CoA rejects P377M worth of tax credits granted to four textile firms

coa rejects p377m worth of tax credits granted to four textile firms - CoA rejects P377M worth of tax credits granted to four textile firms

THE Commission on Audit (CoA) rejected P377.29 million worth of tax credits granted to four textile firms by the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS) between 2008 and 2012, according to the Department of Finance (DoF).

The DoF said in a statement over the weekend that the CoA Special Audits Office (SAO) issued notices of disallowance for the tax credit certificates (TCCs) granted by the textile companies.

These include the P40.88 million granted to Capital-Roll Knit Corp. (CRC), P20.01 million to Tai-Cheng International Resource, Inc. (TICIRI), P15.76 million to Primeknit Manufacturing Corp. (PMC), and P15.03 million to Uni-Glory’s Knitting Corp. (UKC).

The DoF said it received the letter from SAO Director Pearl L. Ramos, noting that the TCCs do not meet the requirements for the grant of tax credit.

It said the importers the companies bought their textile materials from are not registered or accredited with the Board of Investments (BoI) and Bureau of Customs (BoC).

The importers also could not prove payment of duties and taxes, or if ever paid only minimal duties and taxes to Customs, according to the DoF.

“There was no proof of payment of import taxes and duties by the suppliers; validation of actual exportation by the (OSS); in addition to questionable physical existence (of the companies); and the tax credit granted even exceeded the reported payments by the claimants to the suppliers,” it read.

It said the Bulacan-based CRC’s disallowed tax credits covered 10 TCCs issued between 2010 and 2011. CRC also had 75 TCCs granted in 2008-2012 disallowed under a Feb. 21 CoA decision, worth a combined P285.58 billion, the DoF said.

The DoF said the TCCs for the other companies were issued to Bulacan-based UKC in 2010; Valenzuela City’s PMC between September and November 2008; and Calamba, Laguna’s TICIRI in June 2011.

It added that “several officials and employees” of the DoF, OSS, BoI and BoC responsible for processing and approving the TCCs, as well as the recipients from the four textile firms “were held liable by CoA in various instances when the TCCs were issued.”

The SOA said the companies that received the TCCs “did not use them for their own tax obligations and merely transferred their TCCs to other companies.”

The audit disallowances will become “final and executory” if no appeal is filed within six months.

The OSS is an inter-agency body run by the DoF, BoC, BoI and Bureau of Internal Revenue, to process applications for TCCs and duty drawbacks.

Tax credits are given to exporters and manufacturers of products for export, which are registered with BoI. Proof of duties and taxes on raw materials and supplies are a prerequisite for a TCC, since approved applications will mean refund of these taxes.

The DoF issued Department Order No. 039-2018 forming a task force that will investigate and go after officials and firms involved in illegal transactions after uncovering a tax credit scam in 2018.

In July 2018, the DoF also flagged P11.18 billion worth of TCCs that the OSS granted to 33 textile companies between 2008 and 2014 which were either not eligible for the benefit or allegedly non-existent. These were based on CoA findings as well.

Around P8.85 billion worth of tax credits were granted to 29 firms despite the absence of proof that duties and taxes were paid, finished products were exported. Import records from the BoC were also missing.

Meanwhile, some P2.34 billion worth of TCCs were issued after the expiration of the eligibility period. — Beatrice M. Laforga

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