COA uncovers P11.2-B anomaly in tax credits

MANILA, Philippines — The One-Stop Shop Inter-Agency and Duty Drawback Center (OSS) had erroneously granted P11.18 billion worth of tax credit certificates (TCC) to 33 textile companies from 2008 to 2014, the Department of Finance (DOF) said.

Citing a Commission on Audit (COA) report, Finance Secretary Carlos Dominguez said the OSS unduly granted 3,231 tax credits to ineligible and non-existent textile companies during the six-year period.

“In a report dated July 6, 2018, the Commission on Audit found that from 2008 to 2014, the One-Stop Shop Inter-Agency and Duty Drawback Center erroneously issued around 3,231 tax credit certificates (TCCs) contrary to the Omnibus Investments Code of 1987, to the detriment of the government,” Dominguez said in a press briefing.

Of this amount, P8.85 billion in tax credits were granted to 29 claimants, and were overstated and supported by spurious documents, according to the finance chief.

A TCC is a proof of a company’s claim for tax credits, which are granted to exporting firms entitled to duty-free privileges.

To claim TCCs, companies should be able to provide proofs showing actual payments of duties and taxes for the importation of raw materials and exportation of finished products.

However, Finance Undersecretary Antonette Tionko said this was not followed as the OSS issued guidelines allowing the issuance of TCCs without these documents.

Meanwhile, another P2.34 billion was released to four claimants whose fiscal incentives have already expired, Dominguez said.

The COA also found that the OSS “failed to conduct thorough pre-qualification of claimants.”

Of the total TCCs issued, COA said P9.09 billion were merely transferred by the claimants. COA said P8.96 billion were transferred to non-textile enterprises despite having no written documentation issued by the Bureau of Investments.

In response to the COA report, Dominguez issued Department Order 39-2018, which created a task force to investigate the matter and recover the P11.18 billion erroneously granted from 2008 to 2014.

He said the task force will be in charge of the cancellation of TCCs that are still in circulation, and the coordination with the Bureau of Internal Revenue and Bureau of Customs for the assessment of taxpayers who applied for the erroneous TCCs.

It is also tasked to investigate and impose administrative sanctions against erring OSS personnel.

“Expect this department to pursue the appropriate charges against all public officers and private persons who manipulated and unjustly benefited from the tax credit process with the OSS,” Dominguez said.

“A copy of the COA report has been furnished to the Board of Investments for appropriate action against accredited enterprises,” he added.

According to the finance chief, the DOF will make claims and ask the companies to pay immediately in order to recover the amount granted.

“If they don’t pay, we will pursue it in court,” he added.