AUTHORS NOTE: This afternoon, the Executive Committee of the One-Stop Shop Interagency Tax Credit and Duty Drawback Center will eet to discuss the controversial office order which that weird character Sheila Castaloni has issue. This article serves as a background material about that controversial office order. The biggest issue is its retroactive effect, which even lawyers do not agree. Does she know her law? Anyway, kindly read this piece... NEW ORDER DIVIDES DOF, DTI ON TAX CREDITS FOR PHL TEXTILE FIRMS The office order which One Stop Shop Interagency Tax Credit and Duty Drawback Center (OSS-Center) officer-in-charge Sheila Castaloni has issued to impose new documentary requirements for tax credit claims is dividing the Department of Finance (DoF) and Department of Trade and Industry (DTI), as they take contrary views on it. Aside from purchase invoices, delivery, and official receipts, Office Order 015-2014, which Castaloni has issued on Oct. 10, requires exporter-claimants to submit several additional documents before the OSS-Center processes their tax refund claims. These new documentary requirements include proof of yarn and fiber importation by the supplier like import entry and internal revenue declaration, commercial invoice, bill of lading, and statement of duties and taxes. Other requirements include waiver of the suppliers claim for tax credits, and various notarized certification on the suppliers identity, operations, and other details. Export firms have objected to the new imposition because of its retroactive effect to include pending tax refund applications amounting to slightly over P2 billion at the OSS-Center. The exporter-claimants have complained of difficulties arising from Castalonis inaction on their claims. Meanwhile, President Benigno Aquino has approved the Investment Priorities Program (IPP) for 2015-2017, which seeks to revive and resuscitate the ailing manufacturing sector as a key area to generate employment for the nations increasing work force. Textile and garment are among the major industries, which the IPP has identified as requiring assistance to revive the ailing manufacturing sector. The OSS-Center is the DoF attached agency that processes and issues tax refunds in the form of tax credit certificates, or TCCs, to exporter-claimants to enable them to compete in the world market. In her Oct. 28 letter to Efren Leano, executive directror of the management services group of the Board of Investments (BoI), an attached DTI agency, Emelda Erasmo, manager of Mighty Textile International Corp., a tax credit claimant, said that in her discussions with the OSS-Center, the DoF has taken the stand that the textile industry does not deserve to get tax refunds. The financial statements of the textile companies show these firms are not profitable at this time. Thus, it is not reasonable for these firms to continue operations, Erasmo said quoting an unidentified source at the OSS-Center. These textile firms relying only on tax credits rely only on such transferability to survive, employ a handful of workers, and are not internationally competitive, Erasmo said. We are appalled with these new perceptions voiced out by the OSS-center and wish to seek your speedy and gracious assistance by instituting immediate discussions with the officials of the OSS-Center and the OSS [Executive] Committee to correct if not rescind the 10 October 2014 Office Order, she said. In his Oct. 10 rely to Erasmo, Leano confirmed that the BoI has received letters from several BoI-registered textile manufacturing firms voicing their concerns on the controversial office order of the OSS-Center. Leano summed up the issues confronting the office order: - it requires the firms to submit third party documents on a retroactive basis for all pending claims for processing, but compliance would be difficult for the firms; and - it restricts the firms option to apply for tax credits under the standard rate system. Sensing the magnitude of their issues, Leano said the BoI earlier asked the OSS-Center to convene its Executive Committee, the highest policy-making body composed of representatives from DoF, BoI, Bureau of Customs, and Bureau of Internal Revenue. Castaloni set it on Nov. 26, but the BoI complained and asked for a postponement because the OSS-Center had failed to provide the BoI of the pertinent information and documents, including the agenda of the meeting. It was reset for a latter date. In contrast to the OSS-Centers stand, the BoI, speaking through Nestor Arcansalin, its OIC- executive director, has taken the stance that the textile industry is still considered a distressed industry. In his July 30 letter to OSS-Center deputy executive director Carmelo Casibang, who earlier asked for an update on the textile industry, Arcansalin said the textile firms financial data showed that the return on sales (ROS) and gross profit margin (GPM) were very low. In 2012, the average ROS was 0.26 percent, or a profit of P.0026 for every peso, or less than one centavo profit per one peso sales, Arcandalin said, while the GPM average was 4.34 percent to show that for every peso in sales, the textile firm has four centavos left to cover operating costs and profit. Arcansalin said the trade performance of the textile industry for 2009-2013 showed a declining balance of trade and net export ratio, making the Philippines a net importer of textile products. The industry also posed a negative net export ratio for the past five years [and this] may be attributed to the high cost of production of local textile manufacturers, and thus not competitive with other countries, Arcansalin said. In March, 2013, the Executive Committee of the OSS-Center passed a resolution to extend conditional grant of tax credit certificate transfer privileges to the distressed textile sector subject to annual review of the BoI. Castaloni has become controversial after she virtually suspended and even undermined the tax credit system by refusing to sign the tax credit claims of exporter-claimants since July 16 and allegedly maltreated OSS-Center employees, whom she accused of being corrupt without showing any basis. At least 18 export firms and the Taiwan Textile Association have officially asked President Benigno Aquino III to fire Castaloni for alleged acts inimical to the Philippine export sector. Meanwhile, 36 of the 57 OSS-Center employees have petitioned Finance Secretary Cesar Purisima to replace Castaloni for gross misconduct, incompetence in the performance of official duties, neglect of duty, oppression of co-workers, and discourtesy in the performance of her duty. At least three otehr complaines were lodged at the Civil Service Commission charging Castaloni of violations of the Civil Service Law. OSS-Center records chief Manolita Calix alleged in herr affidavit complaint to the CSC that Castaloni had replaced her to put under her control the office records and file for still unexplained reasons. Two export firms - Mighty Textile International Corp. and Wintex Textile Corp. - have sought before the CSC Castalonis dismissal for gross misconduct, acts prejudicial to civil service, and inefficiency and incompetence in the performance of her duties. #
Posted on: Thu, 04 Dec 2014 05:43:13 +0000
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