Tariff Commission's Monitoring Report on Duty — and Tax-Exempt Imports for the Year 1994

August 2, 1995 BIR RULING [UN-286-95] MEMORANDUM FOR : Executive Director Vicente G. Quintos National Tax Research Center FROM : Commissioner Liwayway Vinzons-Chato Bureau of Internal Revenue SUBJECT : Tariff Commission's Monitoring Report on Duty and Tax-Exempt Imports for the Year 1994 We are submitting herewith our comments and/or recommendations on the above-captioned report sent to us by Secretary Roberto F. de Ocampo on June 22, 1995 in connection with the letter of Chairman Nilda D. Vasquez of the Tariff Commission dated May 25, 1995 requesting for suggestions which might help them improve their future monitoring activities on duty and tax-exempt imports. As noted by Chairman Vasquez, a substantial amount of exempt importations were granted for the year 1994 with unidentified or misidentified exemption laws which contributed to the Government's huge revenue loss (i.e., an estimate of P81.67 million, which is P29.29 million higher than last year's P52.38 million). She also suggested that closer coordination be promoted among the concerned agencies, such as the Bureau of Customs, the Board of Investments and the Department of Finance to minimize further questionable exempt importations. It is further stated that perhaps the Bureau of Customs can help immensely in this endeavor by verifying the validity and correctness of the importer's claim under a particular exemption law. Furthermore, based on the report, the private sector obtained the dominant share of exemption benefits, accounting for a huge 90% of total dutiable value and, as a consequence, 76% of total revenue was foregone. Only 10% and 24% of total dutiable value and foregone revenue, respectively, remained for government. COMMENTS AND RECOMMENDATIONS: A cursory look at the report, particularly the exemptions claimed under unidentified and misidentified laws, gives rise to the question of why importers who claim exemptions but failed to identify the specific exemption laws that would cover their importations are still being granted their claim for exemptions. We wish to point out that it has always been the rule that "exemptions from taxation are always construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority". Thus, to be exempted from the payment of taxes, it is the taxpayer's duty to justify the exemption "by words too plain to be mistaken and too categorical to be misinterpreted." It is therefore the recommendation/suggestion of this Office that where a taxpayer, whether public or private sector, could not categorically specify the law exempting its/his importation, its/his request for such exemption should be denied. It is noted, however, on the other hand, that both the public and private sectors claim exemptions under several tax exemption/incentive laws. It may be stated that some tax exemption/incentive laws become irrelevant after a number of years of existence, while others serve their purpose well, others have to be modified for greater efficacy, and still others must have already been repealed. The above-captioned report revealed that the revenue losses under this category are likewise of a significant magnitude. It is therefore recommended/suggested that a closer and continuing examination and scrutiny of these laws should be rendered to be able to evaluate its effectiveness and in order that proper measures may be made hand-in-hand with the country's development plan. Finally, we concur with Chairman Vasquez's view that closer coordination should be promoted among the concerned agencies (i.e., the Bureau of Customs, the Board of Investments and the Department of Finance and including the Bureau of Internal Revenue) to minimize further questionable exempt importations. Likewise, we concur with her observation that the Bureau of Customs can help immensely in this endeavor by verifying the validity and correctness of the importer's claim under a particular exemption law before granting the exemption. cdtech LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue