BoC investigating possible misdeclaration of palm oil imports

THE Bureau of Customs (BoC) has begun looking into palm oil imports in response to concerns expressed by the coconut industry of rampant misdeclaration to avoid taxes.

“The Philippine Coconut Authority (PCA), through the DTI (Department of Trade and Industry) and Bureau of Plant Industry (BPI), flagged several issues that might need an audit of palm (oil) importers. We have a vibrant coconut industry and one of the things I think they feel might be affecting them is the importation of palm oil either as a finished product or as a feed-grade material,” Vincent Philip C. Maronilla, the Customs assistant commissioner who heads the Post Clearance Audit Group (PCAG), told BusinessWorld by phone Friday.

He said the PCAG started issuing audit notification letters (ANLs) to 13 companies last month signifying its intent to investigate one year’s worth of financial reports to detect potential tax leakages from the industry. He also endorsed more ANLs to the Customs Commissioner for consideration.

“We will extend that to three years if we find issue,” he added.

The PCAG will be looking at instances of deliberate misclassification of palm oil products from food grade to feed grade to avoid paying value-added tax (VAT).

He gave no estimate of the taxes potentially foregone by the government “but it would be substantial if we’re able to prove that there’s an excess of imports as against the permits issued by the DA (Department of Agriculture) or there has been misclassification of products from a food-grade quality to feed-grade quality, because that would mean value-added taxes were not paid because feed-grade palm oils are exempt from VAT,” Mr. Maronilla said.

A PCAG investigation last year found that the government lost P1.4 billion in potential revenue due to the undervaluation of rice imports.

Mr. Maronilla said Customs is also considering other agriculture products like meat for post-clearance audits, after an Executive Order (EO) issued in May reduced tariffs and allowed more imports to come in at favorable rates. He said the audit may start in mid-2022 once the one-year validity of the EO expires.

“Importers of MDM (mechanically deboned meat) mostly paid voluntarily. We did not see a lot of issues when it came to value and classifications… Given the EO, we’ll wait for the period to end before we do a one-year audit. We want to give it a chance to be implemented fully without… a post-clearance audit conducted (in the middle of implementation,)” he said.

The BoC is the second-biggest revenue generating agency, next to the Bureau of Internal Revenue.

“We’re on track with our collections… I hope that we’ll be able to sustain that momentum and not just meet the collection target for 2021 again. We met it in 2020, but (hope to) collect a little bit more to help the government with its finances,” he said.

The BoC collected P59.9 billion in September, surpassing its P56.9-billion target by 5.3%.

This brought its nine-month total to P472.204 billion, or 76.6% of its target for 2021. — Beatrice M. Laforga