Looking closer at the Fiscal Intelligence Unit (FIU)

Revenue Memorandum Circular (RMC) No. 14-2014 published the full text of Executive Order (EO) No. 155, Dec. 18, 2013, which transferred the functions of the Post Entry Audit Group (PEAG) under the Bureau of Customs (BOC) to the Fiscal Intelligence Unit (FIU) of the Department of Finance (DOF).

Let us take a look at the FIU, to appreciate its functions and to know what to expect from this relatively new unit of the DOF.

The FIU was formally created through DOF Order No. 052, dated Oct. 11, 2013 under the direct control and supervision of the Secretary of the DOF.  The FIU was initially to serve as the DOF’s data analytics unit in charge of the following:

1. Identifying potential revenue sources and leakages by analyzing data from the Bureau of Internal Revenue (BIR), BOC, Bureau of Local Government Finance, and other revenue generating agencies attached to the DOF, and comparing these with third party information.

2. Monitoring revenue performance of the government’s revenue generating agencies in coordination with their respective statistics divisions, and recommending to the Secretary of Finance improvements to help achieve their targets.

Under DOF Order No. 10-2014, the FIU is “placed under the Revenue Operations and Legal Affairs Group”.  The enactment of Executive Order (EO) No. 155, series of 2013, now adds the function of enforcement to the responsibilities of the FIU.  The Post Entry Audit (PEA) section of the FIU is composed of personnel from other offices within the DOF (no personnel from the BIR or the BOC).

With a grasp of the FIU as a unit, we move to an understanding of the FIU as a function.

Post entry audit

In a DOF press release dated Feb. 12, 2014, DOF Secretary Cesar V. Purisima mentioned several points:

1. The PEA function of the FIU is a “key measure” in the current administration’s Customs Reform Agenda.  “(T)he post entry audit work the FIU will perform is critical to our campaign to run after smugglers, and will institutionally provide a good check and balance mechanism for Customs.”

2. The collection efforts of the PEAG at the BOC for the year 2013 were miniscule compared to the estimated foregone duties and taxes lost to smuggling every year.

3. Smugglers identified by the FIU (using preliminary risk analysis and profiling system) were not in the BOC’s list of smugglers.

4. Intent to substantially increase collections from audits for 2014.

Before these statements were released, the DOF issued DOF Order No. 11-2014, providing the specific rules and guidelines for the conduct of the PEA by FIU (effectively amending Customs Administrative Order or CAO No. 4-2004).  Changes in the rules of PEA include the lengthening of the retention period of import documents, the qualification of errors in accomplishing import documents as basis for the issuance of an ANL, and harsher penalties for violations of customs rules and regulations on retention of documents and record keeping.

Given these statements and issuances from the DOF, the expectation is an increase in PEA activity, this time carried out by DOF personnel. The mention of smugglers may be indicative of the focus on certain entities that would be subject to PEA investigations. On the other hand, for importers who have been the recipients of previously issued Audit Notification Letters (ANLs), these audits are to be continued by the FIU, since the FIU is not precluded from auditing an importer that has already been subject to PEA resulting in an assessment of deficiency customs duties and taxes.  As of this writing, personnel of the PEA section of the FIU are currently evaluating dockets of previous audits transferred by the PEAG.  Thus, importers with pending PEA investigations should expect the continuation of the PEA, if not a resolution on the said pending PEA.

Provisional lifting of the suspension of importers’ accreditation

Under DOF Order No. 13-2014, dated Feb. 6, 2014, the FIU is likewise tasked to process and evaluate requests for the provisional lifting of suspensions of importer accreditations which may have been pending since December 2013.  In evaluating the requests, the FIU would refer to the requirements of the BIR as stated in Revenue Memorandum Order No. 10-2014 (BIR accreditation of importers and customs brokers).  This result of the evaluation by the FIU should only be recommendatory, since the BOC retains the power to decide whether the suspension should be lifted or not.

Granting the FIU its new enforcement functions, the resulting changes in customs rules and regulations represent a new challenge to both importers and customs brokers alike.  It would be wise to consult your customs specialists to help in complying with the new requirements, whether they be for accreditation, or for a PEA investigation.

Andrew James Gerard Dulay Ruiz is a senior manager from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

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