BIR plan to lift excise tax exemption on some export products opposed

Cigarette and liquor companies engaged in export are opposing a plan by the Bureau of Internal Revenue (BIR) to lift the outright excise tax exemption privilege on some products for export.

In separate letters to the agency, the companies said the Philippines would be the only country that would be slapping excise taxes on products for export.

La Suerte Cigar & Cigarette Co., for instance, said that goods manufactured or produced in the Philippines like cigarettes intended for export and are actually exported to foreign countries are not subject to excise tax.

“There is nothing in the law that provides for the pre-payment of excise taxes on goods actually exported,” La Suerte Cigar said in an Oct. 25 letter to Internal Revenue commissioner Lilian Hefti.

Moreover, La Suerte said, the Philippines will be the only country that would subject to tax the goods that are exported “instead of offering protection, subsidy, incentives to manufacturers/exporters like other countries, among them are the United States and Japan.”

“This is in reality a form of harrassment, slowly killing the export business,” the company said in a letter.

In another letter, Tanduay Distillers Inc., Asian  Alchohol Corp., Central Azucarera de Tarlac and IPI Distillery, Inc. said that tax exemptions are granted by law and these exemptions cannot be removed by mere regulations.

“The BIR should consider an in-depth review of the existing system on how the alleged abuses are being perpetrated and impose the full force of the law against them without sacrificing the law abiding taxpayers,” the liquor companies said.

Hefti, however, said the proposed regulation aims to eradicate the practice of some manufacturers who seek excise tax exemption by falsely declaring that their products are for export.

Under existing BIR rules, manufacturers of products that are subject to excise taxes such as oil, cigarettes and cosmetics have to pay their excise tax obligations first before the goods can be taken out of the factories.

Products that are for export, however, are exempted from excise taxes.

BIR officials are deployed in factories of goods which are subject to excise taxes but agency officials said there are still manufacturers who try to skirt around existing rules.

As such, the agency has proposed to lift these so-called outright excise tax exemptions.

In the proposed revenue regulation, the BIR said manufacturers should first settle their excise tax obligations and file a refund after they have presented documents validating that the products are for export and are thus exempted from excise tax.

Furthermore, the BIR said that the remedies may either come in the form of a claim for excise tax credit or refund or product replenishment.

The manufacturer has the option to avail a claim for product replenishment instead of filing a claim for tax credit or refund of the excise tax that have been previously paid on the products subject to certain conditions, Hefti said in the proposed regulation.

For instance, the option of product replenishment may be availed of by the manufacturer if similar kind and quantity shall be removed from the place of production.

A request for replenishment for a different kind of product shall not be allowed, Hefti also said.

Hefti said the regulation intends to “minimize the rising incidents of reported diversions of declared articles for export to the local market, as well as domestic sales originally declared as intended to taxexempt persons and entities but are subsequently found in possession of persons or entities that are not entitled to such tax exemption privilege.”

She also said that the regulation intends to “rationalize the practice of some taxpayers of immediately availing outright tax exemption but are delaying or totally ignoring the prescribed submission and full liquidation of their claimed tax-exempt shipments with complete supporting documents.”