Drilon urges gov't to blacklist Xuzhou, other companies that did not pay income tax after bagging billions of contracts from PS-DBM

Senate Minority Leader Franklin M. Drilon said Xuzhou Construction Machinery Group should be banned from doing business in the country over its non-payment of income and other taxes and for clear violations of the country's National Internal Revenue Code.

Drilon made the call after it was revealed during yesterday's inquiry of the Blue Ribbon that the company that bagged around P2.23 billion worth of contract from the Procurement Service of the Department of Budget and Management (PS-DBM) did not pay the mandated income taxes.

Drilon's call is consistent with the pronouncement of the President early this year that he would prevent any company from operating until they have fully settled their tax obligations to the government.

Drilon also said the government should immediately ban Xuzhou and withhold any of its pending collectibles in PS-DBM.

"It is clear Mr. Han that you did not pay a single peso of income taxes in the Philippines, notwithstanding the fact that you were awarded with contracts worth P1.67 billion for the supply of medical supplies at PS-DBM," Drilon told Xuzhou during the inquiry.

The official record of the PS-DBM, as of September 21, 2021, revealed that Xuzhou bagged the fourth highest amount of PS-DBM contract in the amount of P2.23 billion out of the P41.46 billion illegal and anomalous fund transfers to PS-DBM that is being investigated by the Blue Ribbon, according to Drilon.

"You sold goods here and you made profits from commercial transactions. You are liable for income taxes. I now call on the BIR commissioner to take a look at this company, how you can collect taxes on the sales they made in the country," Drilon underscored during the hearing. He cited Section 23 (General Principles of Income Taxation in the Philippines) of the NIRC. The provision states that "(F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines."

Drilon cited Section 22, (H) of NIRC that clearly states that the term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within the Philippines.

Xuzhou is a resident foreign corporation. Its country representative, Robin Han, said he has been representing the company since 2012. He admitted they did not pay income taxes in the Philippines. He added that they paid taxes in China.

But Drilon said the country's tax laws mandated that foreign corporations should pay income taxes: "You entered into a transaction in the Philippines where you made income, and therefore under Philippines laws, you are liable for income taxes."

A certified public accountant Mon Abrea, who was present at the hearing, concurred with Drilon, saying that Xuzhou should have paid 25% income tax.

Drilon said Xuzhou's admission "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."

"Did the other companies engaged by PS-DBM pay their dues? We will look into it and make sure they pay," Drilon vowed.

Xuzhou also admitted that it is not registered under the country's Securities and Exchange Commission (SEC) and it is not registered with the Bureau of Customs.

The BIR issued a "Certificate of No Records Available of Income Tax Return" on the corporation. The Bureau of Customs (BOC) also certified that it is not an accredited importer.

Prior to 2020, Xuzhou admitted that it was never engaged in the transaction of medical supplies, Drilon noted.