The House Committee on Ways and Means on Monday told Philippine Economic Zone Authority (PEZA) Director General Charito “Ching” Plaza to keep an eye out on business locators within its jurisdiction that are possibly up to no good.
Committee vice chairperson Nueva Ecija Rep. Estrellita Suansing also asked Plaza to establish good working relationship with the Bureau of Internal Revenue (BIR) and Bureau of Customs (BoC) after agency officials told the House panel in a virtual hearing how difficult it can be at times to enter the economic zone.
Discussed during the hearing was House Resolution (HR) No. 79, which called for an investigation into the manufacturing of illegal cigarettes, fake cigarette labels, and fake revenue stamps; smuggling of fake cigarettes and cigarette-making machines; and loss of revenue because of uncollected taxes.
“I would suggest that you improve your system to ensure na ‘yung mga locators natin ay tama ang ginagawa (to ensure that what our locators are doing is legal),” Suansing said.
Plaza had confirmed to the panel that at least two locators within PEZA were under investigation by BIR in connection with the illicit cigarette trade. However, the committee only referred to these two companies as “Locator 1” and “Locator 2” for purposes of the hearing.
According to Plaza, Locator 2 imports raw materials to produce the cigarettes, while Locator 1, which is the mother firm, exports the finished product to other countries.
The problem, according to BIR Director Arnel Guballa, is that Locator 2 has never been registered with BIR since it entered the ecozone in 2016. While the particular locator was closed down last February, Guballa said they faced challenges in their operation.
“The difficulty that we have for legal intents and purposes is that it (locator) is located inside PEZA. Hindi kami puwedeng pumasok agad (We can’t enter it that easily) and at the same time we had to strengthen our evidence regading this company,” he said.
“Actually this is a discreet operation of a company…we had to be really be sure of the evidence because it was just a tip from the informer that a company inside the locator is manufacturing cigarettes. So nakakapagtaka sa amin ‘yun, why magkakaroon tayo ng manufacturer of cigarettes availling of tax incentives in (PEZA). Medyo nagulat din kami doon (So it was strange to us why we would have a cigarette manufacturer availing of tax incentives in PEZA. That was a surprise to us),” he added.
BOC Commissioner Rey Leonardo Guerrero echoed similar procedural difficulties as far as his agency’s interactions with PEZA is concerned.
“Madam Ching is correct that there is a BoC office at PEZA. But we are limited in our access to the warehouses. We are only allowed visitation and inspection in case of audit and we still have to coordinate with them before we actually enter the warehouses,” Guerrero said.
Suansing commented: “I really can’t comprehend kung paano nakapag operate for four years na hindi naka-register sa BIR ( I really can’t comprehend how it was able to operate for years without being registered to the BIR) but PEZA allowed them to be locators and enjoy the incentives of being a locator.”
Committee chairman Albay Rep. Joey Salceda estimated that based on figures sent to him by the BIR and BoC, the national government has lost nearly P30 billion in foregone revenue from excise taxes due to illegal cigarettes since 2018.
“We’re talking about a P30-billion problem. This is not a small thing we’re talking about. Those are actual (fake) stamps and cigarettes seized,” he said.
Plaza, in her defense, said she was not yet PEZA chief in 2016 when Locator 2 was established. “They have a TIN (taxpayer identification number) so we assumed they are registered with BIR,” she said. Locator 1 was established much earlier in 2010.
Plaza maintained that the BIR and BOC “can go there (PEZA) anytime they want.”
Meanwhile, another panel vice-chairperson, AAMBIS-OWA party-list Rep. Sharon Garin, said it’s a “double whammy” against the country that the Locator 2 didn’t pay taxes and imported tobacco abroad instead of purchased it from local farmers.
Garin told Plaza: “Lets allow BIR and BoC to enter (the warehouses). Let’s not have them wait because the element of surprise (is important)…I don’t like hearing about squabbles in the executive. That is alarming for us. I know your zone is performing well but let’s cooperate.”