One-stop-shop tax center cuts tax credits by 80% since 1998

After a series of tax credit scams that cost the government over P5 billion in foregone revenues a year, the Department of Finance (DOF) said that its controversial one-stop-shop has cut down tax credits by as much as 80 percent since 1998.

The One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS Center) reported yesterday that the clean-up of tax credit certificate issuances has reduced tax credits to an average of P2.8 billion a year.

OSS Center executive director Ernesto Q. Hiansen told reporters that prior to the clean-up, the center was issuing an average of P11.98 billion worth of tax credits yearly from 1995 to 1998.

"Following the discovery of the scam in mid-1998, our office embarked on a massive re-engineering of our operating systems and procedures," Hiansen said.

According to Hiansen, the changes involved the establishment of critical control units to enhance the efficiency and transparency of OSS Center’s operations.

Hiansen explained that the scams discovered in 1998 involved the use of take tax credit certificates (TCCs) by criminal syndicates. "The first step we had to take, therefore, is to make sure that TCCs are no longer easy to fake," he said.

Hiansen said the OSS Center has overhauled its TCCs which now use security paper from the Bangko Sentral ng Pilipinas (BSP) printed at the BSP’s security printing plant in Quezon City.

"There are 21 security features in the TCCs with controls held by the different government agencies involved in the administration of tax credits," Hiansen explained. "That means no single agency controls the security of these certificates."

Despite these efforts, however, Hiansen admitted that criminal syndicates continue to develop new schemes to skirt the stringent measures adopted by the OSS Center as well as the Bureau of Internal Revenue and the Bureau of Customs.

"Starting 2001, we uncovered efforts by these syndicates to subvert the system using fake, tampered or recycled tax credit certificates," Hiansen said.

He said the OSS Center had detected two major modus operandi.

The first scheme, Hiansen said, involved the submission of fake documents to the TCC issuing office in order to obtain an authentic certificate and the second was to completely bypass the TCC office and instead fake the final TCC itself.

According to Hiansen, the investigation and prosecution of tax credit scam syndicates is under the jurisdiction of the Office of the Ombudsman which has so far filed over 60 cases for prosecution.

So far, however, Hiansen said only one case has advanced to the level of trial, involving a company owned by Felix and Gloria Chingkoe who have been ordered arrested.

Hiansen said Gloria Chingkoe is currently out of the country, prompting the Ombudsman to initiate extradition proceedings to enable Philippine authorities to issue the warrant of arrest.