Dangerous precedent

Samples of counterfeit cigarettes seized by the Bureau of Customs (CDN FILE PHOTO/ JUNJIE MENDOZA)

President Duterte’s remarks regarding Mighty Corp.’s tax evasion problem is somewhat disturbing. It could send the wrong signal to law-abiding taxpayers and embolden unscrupulous traders.

In a speech in Davao last week, the President was quoted as saying that Mighty can settle its tax deficiency if it doubles its offer—an amount that, according to him, could be used to refurbish hospitals in Jolo, Basilan and Manila. Noting that Mighty’s settlement offer of P1.5 billion was “definitely unacceptable,” the President explained that there was deceit, so Mighty president Alex Wongchuking, whom he had earlier ordered arrested, needed to give double, or P3 billion. As if this were not enough, he assured Wongchuking that if someone in power were to pursue the tax-evasion case, “I can always pardon him.”

The President should be reminded that this is not a simple tax-deficiency case in which accountants perhaps erred in including deductions that were not allowed by the law in their tax computations, or in excluding other income that should have been otherwise taxed. As other people in the government have argued, Mighty should be charged with economic sabotage for evading payment of billions of pesos in taxes by using counterfeit tax stamps.

Mighty has been accused of doing this since President Benigno Aquino III’s administration. If the government were to settle and consider just the money, Mighty’s tax obligations or deficiencies should run into the tens of billions of pesos. But it’s more than just the money. There is a bigger crime involved. It is about sending the right signal to the business community that crime is to be punished. Besides, given the evidence in the government’s hands, Finance Secretary Carlos Dominguez III has said that an airtight tax-evasion case is being prepared against Mighty.

Mr. Duterte’s argument is that tax cases can be settled: “When you failed to pay your taxes, intentionally or unintentionally, you can settle it. The law allows settlements, compromise. That’s the word of the law.” But, again, this is more than just a simple tax case. Mighty has been accused of depriving the government of billions and billions of pesos in unpaid taxes since the past administration by resorting to unlawful means—faking tax stamps possibly in connivance with the government entity printing those stamps, which will involve a different criminal case.

We hope that the President’s remarks in Davao were just one of his “moments,” and that he didn’t mean what he said. The undisputed fact remains that raids conducted two weeks ago by the Bureaus of Customs and of Internal Revenue on warehouses in General Santos City and in San Simon in Pampanga yielded Mighty cigarettes with P1.1 billion in unpaid excise taxes. Mighty did not dispute that it owns the confiscated cigarettes, but its band of highly paid lawyers was able to secure an order from Judge Tita Bughao Alisuag of Manila Regional Trial Court Branch 1 temporarily restraining the BOC from conducting operations against the company.

We can now only hope that Dominguez, who heads Mr. Duterte’s economic team, can influence him into changing his mind. The day after the President spoke in Davao, the finance secretary said there would be no settlement. “The case [against Mighty] will push through. We will file a case because it’s our duty,” Dominguez said after speaking at a tax reform forum hosted by the Philippine Chamber of Commerce and Industry.

What the administration will do in Mighty’s case will speak much of its anticorruption promise. A meager P3-billion settlement will embolden others to cheat on their tax payments and just agree later to settle if caught by authorities. Besides, the fact remains that Mighty owes more than just double the P1.5 billion it now claims it owes.