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Tax credits to 4 firms disallowed

The Commission on Audit (COA) has issued another set of Notices of Disallowance (NDs) on tax credit certificates (TCCs) worth a combined P153.13 million granted to four textile companies  that were earlier found to have secured illegal tax perks totaling P605.98 million from the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS).

These four textile firms are Capital-Roll Knit Corp. (CRC), Uni-Glory’s Knitting Corp. (UKC), Primeknit Manufacturing Corp. (PMC) and Tai-Cheng Integrated Resource Inc. (TICIRI), said the Commission on Audit (COA) in a letter to Finance Secretary Carlos Dominguez III.

The combined NDs of these four textile companies now total P759.12 million, based on the COA letter dated Oct. 21, 2020.

The four errant textile companies had illegally acquired the TCCs over a four-year period from 2008 to 2012, the Department of Finance (DOF) said.

Two other firms with disallowed TCCs totaling P59.50 million were also included in the audit done by the COA-Special Audits Office (COA-SAO), the letter to Dominguez said. 

Miskhu Industrial Corporation (MIC) and Universal Pacific Knitting Mills, Inc. (UPKM) were found to have been issued illegal TCCs worth P31.17 million and P28.33 million, respectively.  

These disallowed TCCs to MIC were issued in 2009, while those for UPKM were issued in 2008.

With the  NDs of the four textile firms worth P759.12 million and the new set of NDs for UPKM and MIC amounting to P59.50 million the grand total of the disallowed TCCs issued to these six companies now stands at P818.6 million.

The  COA-SAO said that on top of the earlier disallowed TCCs granted to CRC in the sum of P410.03 million,  a new set of NDs was issued to the firm amounting to P45.88 million. 

This brings the total amount of NDs on CRC’s tax credits to P455.91 million. 

UKC, with TCCs totaling P78.02 million that were earlier disallowed by COA, also received NDs for a separate set of TCCs amounting to P37.30 million, in the latest audit done by the COA-SAO. 

Its disallowed TCCs now amount to  P115.32 million. 

PMC’s disallowed TCCs of P55.90 million increased to P93.44  million after the COA-SAO determined a new set of TCCs worth P37.54 million  were illegally issued to it from 2009 to 2010. 

The COA-SAO also found that P32.41 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 worth P62.04 million combined.

The total value of TICIRI’s disallowed TCCs is P94.44 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 in the past, 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 they had used in manufacturing their goods.

Approved applications meant refunds on their duties and taxes that were used to pay other tax liabilities due the government.  

However, TCCs were subsequently issued  illegally  to either ghost exporters or real companies that did not deserve the tax credits. PR

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