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Business

COA flags 8 firms in tax credit leaks

Elijah Felice Rosales - The Philippine Star
COA flags 8 firms in tax credit leaks
The photo of the Commission on Audit's office in Quezon CIty taken on Aug. 17, 2021.
The STAR / Michael Varcas, file

MANILA, Philippines — The government has given up at least P3 billion in revenues to eight textile makers that received tax credit certificates (TCCs), but failed to qualify for them, the Commission on Audit (COA) said.

In a report, COA informed Finance Secretary Carlos Dominguez III that the government suffered another P412.77 million in leakages from the grant of TCCs to textile manufacturers.

COA has also disallowed P2.6 billion in TCCs that the One Stop Shop Inter-Agency and Duty Drawback Center extended to textile producers from 2008 to 2014.

Silvertex Weaving Corp. and Capital Roll Knit Corp. accounted for more than half of the TCCs at P906.8 million and P664.92 million, respectively. Miskhu Industrial Corp. obtained P451.98 million in tax credits that were invalidated by COA.

Primeknit Manufacturing Corp. also secured P312.08 million in TCCs, while Uni-Glory’s Knitting Corp. got P241.68 million, both nullified by state auditors. Tai Cheng Integrated Resources Inc. also owes the government P198.81 million from the tax credits it bagged.

Universal Pacific Knitting Mills Inc. and Knitech Manufacturing Inc. were also named by COA in its report, taking TCCs worth P127.81 million and P114.2 million, respectively, in spite of issues on compliance.

The COA has flagged the transactions made during the period to hold the claimants of the TCCs liable for owing taxes to the government.

Manufacturers can apply for TCCs to reduce the taxes that they need to pay to the government, from which savings will be incurred that they can use to pay their other liabilities. However, the textile makers tagged in the COA report abused this practice by selling their tax credits to fellow exporters.

According to state auditors, the textile firms asked for TCCs to cover for the duties and fees that they paid as exporters. However, the tax credits, availed at discounted prices, were sold to other firms who then exploited them to bring down their liabilities.

The COA also found out that the public servants involved in the anomaly issued TCCs to either ghost exporters or unqualified firms or manufacturers that operate outside the textile trade.

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