COA disallows another P153.13M worth of tax credits

Another P153.13 million in tax credit certificates (TCCs) earlier issued by an arm of the Department of Finance (DOF) through a scam involving unqualified—and some even nonexistent—garments and textile companies have been disallowed by the Commission on Audit (COA) as part of the crackdown on illegal tax perks given away over a decade ago.

In a statement on Friday, the DOF said the COA last month wrote Finance Secretary Carlos Dominguez III to tell him that the agency had issued new notices of disallowance to the TCCs obtained by Capital-Roll Knit Corp., Primeknit Manufacturing Corp., Tai-Cheng Integrated Resource Inc. and Uni-Glory’s Knitting Corp.

As of October, the COA issued a total of P759.12 million in notices of disallowance covering these four firms, which earlier secured TCCs from the DOF’s One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS) from 2008 to 2012.

The DOF said two other companies—Miskhu Industrial Corp. and Universal Pacific Knitting Mills Inc.—were also found by the COA’s special audits office as had been issued with illegal TCCs worth P31.17 million in 2009 and P28.33 million in 2008, respectively.

Across these six firms, the amount of disallowed TCCs totaled P818.6 million to date.

In 2018, COA uncovered P11.2 billion in questionable TCCs issued to 33 garments companies from 2008 to 2014 even as they were not registered with the Board of Investments, hence not entitled to fiscal and other perks given away to investors such as tax credits.

TCCs were refunds that exporters can claim as an incentive for the import duties they paid for imported raw materials.

Instead of cash refunds, the government issued TCCs, which companies could use to settle their other tax obligations.

The DOF had blamed this scam on an OSS Center office order issued around 15 years ago, which allowed claiming of TCCs even without submitting actual proof of importation.

Since 2014, OSS Center withheld issuance of TCCs to textile firms.