Two (Philippine Economic Zone Authority) PEZA-registered locators were allegedly able to manufacture and sell unregistered cigarettes inside a Special Economic Zone (SEZ).
The Department of Finance said the Bureau of Internal Revenue seized the unregistered cigarettes as well as the cigarette-making machines from the firms’ warehouses following a filed complaint against the companies for violating the tax code.
Finance Secretary Carlos Dominguez III pointed out that these firms took advantage of tax breaks granted by the Investment Promotion Agency by not paying income taxes, excise tax, value-added tax and customs duties at the sale of their “illicit products.” The activity was done due to a registration “loophole.”
PEZA registration requirements do not involve submission of authorization from the BIR for locator-applicants manufacturing regulated products such as cigarettes, medicines, oil and alcohol.
“The fact that the alleged illicit activities occurred inside the PEZA Ecozone is alarming. Not only did PEZA provide tax breaks to the alleged perpetrators, the government has lost billions of pesos in income taxes, excise taxes, VAT and customs duties when these illicit goods entered the local market,” disclosed Finance Secretary Dominguez.
In his letter to Trade Secretary Ramon Lopez who supervises PEZA, Sec. Dominguez shared that DOF-led BIR is now drafting revised guidelines which will soon require cigarette manufacturers to register with the BIR before setting up their shop in SEZs.
The finance secretary also agreed with Albay Representative Joey Salceda’s proposal in a House hearing that PEZA needs to strengthen its police force to patrol SEZs for possible illicit activities. The BIR is also reviewing Revenue Regulations (RR) No. 9-2015 after the lawmaker called on the agency to consistently affix stamps on all cigarette packs whether for export or local consumption. -Naomi Tiburcio
