BIZ  COLUMN:  TEVES'  BRAVE  STAND

MANILA,
AUGUST 30, 2009
(STAR) HIDDEN AGENDA By Mary Ll. Reyes - That was one brave stand Finance Secretary Gary Teves took recently, and it is worth citing.

We refer to his remarks that “the improved economy is not being felt by the poor.” We feel this is a brave stand because, one, the remarks were full of candor; and two, the remarks were so susceptible to misinterpretation that they could have put Teves in hot water.

But he made the remarks anyway and in our book, that was one brave act.

Some quarters, however, attempted to portray Teves’ remarks as a confirmation of the assertion by critics that the so-called economic gains of the Arroyo administration have not benefited the poor.

In fairness to the Secretary, it is true that he is one who would speak out his mind. But the notion that he is belittling the economic gains of the current administration through those remarks may be a gross misinterpretation of Teves’ original statement.

He likened the country’s economic state “to a family where lack of funds prevents the breadwinner from buying household necessities”. He also expressed concern that the country’s population is growing at a rate of six percent per annum and now nears the 100 million mark.

Despite this, Teves said the government is doing its best “to find additional sources of funds to help alleviate our economic situation”. So, there you are. That should set the record straight. Talking about generating more funds to alleviate the economic situation, Teves made another bold move by backing the decision of the Development Budget Coordinating Committee (DBCC) to keep the revenue goals of the Bureau of Internal Revenue (BIR) unchanged.

It will be recalled that the DBCC approved a wider deficit for next year but has decided that the BIR should still keep its collection goal at P875.1 billion for next year.

This is probably why Teves is taking yet another brave stand– to maintain strict standards regarding petitions for tax exemptions by business giants, a handful of which are reportedly in his table and for which strong lobbies are being exerted.

A case in point is his reported continued refusal to succumb to pressure from a group of Malaysian and Chinese-Filipino businessmen who want a P500- million- or- so exemption from the payment of value-added taxes (VAT) covering the transfer of the ownership of the prime Sta. Ana racetrack to a holding company called JTH Davies.

It will be recalled that several Filipino shareholders of the Philippine Racing Club, Inc. (PRCI) which originally owned the Sta. Ana racetrack had fought the transfer of the property’s ownership, alleging that the move lacked transparency and that the deal was lopsided in favor of the holding company.

The Malaysian-cum-Chinese-Filipino group, however, managed to push the property transfer, but the move was stymied by the VAT implication. It will be recalled that the group had earlier managed to get an exemption from resigned BIR chief Lilian Hefti, but the move was recalled following a Teves directive. Hefti thereafter reviewed the exemption and subsequently revoked it.

The group reportedly continues to contest the revocation of the VAT exemption. This is expected since the group had already told shareholders and the Securities and Exchange Commission that there is no way it can complete the controversial property transfer unless it can get the VAT exemption.

Teves’ current brave stand that the transfer is VAT-covered appears to have placed him at loggerheads with the group which now reportedly wants to bring the issue to court. The group includes Chinese-Filipino businessman Santiago Cua Sr., Thai-Malaysian businessman Surin Upatkoon who is at the center of the Temasek Holdings-Shin Corp. scandal in Thailand, as well as Malaysian gaming industry tycoons Lawrence Lin Swee Lim and and Teong Leong Lim.

The current prognosis is that the group is pretty determined to get Teves to cough up the exemption.

It is interesting that the controversy generated by the Sta. Ana racetrack row should now find itself in Teves’ table. If we correctly recall, the battle between Filipino PRCI shareholders and the Malaysian-Chinese-Filipino group has raged for about two years now over issues of transparency and good corporate governance with the Filipinos clamoring for access to information.

The boardroom row turned into a legal battle royale which eventually went all the way up to the Supreme Court. The group scored some legal points until Teves took one brave stand and refused to succumb to the pressure to forego half-a-billion in Philippine revenues from the VAT slapped on the property transfer.

Gov’t should just do its job

Ever wonder why gasoline and diesel prices in many areas in Metro Manila are cheaper than the suggested retail prices of oil companies? The cheap fuel prices are not because of free competition brought about by deregulation, rather it is from oil smuggling.

These unscrupulous businessmen do not pay excise and value added taxes for these petroleum products. At a time when government is expecting a budget deficit of around a P100 billion this year coupled with an ongoing global recession, the taxes and revenues lost from oil smuggling become even more vital. It is estimated that the national government loses roughly P30-billion annually from oil smuggling.

In many special economic zones, several companies are licensed to import fuel products tax-free as long as these are sold to locators within the free ports. But once these fuel products are sold outside, the companies must pay the appropriate taxes and duties.

Recently, the Presidential Anti-Smuggling Group (PASG) headed by Antonio Villar Jr. recommended the filing of criminal charges against no less than Bureau of Customs (BOC) Commissioner Napoleon Morales and some BOC officials for purportedly allowing the entry of smuggled oil into the country by a private firm, effectively defrauding government of hundreds of millions of pesos.

During a two-month investigation in coordination with the National Bureau of Investigation (NBI), PASG alleged that Morales, Mindanao Container Terminal Port collector Rudy Amistad and Jetti Supply Distribution Inc. (JSDI) “conspired in smoke-screened oil smuggling activities and non-payment of taxes and customs duties from 2006 to present.” JSDI is an importer of oil products at the Philippine Veterans Investment Development Corp. (PHIVIDEC) special economic zone in Tagoloan, Misamis Oriental.

In the Subic Bay Freeport Zone, there have been verified reports that oil imported for use at the free port manages to find its way outside and ends up in nearby provinces. To curb this, the Department of Finance (DOF) has mandated companies importing diesel and kerosene in Subic to use unique fuel marker dyes so that it can track fuel products that are “smuggled” out of the special economic zone. In random inspections, representatives of the DOF caught some service station dealers in Pampanga earlier this year selling diesel with the unique marker dyes, which is for all intents and purposes, a smoking gun, proof that fuel products are being smuggled from Subic Bay.

Diesel imported into Subic Bay in the first quarter of 2009 has reached 1.4 million barrels or about 10 percent of the country’s total demand for that period. While Subic is a thriving economic zone, there is no way that the industries and vehicles there consume a tenth of the country’s total diesel demand. About 40 percent of the country’s diesel supply is consumed in Metro Manila, mainly by the transportation sector. Doing a quick computation, it would mean that Metro Manila and the Subic freeport already consume half of the Philippines’ total diesel demand. This would seem illogical given that diesel is widely used elsewhere in Luzon and across the country. This begs the question—where is all the diesel “imported” to Subic going?

If this can happen in Subic and PHIVIDEC, is this also happening in special economic zones such as Clark Freeport and the Cagayan de Oro Freeport Zone?

If government really wants more revenue, it only needs to enforce the law. It is as simple as that.


Chief News Editor: Sol Jose Vanzi

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