DESPITE THE OPPOSITION OF SOME BUSINESSES
After listening to opposition and concern from some businesses, the House of Representatives ultimately passed yesterday a bill that eliminates the 30-day grace period for importers to pay the excise tax on goods that require Customs inspection and clearance.
House Bill 21-104, which was authored by House floor leader Rep. John Paul P. Sablan (R-Saipan), passed with 12 “yes” votes. Rep. Ralph Yumul (R-Saipan) abstained. It now goes to the CNMI Senate for action.
Those who voted “no” were Reps. Joseph “Lee Pan” Guerrero (R-Saipan), Sheila Babauta (Ind-Saipan), Donald Manglona (Ind-Rota), Edmund Villagomez (Ind-Saipan), and Richard Lizama (Ind-Saipan).
Rep. Edwin K. Propst (Ind-Saipan) was not present during the voting as he had to leave early. Rep. Tina Sablan (Ind-Saipan) was absent.
In a later interview, Rep. John Paul Sablan said that H.B. 21-104, a working document with the Division of Customs, was heard for the past two sessions, during which lawmakers heard comments from the business community.
Sablan said many of those comments of the business community were also heard yesterday morning during the session, which is why they made amendments to the bill to address the concerns that businesses have. That includes inserting a provision that gives the Customs director or his or her designee the discretion to work with businesses, especially in these very trying times. He said that when businesses need more time to pay their taxes, they should appeal to the Customs director and explain the hardships.
“And that goes to any businesses,” he added.
Sablan said that part of the intent of the bill is to deter fly-by-night operators that import goods here. Once these fly-by-night businesses get their goods, they could no longer be found after 30 days, he said.
As for the concern of other low-risk business that need more time to pay their excise tax, Sablan said this is why they inserted a provision that gives the Customs director discretionary powers, “because the director deals with these people on a daily basis.”
“If, for example, Joeten needs the 30 days for them to pay the excise tax, what they need to do is appeal to the director and express the reasons behind the need to continue the 30-day grace period,” he said.
For businesses that are just here for a short time—for example, just to erect one building— Rep. John Paul Sablan said the government has to start taking the taxes upon Customs clearance.
He said the final version of his bill has a provision to give the discretion to the Customs director if any business needs more time to pay its tax. He said that provision wasn’t in the original bill. “That provision can still allow you to pay after 30 days,” he said.
Sablan explained that he put in that provision for those who would be impacted most in these trying times.
Speaking for J.C. Tenorio Enterprises Inc., Clarence P. Tenorio said they oppose the original version of the bill from a practical standpoint. Reducing the time required to pay the excise tax is unreasonable for companies that receive containers and packages through the ports on a rolling basis, he said.
Tenorio said this bill will require their businesses to rush daily operation, inflicting an unnecessary burden on their receiving and accounting department to verify the shipments with invoices for discrepancies between invoices and shipments and issued checks to Customs.
By cutting out the grace period, the Legislature is essentially placing additional hardship on public needs at time when the people are feeling the pinch of the current crisis, Tenorio said.
Charles Cepeda, general manager of Pacific Trading Co., said that Customs director Jose C. Mafnas is doing an excellent job with Customs, but this bill needs scrutiny, especially about giving the director so much discretion.
Their worry is that there is no assurance that the next Customs director would be like Mafnas, he said.
“I support it for as long as he [Mafnas] is the director, but I don’t know about the next one,” he said.
Saipan Chamber of Commerce executive director Maxine Laszlo said they oppose the passage of the bill until there is more talk among the Legislature, Customs, and businesses in order to get more input.
Mafnas said he understands there are some House members who are reluctant to support the bill as it touches on businesses or importers, while some are perhaps concerned that zeroing out the 30-day grace period is too drastic.
“I hope that after today, you will understand why I am so passionate to repeal the 30-day grace period for excise tax payment,” he said.
Mafnas disclosed that, as of Tuesday, they have 111 importers that are over the 30-day grace period, with a total amount of $120,000 that is due.
He said there are 468 importers that are 120 days overdue, with a total amount of $192,000 due.
“Majority of these are the short-term and one-time importers,” the director said.
Mafnas said there are 107 businesses that have closed their operations, with outstanding accounts totaling $92,000.
“There are no contact numbers, no address, etc. In our books, we consider this as uncollectible,” said Mafnas, adding that they have removed and continue to remove from their system many businesses/importers that are over the statute of limitation.
Rep. Sheila Babauta wants a public hearing on the bill first, saying she wants to hear more recommendations and concerns from the businesses community.
She encouraged House members to listen to the comments of the business community and not rush this bill. In these hard times, the CNMI is heavily reliant on the business community, Babauta said.