October 23, 2017, 3:59 pm
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Biazon ignores tobacco anomaly

Whatever Customs Commissioner Ruffy Biazon does in straightening out the mess in his bureau is made useless by his indifference to an anomaly glaringly appearing in the records. 
 
He continues to be blind as to how Mighty Corporation, an ertswhile small but now a big player in the cigarette manufacturing business, is able to import tobacco at 85 percent below the average world price.
 
He knows that the company is deeply involved in technical smuggling that in turn denies the bureau of hundreds of millions of pesos in tariff payments. The willful indifference is one big reason the bureau cannot meet collection targets. 
 
We surreptitiously obtained from the National Tobacco Administration the information that Mighty was importing tobacco at $0.68 a kilo while other cigarette makers pay the average world price.
 
Business Insight sources recently confided to us Mighty is paying the same $0.68 per kilo for local tobacco. The market price is much higher. We fail to see what benefit the company gets underpricing purchases of local leaf.
 
Our guess is the understated price saves the company a lot of money that in turn enables it to buy more tobacco—local and foreign—that in turn makes possible the production of more cigarettes.
 
Consequently, Mighty is able to increase sales although it appears on the record of declaration of volume to the Bureau of Internal Revenue (BIR) that the company is incurring a big loss, as estimated by AC Nielsen, a marketing survey firm, at more than P4 per pack.
 
So far, it has not occurred to Biazon that the money Mighty saves by dodging tariff payments enables the company to make it appear it is suffering a loss but actually makes profits by underdeclaring production, according to detailed analysis made by Nielsen.
 
The underdeclaration becomes even more profitable with the tolerance of Biazon. The money the company “chisels” from government by avoiding payment of the correct tariff enables Mighty to buy more tobacco.
 
I am happy to hear that the ways and means committee of the House of Representatives will investigate what it believes is massive tax cheating by Mighty. The first step, in my mind, is to summon Biazon and require him to explain how the apparent technical smuggling has escaped his attention.
 
I never had a desire to testify in any congressional inquiry unless summoned. This time, however, I am prepared to face the Congressional committee investigating the case. It would help the probe body find the truth if Biazon would be confronted with the customs document in my possession.
 
We reported earlier that Finance Secretary Cesar Purisima knows about the document showing that Mighty imports tobacco at 15 percent of the world price.
 
We do not exactly want to go back on our word. But it is entirely possible that Biazon keeps the damaging document to himself and that it is possible he has not informed Purisima about it.
 
If I am summoned to a hearing, face to face with Biazon, Purisima will have the opportunity to find out the truth or falsity of what I have been saying. Knowing him, he will definitely take immediate steps.
 
We cannot guess what he will do but we are certain he would ask Biazon why he never required Mighty to explain the   discrepancy between the price that the company pays for imported tobacco and the average world price.
 
The congressional investigation should be pursued to its logical end. The logical end is requiring Biazon to explain the anomaly.  
 
If evidence of guilt is established, the final report of the committee should not merely require Mighty to pay the correct tariff.
 
The report should also recommend the dismissal of Biazon.
 
Few people in high places in government realize that in the end, the name of President Aquino can be dragged into the case.
 
There are clear suggestions of corruption based on the documents in our possession. People in government, more particularly Biazon and Purisima—after he gets the facts—appreciate the shame that President Aquino can go through considering the fact that he certified as urgent the enactment of the bill that is now the present excise tax law on sin products.
 
Everybody thought the tax was an accommodation to British American Tobacco.  Maybe it is. Unfortunately, Mighty appears to have found a way of benefiting immensely from a law harsh to others.
 
We have documents showing Mighty paid more than P2 billion excise tax in the first five months of the year. The company would not have been able to pay that much if its share of the market had not increased allegedly from 3 percent to the present 30 percent.
 
What the BIR and Customs may not know is that Mighty does not declare 59 percent of its cigarette production to the BIR. This is what AC Nielsen claims it discovered in its survey.
 
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