Hurdling the importer’s and broker’s accreditation requirements

IN AN effort to curb incidents of smuggling and to root out well-entrenched corruption in the Bureau of Customs (BoC), the Department of Finance issued Department Order No.12-2014, dividing the accreditation into two phases: Bureau of Internal Revenue (BIR) accreditation and BoC accreditation.

Under the BIR accreditation, importers and brokers are faced with stringent requirements to secure BIR Importer Clearance Certificates (BIR-ICCs) and BIR Customs Brokers Clearance Certificates (BIR-BCCs). According to the BIR accreditation criteria, applicants should have no records of any account receivable or delinquent accounts with the BIR. Also, the applicants must have no unresolved issues arising from discrepancies in the declared income or expenses resulting from the matching of third-party information from the BIR’s Reconciliation List for Enforcement System (RELIEF), and Tax Reconciliation System (TRS).

Based on these criteria, it appears that applicants with Letter Notice (LN) from the BIR or those with open assessments are left with no choice but to pay their deficiency taxes immediately to secure their accreditation. Importers and brokers who are in desperate need of accreditation are now forced to pay and settle the LN and tax cases. This is because, until all the discrepancies in the declared income or expenses resulting from matching of third-party information from the RELIEF and TRS are resolved, the accreditations of importers and brokers are put on hold.

In many instances, it cannot be discounted that source data generated by RELIEF and TRS are not complete. Also, third-party information is not at all times reliable, and resolving these discrepancies takes considerable time. The challenge faced by the importers and brokers now is if there are other available remedies to secure accreditation while discrepancies are being reconciled and tax cases are being resolved.

It seems that with the new criterion, many businesses will have to stop operations until the resolution of LN and tax cases. This criterion will not be helpful to our economy as this impedes the productivity and growth of business. It also bears stressing that such criterion impairs the applicant’s right to due process. The BIR, in effect, restricts the remedy afforded to taxpayers in the assessment process by giving applicants no other recourse in the LN and tax assessments but to pay the deficiency taxes. The applicant, instead of resolving the LN case and tax assessments, is now compelled to just pay the tax deficiency to secure the accreditation.

Also, the said criterion limits the remedy of applicants with compromise applications pending with the BIR. Compromise application is availed by taxpayers when the tax assessments are of doubtful validity. In most instances, evaluation and approval of compromise application takes years to be decided.

With this new criterion, applicants are now forced to forego the compromise application and to pay the delinquent taxes which, in the first place, were applied for because of the doubtful validity of tax assessments. Therefore, the new criterion essentially limits the applicants from pursuing the final resolution of their compromise application with the BIR. This again impairs the applicant’s right to due process.

Another criterion set by the BIR requires the applicant-corporation to provide a Certificate of Good Standing issued by the Securities & Exchange Commission (SEC). This is another hurdle faced by applicants in securing BIR accreditation. The SEC Monitoring Division conducts strict checking and verification of applicant’s record to ensure compliance with all the reportorial requirements of the SEC. Any inconsistencies on the information contained in the Articles of Incorporation and By-Laws with the filed financial statements (FS) and General Information Sheet (GIS) constitute violation of SEC reportorial requirements. What would be the option of the importers and brokers if there is a delay in the issuance of Certificate of Good Standing?

If the applicant-corporation is a Philippine Economic Zone Authority (PEZA)-registered or BOI-registered entity, will clearance from these agencies still be required to ensure that applicant-corporation is in good standing? The regulations are not clear with these concerns.

The BIR also requires all applications for accreditation to be filed directly and by personal appearance at the Accounts Receivable Monitoring Division (ARMD). However, for applicant-corporations such as regional operating headquarters (ROHQ) and branches, the board of directors and officers stated in the GIS are all outside the Philippines. Can the requirement of personal appearance before the ARMD be relaxed? In such cases, the application for accreditation may be delegated to any authorized representative through consularized special power of attorney.

While we support the laudable efforts of the government to eradicate if not lessen corruption cases in the bureaucracy, the BIR and the BoC must be cognizant of the anxiety, frustration and dissatisfaction that these stringent regulations bring especially to importers and brokers. Any delay in the accreditation process may adversely affect the business climate of the country. By putting in place requirements that are onerous and burdensome to all importers and brokers coupled with the limited time given to comply with such requirements, the regulation tends to penalize those importers and brokers who are honest and diligent in paying correct taxes. The BIR and the BoC must therefore revisit the existing rules and regulations to ensure that no rights are compromised in the pursuit of good reforms in the government. Also, the BIR must relax the rules and give ample time for affected parties to comply with the requirements since this is the first time that the regulation will be implemented.

The author is a tax associate with the tax advisory and compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.

source:  Businessworld