The Commission on Audit (COA) has questioned more than P12 billion worth of tax refunds that the Bureau of Customs (BOC) had approved in 2010, saying they were illegal and not allowed under the Tariff and Customs Code of the Philippines.
But the BOC has contested the audit findings, saying there are many bases for granting refunds.
The COA said the BOC had approved illegal drawback of customs duties amounting to P12.76 billion. These were not among the allowed drawback of customs duties and taxes under Section 106 of the Tariff and Customs Code of the Philippines (TCCP), it said.
Illegal drawback
“Illegal drawback of customs duties and taxes were approved by BOC amounting to P12.764 billion for [calendar year] 2010 contrary to Section 106 of the TCCP,” it said in its 2010 report on the customs bureau.
Under the TCCP, drawbacks are allowed for imported fuel used for vessels engaged in coastwise trade or trade with foreign countries; petroleum oils obtained from bituminous minerals; crude eventually used to generate electric power and manufacture city gas; and articles made from imported materials used in the manufacture of articles for export.
The COA noted that the BOC had approved refunds for value-added tax (VAT), input tax, customs duties paid for fuel and petroleum products bought from Petron, reexportation of petroleum products in its original form to Vietnam, and fees paid on importation of crude oil and petroleum products for 2002 to 2005, among others.
The BOC, however, said duty drawbacks under the TCCP is just one of the refund mechanisms under the code.
Other bases
There are also other bases for the grant of duty or VAT refund, and these are found in other sections of the TCCP for ordinary claims arising from double payments; protest cases; reduction in rates of duty due to Free Trade Agreements or executive orders; and other special laws, executive orders and international agreements that grant exemptions from the payment of duties and taxes.
But the COA issued a rejoinder and said none of the P12.7 billion tax credit certificates fell under the refund mechanisms mentioned.
The BOC also told the audit agency that VAT refunds and excess input VAT paid on importation were evaluated, processed and approved by the Bureau of Internal Revenue. It said the BOC, being deputized by the BIR to collect VAT on importations, is allowed to issue corresponding tax credit certificates on excess input VAT paid on importations.
It also said it issued the tax credit certificates pursuant to an agreement between the BOC and BIR dated April 8, 1988.
The COA, however, said the tax credit certificates issued for VAT refunds and excess input VAT evaluated by the BIR were not within the ambit of Section 106 of the TCCP.