught up with them after enjoying a seemingly kid’s glove treatment from the previous administration.

To ensure the full cooperation of retailers, the BIR should issue guidelines regarding products emanating from Mighty’s distribution network. As for the compromise being proposed by President Rodrigo R. Duterte which is allowed under the National Internal Revenue Code, conditions should be set in place to prevent future abuses, including stiffer penalties for subsequent recurrence.

Mr. Dulay told reporters yesterday that the BIR is even considering the cancellation of Mighty’s license to operate. He said: “Because there was a violation of the Tax Code, we’re also looking into that.”

One of the measures he has already taken is the quarterly reshuffling of revenue officers on the premises of tobacco manufacturers. During the reign of his predecessor, former Commissioner Kim Jacinto-Henares, it took years before BIR officials were rotated, and those who were embedded in the organizations they monitored allegedly turned a blind eye when it came to shenanigans.

Since the single excise tax rate on the so-called sin products took effect last Jan. 1, pink-colored tax stamps have been affixed on cigarette packs. This makes it easier for regulators to immediately see if a product is authentic or not. Another way to closely monitor the daily operations of alcohol and tobacco companies is by seeing to it that machines stop production at the end of each day and resume operating the next business day.

A source from the banking industry has hinted that the embattled firm is now considered a high credit risk. “Pasikip ng pasikip na ang mundo nila,” he said.

Finance Secretary Carlos G. Dominguez III announced last week that the government would not give Mighty special treatment, saying: “The rule of law must be applied equally. All kinds of crime must face swift and sure justice, and Mighty is no exception. Those fraudulent tax stamps represent billions of pesos worth of theft from the Filipino people.”

He expressed confidence that strong evidence gathered by the BIR and the Bureau of Customs would pin down the company and “seems to overwhelmingly point to their guilt.” He assured Mighty executives that they “will have their constitutional opportunity to prove their innocence.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author is Chief Financial Officer of the Asian Center for Legal Excellence and serves as Co-Chairman of the FINEX Media Affairs Committee.

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