THE COMMISSION on Audit (CoA) rejected P1.58 billion worth of tax credits that had been granted to six textile companies by the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS) between 2008 and 2014, the Department of Finance (DoF) said.
The DoF said in a statement Wednesday that CoA issued notices of disallowances 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), whose tax credit certificates (TCCs) were later found to have been issued illegally.
In the second quarter, CoA rejected an additional P389.27 million of tax credits that were previously issued to these six companies by the OSS, on top of the P1.195 billion worth of TCCs disallowed as of the end of March.
State auditors disallowed P97.72 million of CRC tax credits last quarter, on top of the P567.2 million worth of TCCs that were rejected previously, bringing its total to P664.92 million. The
CoA also invalidated a fresh batch of TCCs worth P70.88 million issued to UKC, bringing its total to P241.68 million.
It rejected P60.04 million worth of PMC tax credits, bringing the textile firm’s total to P214.31 million.
It also voided P57.54 million in tax credits received by TICIRI, whose running total is now P141.27 million.
MIC had P56.87 million worth of tax credits disallowed during the quarter, to bring the company’s total to P136.98 million.
The commission rejected P46.2 million worth of TCCs issued to UPKM, for a running tally of P127.81 million.
The OSS, an interagency body consisting of representatives from the DoF, Board of Investments (BoI), and the Bureaus of Internal Revenue and Customs, processes applications for TCCs and duty drawbacks.
Tax credits are given to exporters and manufacturers of products for export that are registered with BoI. Proof of duties and taxes on raw materials and supplies are a prerequisite for a TCC; approved applications will then trigger refunds of these taxes.
With approved applications, exporters can then offset the tax credits against other taxes due. However, the DoF has said that companies that illegally obtained TCCs sold the certificates to other companies at a discount which the latter can then use to reduce their own tax liabilities.
It added that based on the CoA findings, the OSS granted the tax credits to either ghost exporters or operating companies that were not in the export business or were not eligible for the tax perks.
In 2018, the DoF formed a task force to investigate and go after officials and companies involved in the illegal grant of tax credits. That year, the agency flagged P11.18 billion worth of TCCs that the OSS granted to 33 textile companies between 2008 and 2014, backed up by CoA findings. — Beatrice M. Laforga