Japan Tobacco to acquire Mighty Corp. for P45 B

MANILA, Philippines -  Mighty Corp. has offered to settle its tax liabilities of P25 billion through a loan and through proceeds of its sale to Japan Tobacco International (JTI) Philippines Inc.

“We are studying the offer,” Finance Secretary Carlos Dominguez III said in a statement.

However, Dominguez clarified that the settlement offer of the Bulacan-based manufacturer is separate from criminal charges the Bureau of Internal Revenue (BIR) filed against the company.

In a letter to BIR Commissioner Caesar Dulay last July 10, Mighty president and director Oscar Barrientos said the company is willing to offer an amount of P25 billion as settlement for the company’s tax liabilities.

Barrientos said the fund for the settlement would be sourced from an interim loan from JTI Philippines, as well as from proceeds from the sale of Mighty, its affiliates and assets – including those owned by Wong Chu King Holdings Inc. – to JTI for a total of P45 billion, exclusive of VAT.

According to Barrientos, the P25-billion settlement offer will include P3.5 billion for the deficiency excise taxes on its cigarette products and P21.5 billion for the internal revenue tax liabilities, including income taxes from 2010 until the tax period at the closing of the deal with JTI.

The initial payment of P3.5 billion would be paid on or before July 20, just before Mighty Corp. and JTI sign a binding memorandum of agreement on the proposed buy-out.

The balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.

Barrientos has also requested the BIR for a reinvestigation of its pending cases before the Department of Justice following the initial payment of P3.5 billion.

“We also respectfully request the BIR to issue to the company and its shareholders and officers following closing of the proposed transaction (with JTI) and the payment of the P21.5 billion the relevant Certificate of Availment of Compromise, a final tax assessment for all the Company’s excise and other tax issues described above, and relevant tax clearances to the Company, its shareholders and officers,” Barrientos’ letter read.

Three cases have been filed by the BIR against Mighty Corp. before the DOJ for the alleged non-payment of excise taxes and the use of counterfeit tax stamps. In total, Mighty’s estimated tax liabilities have reached P37.88 billion.

Barrientos has also committed to retire the operations of Mighty Corp. after the conclusion of its deal with JTI.