Government lost P1.6 billion from TCCs to unqualified textile companies

MANILA, Philippines — The government has lost about P1.6 billion in revenue to tax credit certificates (TCCs) given to six unqualified textile makers, the Department of Finance said.

The DOF yesterday said the TCCs were granted to the textile firms from 2008 to 2014 despite failing to meet the requirements for securing such incentives. These tax perks were now invalidated by the Commission on Audit (COA).

According to the DOF, the tax credits were handed to Capital Roll Knit Corp. (CRC), Uni-Glory’s Knitting Corp. (UKC), Primeknit Manufacturing Corp. (PMC), Tai-Cheng Integrated Resource Inc. (TICIRI), Miskhu Industrial Corp. (MIC) and Universal Pacific Knitting Mills Inc. (UPKM).

The COA, in its report submitted to the DOF, said it issued notices of disallowance to these firms for getting P1.19 billion in TCCs in the first quarter. In the next quarter, the COA flagged another P389.27 million in tax perks that failed to comply with requirements.

The COA added the firms obtained the TCCs from the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center between 2008 and 2014. The tax credits, state auditors said, should be nullified as the violating firms were either not engaged in export trade, or they fell short of the criteria set by regulators.

CRC tops the list of illegal TCCs acquired at P664.92 million, followed by UKC’s P241.68 million and PMC’s P214.31 million.

Also, TICIRI amassed P198.81 million worth of tax perks, while MIC and UPKM obtained P136.98 million and P127.81 million in TCCs from the government.

The DOF said several officials and employees working for the agency, Board of Investments, Bureau of Customs and the one-stop shop were held liable by the COA for approving the TCCs given to the textile companies.

Exporters and manufacturers can apply for tax credits for duties that they owe the government, then they can use the savings to comply with similar liabilities due to authorities. However, the DOF said some firms abuse this practice by selling the TCCs to fellow enterprises.

As such, the buyer of the TCCs will use the tax credit to reduce their dues to the government. In the process, the economy loses revenue on leakages that could have been collected if only the TCCs were used as intended.