Gov't told: Blacklist firm that paid no income tax despite P2.23-B pandemic contracts

Bella Perez-Rubio - Philstar.com
Gov't told: Blacklist firm that paid no income tax despite P2.23-B pandemic contracts
Xuzhou Construction country manager Robin Han fields questions from Senate Minority Leader Franklin Drilon at Blue Ribbon Committee hearing on October 19, 2021. They conversed mostly through the Senate's translator.
Screen grab / Senate of the Philippines YouTube page

MANILA, Philippines — Senate Minority Leader Franklin Drilon is calling on the government to blacklist one of its top pandemic suppliers, Xuzhou Construction Machinery Group, over its non-payment of income taxes in the country. 

The firm has cornered deals worth P2.23 billion with the Department of Budget and Management's procurement service as of September 2021, figures submitted by the agency to the Senate Blue Ribbon Committee show. 

It is the country's fourth-most awarded pandemic supplier, trailing only Sunwest Construction and Development Corp. (P5.22-B) Element Trade Limited (P6.99-B) and Pharmally Pharmaceutical Corp. (P10.4-B). 

But Xuzhou country manager Robin Han told senators through a translator Tuesday that the firm has not paid income taxes in the Philippines because it is a "state-owned company in China" where it will "definitely pay an income tax."

"But you entered into a transaction in the Philippines where you made income," countered Drilon, a former justice secretary. "And therefore, under Philippine laws, you are liable for income tax." 

Han replied that the firm does not pay income tax because it does not "accept payments here in the Philippines." 

"I dispute that," Drilon said. "You sold goods here and you made profits from commercial transactions. You are liable for income taxes."

"I now call on the [Bureau of Internal Revenue] commissioner to take a look at this company [and[ how you can collect taxes on the sales they made in the country."

Accountant: Non-resident foreign firms should still pay taxes

Mon Abrea, a certified public accountant who was present at the hearing, concurred with Drilon, saying that Xuzhou should have paid 25% income tax as a non-resident foreign corporation. 

Drilon said the BIR has since issued a Certificate of No Records Available of Income Tax Return on the corporation. 

Pharmally's anomalous contracts with the government have so far been the main focus of the Blue Ribbon probe on reported deficiencies in pandemic spending. 

But Drilon said that the Chinese firm's testimony “necessitates a deeper inquiry into tax liabilities of several foreign companies engaged by the PS-DBM in the supply of allegedly overpriced face masks and other medical supplies.”

Xuzhou says PS-DBM handled its customs clearance, VAT 

According to Drilon, the Chinese firm is not registered with the country’s Securities and Exchange Commission (SEC) and with the Bureau of Customs. 

Han acknowledged as much to senators, telling them that Xuzhou only secured clearance with the PS-DBM which handled its clearance with the BOC and deducted 12% value-added tax from their payment.

"[This] is the first time I ever heard of DBM handling clearances for a Chinese company," Blue Ribbon chairman Richard Gordon said. "That's weird."

"I cannot quite reconcile that," Sen. Panfilo Lacson chimed in. 

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