SENATE minority leader Franklin Drilon yesterday urged government to ban a resident foreign corporation from doing business in the country for its failure to pay taxes, and withhold any of its pending collectibles from the Procurement Service of the Department of Budget and Management (PS-DBM).
Drilon noted his call is consistent with the pronouncement of President Duterte early this year that he would prevent any company from operating until they have fully settled their tax obligations to the government.
Drilon made the call after it was learned during last Tuesday’s Senate Blue Ribbon committee hearing on the Pharmally controversy that Xuzhou Construction Machinery Group bagged some P2.23 billion worth of personal protective equipment to PS-DBM last year.
The committee is looking into alleged anomalies in the PS-DBM’s procurement of pandemic supplies from Pharmally Pharmaceutical Corp.
PS-DBM records showed that as of Sept. 21, 2021, Xuzhou got the fourth highest amount of contracts out of the P42 billion transferred by the Department of Health to the PS-DBM for the purchase of pandemic supplies.
Robin Han, country representative of Xuzhou since 2012, said the company is a “resident foreign corporation” that pay taxes only in China.
Xuzhou also admitted it is not registered with the Philippines’ Securities and Exchange Commission or the Bureau of Customs. The Bureau of Internal Revenue issued a “Certificate of No Records Available of Income Tax Return” while the BOC certified that the company is not an accredited importer.
Drilon said under the country’s tax laws, foreign corporations should pay their income taxes to the government since they did business and earned profits in the Philippines.
“You sold goods here and you made profits from commercial transactions. You are liable for income taxes. I now call on the BIR commissioner to take a look at this company how you can collect taxes on the sales they made in the country,” Drilon said.
He said under the Philippines’ National Internal Revenue Code, “a foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.”
Drilon also said “resident foreign corporation” applies to foreign corporations engaged in trade or business with the Philippines.
Xuzhou, he said, is a resident foreign corporation.
Mon Abrea, a certified public accountant who was present during the hearing, said Xuzhou should have paid 25 percent income tax.
Drilon said Xuzhou’s case calls for a deeper investigation on the possible tax liabilities of other foreign companies doing business in the country, particularly with the PS-DBM.
“Did other companies engaged by PS-DBM pay their duties? We will look into it and make sure they pay,” he added.
Drilon also noted that Xuzhou was never engaged in transactions involving medical supplies before 2020.
