The Commission on Audit (COA) has issued another set of Notices of Disallowance (NDs) on tax credits worth a combined P228.71 million granted to four textile firms that were earlier found to have secured a combined amount of P377.27 million in illegal tax perks from the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS).
The four errant firms had illegally acquired the tax credit certificates (TCCs) over a four-year period from 2008 to 2012, the Department of Finance (DOF) said.
These four textile firms are Capital-Roll Knit Corp. (CRC), Uni-Glory’s Knitting Corp. (UKC), Primeknit Manufacturing Corp. (PMC) and Tai-Cheng International Resource Inc. (TICIRI), the Commission on Audit (COA) said in a letter to Finance Secretary Carlos Dominguez III.
The combined NDs of these four textile companies now total P606 million.
The COA-Special Audits Office (COA-SAO) said that on top of the NDs on the TCCs granted to CRC in June in the sum of P40.88 million, and in February totaling P285.58 million, it also disallowed another set of TCCs with a combined amount of P83.56 million issued to the firm from 2010 to 2011.
This bring the total amount of NDs on CRC’s tax credits to P410.02 million.
UKC, with TCCs totaling P15.03 million that were earlier disallowed by COA, also received NDs for a separate set of TCCs amounting to P62.99 million that were issued between 2010 and 2011.
Its disallowed TCCs now total P78.02 million.
PMC’s disallowed TCCs of P15.76 million increased to P55.89 million after the COA-SAO determined a new set of TCCs totaling P40.13 million were illegally issued to it from 2008 to 2009.
The COA-SAO also found that P42.02 million of TCCs granted to TICIRI between 2008 and 2009 should also be disallowed, on top of the earlier NDs that the audit body issued against the firm totaling P20.01 million.
The total value of TICIRI’s disallowed TCCs is P62.03 million.
In its letter to Dominguez signed by COA-SAO Officer-in-Charge (OIC) Gloria Silverio, the audit body again thanked Dominguez “for the usual support and assistance extended” by the DOF to the COA in conducting its audit of the OSS.
Several officials and employees of the DOF, Board of Investments (BOI), Bureau of Customs (BOC) and OSS who were responsible for processing and approving the illegal TCCs, as well as their recipients and claimants from the four companies, were held liable by COA in various instances when the TCCs were issued.
Created under Administrative Order (AO) No. 266 issued in 1992 to process TCCs and duty drawback applications, the OSS is a composite body managed by the DOF, Bureau of Internal Revenue (BIR), BOC and the BOI.
Tax credits were offered as incentives under the Omnibus Investments Code (Executive Order or EO 226) to exporters and manufacturers of BOI-registered products for export that have actually paid duties and taxes on the raw materials and supplies used in manufacturing these goods.
Approved applications meant refunds on their duties and taxes that were used to pay other tax liabilities due the government.
In July 2018, the DOF reported that the COA uncovered a bigger scam, in which the OSS granted TCCs worth P11.18 billion to 33 ineligible or even non-existent textile companies from 2008 to 2014.
Of this amount, P8.85 billion-worth of tax credits were granted to 29 claimants despite the absence of proof of payment of duties and taxes and the export of finished products, and of importation records with BOC.
The other four claimants got TCCs worth P2.34 billion, even as their entitlement to the fiscal incentive had already expired.
Upon the receipt of the report on the P11.18-billion tax credit scam, Dominguez had signed Department Order (DO) No. 039-2018 forming a task force to investigate and run after those involved in these illegal TCC transactions.