Sen. Ralph Recto yesterday urged the Department of Finance to replace the Tax Credit Certificate system with outright tax refund for the country's exporters, a press release from his office said.
"The TCCs should be ultimately removed and replaced by a simple tax refund system to avoid abuses," Recto said following a hearing of the Congressional Oversight Committee on the Comprehensive Tax Reform Package, which he chairs.
He said he also supports the plan of DOF to factor in the TCC payments in the annual budget to enforce transparency and put a cap on its amount.
Recto issued the call after learning that the Bureau of Customs has issued some P10.92 billion of TCCs in 2010, P10.5 billion of which went into the hands of oil companies.
The senator said that in the meantime that the TCC system is not yet abolished, the trading or selling of TCCs should be limited within the members of the export industry while barring non-exporters.
“The DOF should make it a policy that the trading of TCCs should be limited to same industry, like garments to garments or electronics to electronics,” Recto said.
The TCCs obtained by oil companies specifically Shell and Petron, were bought in the secondary market from the garments sector, where were acquired at discounted prices of as low as 70 percent off.
“This means that aside from enjoying fat profits from their relentless oil price hikes, oil players effectively save millions more on their import taxes through the use of discounted TCCs,” Recto stressed.
Businesses engaged in exports are given TCCs as reimbursement for the import duties and taxes that they paid in bringing in raw materials needed for their export-bound products.
But instead of using the TCCs to pay future import bills, exporters often sell them to other companies to raise quick cash, with oil companies as their usual takers.
Recto said the P10.92 billion TCCs issued by the BOC last year virtually wiped out the P9 billion excise taxes paid by the oil companies for their imports in 2010, the press release said.
He said safeguards such as the ones he proposed should be put in place to avoid a repeat of the Chingkoe-TCC scam wherein some P73.76 million of TCCs were obtained from 1995 to 1997 on the basis of allegedly spurious documents, it added.*