The Philippine Department of Finance (DOF) last week issued Department Order (DO) No. 11-2014, which provides guidelines to be followed by the DOF Fiscal Intelligence Unit (FIU) in its conduct of post-entry audit of import transactions, pursuant to Executive Order No. 155.
Under EO 155, the Bureau of Customs’ Post Entry Audit Group (PEAG) was wound down and its functions transferred to the Fiscal Intelligence Unit (FIU) of the DOF.
Finance Secretary Cesar Purisima considers the transfer of the PEAG to the DOF-FIU a key measure in the President’s Customs Reform Agenda aimed at improving revenues and compliance to the rule of law.
“The post entry audit work the FIU will perform is critical to our campaign to run after smugglers, and will institutionally provide a good check and balance mechanism for Customs. The PEAG, when it was still in the BOC, was only able to collect around P700 million from importers last year, around a third of which was from a voluntary disclosure of a multinational company. This is a miniscule amount, compared to the P200 billion in foregone duties and taxes lost to smuggling every year. This year, we plan to increase collections from our audits substantially,” Purisima said in a statement.
“When our team reviewed the documents transitioned to the DOF by the BOC-PEAG, many big-time smugglers identified by the FIU through our preliminary risk analysis and profiling system were not even in the BOC’s list,” the finance chief added.
The order spells out guidelines and processes for the conduct of audit examination. Under the new rules, the DOF-FIU, upon determination of potential weighted risk of import transactions, will inform the Commissioner of Customs in writing that an audit of certain importers shall be undertaken. Within 15 days from receipt of notice, the Commissioner of Customs will issue an Audit Notification Letter (ANL) to the concerned importer and/or broker/s authorizing the conduct of audit of import transactions made, for the period of three years from the date of final payment of duties.
The ANL from the Commissioner of Customs will state the names of the members of the FIU audit team, the date and time of the pre-audit conference, and the date of commencement of the audit proper. The documents to be submitted by the importer and broker should be certified by the importer and/or broker to be true copies of the same.
Refusal to grant full and free access to an authorized DOF-FIU officer shall be subject to the following penalties: (a) punishment for contempt from the proper court of criminal jurisdiction, (b) reassessment of importation based on the available data with the presumption of inaccurate valuation, (c) imposition of fines equivalent to 20% of value of articles for which no records are kept, and (d) institution of criminal prosecution with a fine of P100,000 to P200,000 and/or imprisonment of two years and one day to six years.
Any person who refuses to pay the proper duties after having being subjected to post entry audit and examination, will be penalized according to three degrees, depending on the mitigating, aggravating, or extraordinary circumstances: negligence, gross negligence or fraud. The decision of the Commissioner of Customs may be appealed subject to Section 2402 of the Tariff and Customs Code of the Philippines.
Except in cases of fraud or unless otherwise specified by the law, the Commissioner of Customs may, subject to the approval of the Secretary of Finance as recommended by the DOF-FIU, exercise power to compromise the imposition of fines when the importer makes a voluntary and full disclosure of the deficiency prior to the commencement of the audit stated in the ANL, provided that the compromise shall only be to the extent of the voluntary disclosure made.
The order provides the obligation for importers and customs brokers to keep records for ten years from the date of filing of the import entry, and specifies the required records to be kept.
The order also provides a clause on complete transfer and transition of records of finished audit cases, and cases pending with the BOC-PEAG. The genuineness and completeness of records turned over to the DOF-FIU shall be certified by the head of the BOC-PEAG. The Order shall take effect fifteen (15) days after the date of publication.
Another order issued by the Secretary of Finance, DO No. 10-2014, placed the DOF-FIU under the Revenue Operations and Legal Affairs Group of the DOF. – Department of Finance press release
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