The 30-day grace period for importers to pay excise tax on goods is a major gap in the revenue collections of the Division of Customs and eliminating that grace period is seen as a plus for the division, according to Customs director Jose C. Mafnas.
Speaking before the Saipan Chamber of Commerce last Wednesday, March 4, Mafnas disclosed that there are importers who avail of the 30-day grace period and then disappear, which cramps Customs’ revenue collection.
To combat this gap, the House of Representatives passed a bill last Feb. 12 that would eliminate the grace period for importers to pay excise tax.
Mafnas revealed that there are 139 importers who fall under the 30-day period, with taxes due from them amounting to $378,000; 60 days, 42 importers with tax due of $4,929; 90 days, 31 importers with tax due of $21,000; and 120 days, 812 importers, with taxes worth $611,000.
With about 157 importers, with $159,000 tax due needed to be removed from the system because of the statute of limitation, the total outstanding value that Customs need to go and collect is about $1,015,000.
“That is a lot of money, and I am mandated by law to collect every penny from these people. We are using all kinds of manpower resources to go after these people. Believe it or not, a lot of these people, they change their address, they change their business, they disappear from whatever location that they said they are getting started,” Mafnas said.
The Customs director also stressed that they are not out to close businesses, and that the objective for repealing the 30-day grace period is to close the gap that is being exploited by dishonest importers, and to have a system in place for those who are compliant with Customs import laws.
“Customs is not in the business of closing a business. When an importer has a hard time paying their tax dues, we have a mechanism in place to work with them,” he said.
Even without a grace period, or even with the 30-day grace period, Customs can work with an importer to release their cargo, following a payment plan, Mafnas said. “Regulations say you must not release. You must pay. We will release their cargo pending the payment. Of course, we have to sit down and come up with a payment plan…which only applies to the low-risk importers, or those who have been consistently compliant with Customs import laws.”
Further, Mafnas said that H.B. 21-104 will reduce account receivables, will reduce personnel resources needed to track taxpayers with outstanding arrears, and will allow Customs to focus more on better protecting the CNMI borders.
The bill, according to the Customs director, will also increase revenue by eliminating the grace period, and “have those high-risk importers pay on the spot” with “no chance for them to hide.”
With challenges brought by drug smuggling, undervaluation of goods, and undeclaration of high tax rate commodities and contrabands, Customs believe that the bill will lessen the challenges and bring fairness to honest importers.