Tax credits cost gov’t P12B in first 5 months

Tax credits from January to May had cost the government P12 billion, lower by 13.6 percent year on year, according to the Department of Budget and Management.

Budget Secretary Florencio B. Abad said the decline was due to lower tax expenditures of the Bureau of Customs (BoC) which, in turn, was brought on by a decrease in the need of government agencies to source materials from abroad.

Abad said that, in particular, the National Food Authority would import less rice this year to a planned 500,000 metric tons. The volume means a 41-percent decrease from the 850,000 MT reported in 2011.

The Aquino administration is pushing for self-sufficiency in rice production by as early as next year, as it saw importation steadily decline from an average of 1.3 million MT a year.

During his first State of the Nation Address in 2010, President Aquino zeroed in on the rampant corruption at the NFA, where some officials were accused of padding rice importation volumes as well as prices.

This practice bloated disbursements of subsidies for NFA’s operations and the agency’s debt. Also, high volumes of rice imports took their toll on the nation’s coffers in the form of government spending for tax subsidies via tax credit certificates (TCCs).

Data from the Bureau of Treasury (BTr) showed that from a 15-year peak of P49.72 billion in 2008, expenditures on tax subsidies fell steadily since then to P25.83 in 2011.

Based on BTr data going back to 1997, the least tax credit expense for a full year was P161 million in 1998.

Earlier this year, the President issued Executive Order No. 68, which mandated the BoC and the Bureau of Internal Revenue (BIR) to issue TCCs only if the concerned taxpayers would ask for credit instead of cash.

TCCs are used to offset other tax obligations in the form of tax deductions. But the EO is also meant to address past scams involving billions of pesos worth of fake credits.

Last week, Ombudsman Conchita Carpio Morales ordered the filing of graft and estafa (fraud) charges against 17 former officials and employees of the Deparment of Finance, as well as other private individuals implicated in a scam involving the issuance of P202.4 million worth of TCCs to a fictitious company from 1993 to 1998.

Last April, Abad said the EO would put in place a refund monetization scheme in lieu of the “tedious, prolonged and often corrupt” TCC process.

Under EO 68, the implementation of the scheme will promote “conducive business environment and raise the business credibility of the government both locally and globally.”

Abad said that businesses, especially exporters, have been clamoring for the government to refund their VAT credits more quickly.

But “the outmoded TCC scheme traps their liquidity for as much as three years and exposes them to certain unscrupulous practices,” he said, explaining why the EO has directed the BIR and BoC to refund taxes in cash rather than in credit.