House OKs bill to remove 30-day grace period in paying excise tax

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THE House of Representatives on Wednesday revised and passed a bill that proposes to remove the 30-day grace period in paying excise tax.

Customs Director Jose Mafnas speaks about the intent of House Bill 21-104 during the House session on Wednesday.
J.C. Tenorio Enterprises Inc. head buyer/wholesale manager Clarence Tenorio Jr. shares his comments about House Bill 21-104 during the House session on Wednesday.  Photos by Emmanuel T. Erediano

Eleven members voted yes, five voted no, and one voted “present.”

House Bill 21-104, which was opposed by local business companies and the Saipan Chamber of Commerce, now goes to the Senate. The measure was introduced by House Floor Leader John Paul Sablan.

Besides Sablan, those who voted in favor of the bill were Speaker Blas Jonathan Attao, Vice Speaker Lorenzo Deleon Guerrero, Reps. Tony Borja, Joseph Flores, Marco Peter, Jose Itibus, Ivan Blanco, Joel Camacho, Janet Maratita, and Luis John Castro.

Those who voted no were Reps. Sheila Babauta, Edmund Villagomez, Richard Lizama, Donald Manglona, and Joseph Leepan Guerrero.

House Minority Leader Edwin Propst who participated in the discussion was not in the chamber during the roll call vote.

Reps. Roman Benavente and Tina Sablan were excused from the session.

Prior to the roll-call vote, House Floor Leader Sablan offered a substitute version of his bill.

The original version would require importers to pay the excise tax “prior to Customs clearance.” The substitute bill changed this language to “upon clearing Customs.”

Sablan said the substitute bill would address the concerns raised by J.C. Tenorio Enterprises Inc. wholesale manager Clarence Tenorio Jr., Herman’s Bakery general manager Anne Guerrero Hayes, and Pacific Trading Co. general manager Charles Cepeda.

“For good cause,” the revised version of the bill would give the Customs director an authority to allow excise tax payments “after clearance.”

Rep. Janet Maratita offered a floor amendment that would also address the concerns of local businesses.

She said the Customs director should have authority to promulgate rules that will accommodate long-term importers who are considered “low-risk” for customs violations. These include Joeten, Herman’s Bakery, and Pacific Trading.

Sablan said his bill aims to deter “fly-by-night importers who have been taking advantage of the 30-day grace period.” These importers, he added, “import goods then walk away from their tax obligations.”

Customs Director Jose Mafnas pushed for the passage of the bill, which he said would help the agency collect from short-term or one-time importers who are also “high-risk” importers for customs violations.

As of Tuesday, Mafnas said , there were 111 importers who had yet to pay a total of $120,000 in excise tax even though the 30-day grace period was already over.

He said there are also 468 importers who owe excise tax amounting to $192,000 which is already 120 days overdue.

Some of these short-term importers with unmet obligations to the government have stopped their operations, he added. “They’ve changed their addresses and their contact numbers. They have disappeared. We just have no way of tracking them down. So I guarantee that H.B. 21-104 will definitely solve this problem,” Mafnas said.

For long-term importers who pay their excise tax on time and consistently, Mafnas said Customs can work with them and address their concerns.

These importers are not the target of the measure, he said, only the “high-risk” ones.

Business concerns

Joeten’s Clarence Tenorio told lawmakers that the 30-day grace period “is a necessary step in a process that helps companies and the government run more efficiently.”

He added, “If we were to apply the same rule to our business…then there would not be any considerations for [late] payments of government purchases or leases.”

As for delinquent importers, he said there is already a mechanism in place in current policy: a late penalty payment of 0.5 percent of the unpaid tax and interest.

Tenorio said this can and should be carried out through aggressive enforcement.

“Why penalize businesses that pay their excise taxes on a timely and consistent basis?” he asked

H.B 21-104, as originally drafted, would hurt all businesses, he said, most especially the established ones that continually import supplies to the islands, “creating jobs and helping sustain our communities.”

Pacific Trading Co.’s Charles Cepeda, for his part, commended Mafnas “for doing an excellent job” as Customs director.”

However, Cepeda believes that H.B. 21-104 needs further study and should include an assurance that it won’t hurt the businesses that follow the rules.

He asked lawmakers to defer action on the bill and give other businesses an opportunity to assist in enhancing the measure.

Frannie Tenorio Demapan, another Joeten representative, echoed Cepeda’s comment. She said even if the Customs director is given discretion to help long-term businesses, there is no guarantee that such assistance will continue under future directors.

Anne Guerrero Hayes of Herman’s Bakery said she understands that the intent of the bill is to generate revenue, “but removing the 30-day grace period doesn’t work for all businesses, many of which have to deal with unforeseen circumstances.”

The Saipan Chamber of Commerce, its executive director Maxine Laszlo said, opposes the bill, “at this time.” She recommended further dialogues with and inputs from businesses.

She said other businesses have concerns, too, but their representatives could not attend the House session on Wednesday.

She noted that the excise tax is something that businesses pay even before they sell and earn from their products.

The measure to remove the 30-day grace period, she added, “is not a long-term viable solution to lack of revenue.”

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