The value of tax credits granted to a half-dozen textile companies from 2008 to 2014 that were invalidated by the Commission on Audit (COA) have now ballooned to P1.6 billion, according to a COA report to Finance Secretary Carlos Dominguez III.
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) were among the textile firms found to have secured illegal tax credit certificates (TCCs) from the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS) from 2008 to 2014.
As of the first quarter this year, the COA-Special Audits Office (COA-SAO) reported that it has issued Notices of Disallowance (NDs) to these six textile companies for having secured illegal TCCs amounting to P1.195 billion.
A new set of NDs involving P389.27 million was issued by the COA in the second quarter to these same textile firms, bringing the total of their disallowed TCCs to P1.58 billion, based on a June 22, 2021 letter sent by the audit body to Dominguez.
This latest set of NDs covered TCCs that were issued mostly between 2010 and 2014, according to the letter sent by COA-Director Gloria Silverio.
CRC tops the list with the largest amount of illegal TCCs at P664.92 million.
The COA-SAO reported that on top of the earlier disallowed TCCs granted to CRC in the sum of P567.2 million, a new set of NDs was issued to the firm totaling another P97.72 million.
MIC, which was earlier found to have been issued illegal TCCs worth P80.11 million, was issued a new set of NDs totaling P56.87 million, which brings the total of its illegal tax credits to P136.98 million.
The illegal tax credits of UPKM, Inc. grew to P127.81 million after the COA found a new set of spurious TCCs issued to the firm worth P46.2 million. This is on top of the firm’s TCCs totaling P81.59 million that were earlier invalidated by COA.
UKC, with TCCs totaling P170.8 million that were earlier disallowed by COA, also received NDs for a separate set of TCCs amounting to P70.88 million, according to the latest audit done by the COA-SAO.
Its disallowed TCCs now amount to P241.68 million.
PMC’s disallowed TCCs of P154.27 million increased to P214.31 million after the COA-SAO determined a new set of TCCs worth P60.04 million was illegally issued to the company.
The COA-SAO also found that P57.54 million in TCCs granted to TICIRI should also be disallowed, on top of the earlier NDs that the audit body issued against the firm worth P141.27 million combined.
The total value of TICIRI’s disallowed TCCs is P198.81 million.
Several past officials and employees of the Department of Finance (DOF), Board of Investments (BOI), Bureau of Customs (BOC) and OSS who were responsible for processing and approving the illegal TCCs between 2008 and 2014, as well as the recipients and claimants from the six companies, were held liable by COA.
Approved applications meant tax credits on the duties and taxes that exporters supposedly paid, and they could then use the amount to pay other tax liabilities due the government. The practice of these alleged exporters who illegally obtained TCCs was to sell the certificates to other companies at a discount. The latter would then use the TCCs to pay their own tax liabilities.
The COA found that the OSS issued TCCs to either ghost exporters or real companies that were not in the export trade or did not deserve the tax credits issued to them, such as these six textile companies.
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