[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]
Philippine Govt. Mulls Big Relief for PM Subsidiary (fwd)
July 16, 1998
Philippine Government Mulls Deal
With Tycoon Over Huge Tax Bill
By REXIE REYES
Staff Reporter of THE WALL STREET JOURNAL
MANILA, Philippines -- The Philippine government,
wrestling with a
ballooning budget deficit, said it would drop tax-evasion
charges against
tycoon Lucio Tan if he pays at least 15 billion pesos
($358.9 million) in
unpaid taxes.
The offer to Mr. Tan, who along with his companies is
charged by the
government with owing 25.6 billion pesos in taxes, comes
as the
government has raised its estimate for the budget deficit
this year to 70
billion pesos. That deficit, which officials blame on
Asia's continuing
economic slowdown as well as inefficient tax collection,
is significantly
higher than the deficit of 40 billion pesos that
officials predicted shortly
before President Joseph Estrada took office two weeks ago.
Justice Secretary Serafin Cuevas said that Mr. Tan has
already made an
offer to the government to settle his tax arrears. He
declined to declare the
amount Mr. Tan offered, but he said the government isn't
prepared to
accept a settlement of less than 15 billion pesos. Mr.
Tan and his aides
didn't respond to requests for comment.
"It was Mr. Tan who offered to settle his tax
delinquency," Mr. Cuevas
stressed, denying earlier reports that the government
made the first move.
"Provided Mr. Tan is sincere, I think there is great
probability for this
settlement to prosper," he said.
The government in 1993 said it has evidence that Fortune
Tobacco Corp.,
Mr. Tan's flagship company, defrauded the government of
huge tax
revenue by underpricing its products from the factory and
then reaping
huge profits by reselling the cigarettes through
marketing companies and
bulk buyers between 1990 and 1992. Fortune Tobacco has
repeatedly
denied any such activity, saying its low production price
is because of high
productivity. The controversial case has languished in
the courts as state
tax lawyers were told by the courts to come up with
stronger evidence.
Since Mr. Estrada took office, the government has taken
steps to settle
long-standing cases of tax evasion and illegally acquired
wealth. The
Estrada administration is also considering a tax amnesty
plan that it hopes
will raise 20 billion to 30 billion pesos by allowing
taxpayers to pay a
percentage of the total amount the government says they owe.
The proposed tax amnesty, including the potential
settlement with Mr. Tan,
was welcomed by some analysts. "Any additional input to
our budget is
actually positive," says Erwin Tan, research head at
Securities 2000 Inc.
He added, however, that while this is a practical
solution to the
government's immediate problem, it may not sit well with the
administration's critics.
"It's not going to play well politically," added an
analyst with a foreign
brokerage firm.
Mr. Estrada's critics have chided him recently for
allowing former
associates of the late Ferdinand Marcos to move back into
power. Many
of these businessmen, including Mr. Tan, backed Mr.
Estrada's campaign
for the May presidential elections. The most-touted
example is Eduardo
Cojuangco, who left the country in exile with the
Marcoses in 1986. He
was recently elected chairman of San Miguel Corp., the
food and
beverage giant he headed during Mr. Marcos's rule. Both
Mr. Estrada and
Mr. Cojuangco deny that the government had a hand in Mr.
Cojuangco's
return to power in San Miguel.
Government economic managers fear that a deepening
deficit could push
the state into borrowing heavily from the domestic
capital market and send
interest rates higher. Many economists say that if the
government isn't able
to finance the deficit through other sources, interest
rates for the
benchmark 91-day Treasury bills could hit a high of 17%
in the late third
quarter. The 91-day T-bills averaged 14.756% in Monday's
regular
weekly auction, slightly lower than the previous week's
14.921%.
If the deal with Mr. Tan pushes through and a minimum of
15 billion pesos
is paid by the Chinese-Filipino tycoon, some economists
say the
government has a strong chance of halving the projected
70-billion-peso
deficit. Another factor that will help halve the deficit,
they say, is the
drawdown of $404 million, or about 17 billion pesos, from the
International Monetary Fund, which represents the initial
tranche of an
IMF lending facility made available to the Philippines
early this year.
--Cris Larano of Dow Jones Newswires contributed to this
article
Return to top of page | Format for printing
Copyright © 1998 Dow Jones & Company, Inc. All Rights
Reserved.
July 15, 1998
Philippines Considers Tax
Compromise With Tycoon Lucio Tan
Dow Jones Newswires
MANILA -- The Philippine government may be willing to drop
tax-evasion charges against tobacco tycoon Lucio Tan, one of the
country's wealthiest men, if he pays at least 15 billion pesos
($1=PHP41.703) in unpaid taxes, Justice Secretary Serafin
Cuevas said Wednesday.
The government, alleging that Tan owes some PHP26.5 billion in
unpaid taxes, needs the funds to in part help fill a yawning budget
deficit this year.
Tan, his Fortune Tobacco Corp. and 11 affiliated companies, as
well as 65 of his business executives are facing multiple
tax-evasion charges brought in 1993.
Cuevas said that Tan, who is listed by Forbes magazine as one of
the world's wealthiest men, has already made an offer to the
government to settle tax arrears.
Tan is also majority-shareholder in financially troubled flag carrier
Philippine Airlines (Q.PAI).
Cuevas declined to say the amount Tan offered, but said the
Department of Finance won't be prepared to accept a settlement
of under PHP15 billion.
"But kindly make it clear that it was not the government who
asked Mr. Tan to settle. It was Mr. Tan who offered to settle his
tax delinquency," Cuevas said.
"Provided Mr. Tan is sincere, I think there is great probability for
this settlement to prosper," he said.
The government of newly elected President Joseph Estrada is
considering an amnesty for corporate and individual tax evaders.
Estrada is keen to collect unpaid taxes rather than raise taxes
further to fund his administration.
This week, Finance Secretary Edgardo Espiritu warned that the
budget deficit could stretch to PHP70 billion unless revenue is
raised and expenditure is cut. Last year, the Philippines posted a
small budget surplus.
The tax authorities claim they have evidence that Tan's Fortune
Tobacco evaded billions of pesos in excise taxes between 1990
and 1992 through dummy marketing companies.
Tan denies the charges and claims the tax case was filed for not
supporting President Fidel Ramos' candidacy in 1992.
-By Cris Larano; (632) 892-5590; clarano@ap.org
Format for printing
Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved.