This statement in the penultimate paragraph of retired Justice Dante Tinga in a 2004 case hits home, especially when viewed in relation to the globally-renowned hospitality of Filipinos towards guests.
Even in business, we remain true to our hospitable traits by giving “special” treatment to investors, particularly in preferred areas of investment that have been identified in the government’s Investment Priorities Plan (IPP). One such preferential treatment is the exemption from national and local taxes and duties granted to qualified investors.
This commitment we have as hosts to investors is what the Court of Tax Appeals (CTA) enunciated in a recent decision (CTA EB Case No. 1142, 05 January 2015). The case involved a refund claim by a taxpayer registered with the Philippine Economic Zone Authority (PEZA) of the customs duties it paid on local purchases of petroleum products. The claim was initially denied by the District Collector at the Port of Manila for failure of the taxpayer to establish entitlement to the refund. On appeal, it was also denied by the Commissioner of Customs due to procedural infirmities in perfecting an appeal under the Tariff and Customs Code of the Philippines (TCCP).
Fortunately for the taxpayer, the CTA disagreed with the Commissioner of Customs. Citing the same 2004 Supreme Court (SC) decision (GR No. 144440, 1 September 2004) mentioned earlier, the CTA reiterated that the procedural requirements provided under the TCCP are not applicable to refund claims of entities registered with PEZA under Section 17 of Presidential Decree No. 66. This is because under the said provision, all supplies brought into the economic zone to be used directly or indirectly in the PEZA-registered activity shall neither be subjected to customs and internal revenue laws and regulations nor to local tax ordinances.
More than tax exemption, PD 66 placed the said supplies beyond the reach of customs laws and regulations. In other words, the said supplies are not only exempted from tax but are also exempted from other rules and regulations which are normally followed in the discharge of importation. As a result, neither the prescriptive periods nor the procedural requirements provided under the TCCP should govern the claim for refund of a PEZA-registered entity.
The Court went on to state that the provisions of the Civil Code on solutio indebiti (a principle which applies when taxes or other amounts are paid by mistake) will govern such claims. Therefore, the proper prescriptive period for refunding taxes and duties erroneously paid by PEZA-registered entities on supplies brought into the zone is six years from the date of payment.
It appears that the usual conflict or difficulty that comes with the principle that tax exemptions are to be strictly construed against the taxpayer finds no place here. The exemption is clear and it is consistent with the main pitch of the PEZA law to attract investors. If the courts had ruled otherwise, we may be seen as using the incentives as bait to hook investors.
Cursorily, the grant of incentives would appear to be a mere welcome gesture with revenue concessions the state is willing to absorb. However, there is more to it than meets the eye. From a performance standpoint, foreign investments bring the needed capital seed and revenue to jump-start a struggling economy that is ailing from debt payments, inflation, unemployment and a weak industry sector. Its impact is pervasive and inclusive, reaching even ancillary and peripheral sectors that benefit from its ripple effects.
The nature of the businesses under the IPP would show that the government’s intention is for the investment to trickle to the diverse and manifold sectors of the economy. We take for instance the preferred investment in tourism that creates work opportunities for our kababayans who are in the souvenir cottage industry, travel tours, inter-island transport, taxi services and even street hawkers, to name a few. Consequently, these investments bring to shore multiplier benefits that contribute to overall economic growth -- job generation, skills development, and optimization of local resources.
The decisions of the CTA and SC strike a proper balance between the country’s need to provide a conducive investment climate and the need to enhance revenue collections. The grant of incentives is more than an act of hospitality; it is, in fact, justified in view of the substantial economic benefits brought to the country by such investments.
In fact, pursuant to our investment laws, various campaigns were created to encourage foreigners to invest and do business in the Philippines. The tourism slogan “It’s more fun in the Philippines” is true even from a business perspective, particularly when one looks at the investment laws which grant various fiscal and non-fiscal incentives. But in making such promises, it is a must that we, as host, deliver and follow through on them. Otherwise, the effect will not just be a mere discourtesy to invited guests, but rather a painful slap on the very hand that helped us.
Marie Kristel D. Virtudez is a senior consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
(02) 845-2728
marie.kristel.virtudez@ph.pwc.com
source: Businessworld
No comments:
Post a Comment