BIR unit acts to prevent repeat of tax credit scam

MANILA, Philippines – The government’s One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, the agency that issues tax credit certificates to qualified exporting firms, is putting in place several measures to prevent a repeat of the controversial tax credit scam which erupted in the mid-90s.

Villamor Plan, executive director of the center, said one such measure is to connect the center’s data and information system with that of the Bureau of Customs (BOC) by the third quarter of next year.

“What we want is to have the same database and same information,” said Plan, adding that having an integrated system would easily enable the BOC to verify if the tax credit certificates held by firms were indeed issued by the center.

The One Stop Shop is an agency under the Department of Finance (DOF). A TCC serves as proof of a company’s claim for tax credits, which are granted either to exporting firms that are entitled to duty-free privileges or to those that have tax refunds. Holders may use these certificates in paying taxes. Fraud is committed when companies acquire the certificates illegally.

Plan also said the interconnection would lessen human intervention which would, in turn, reduce red tape.

“The key really is diminish human intervention,” said Plan.

Interconnecting the center’s database with that of the BOC would also reduce the processing time for the certificates.

Plan said that the BOC’s processing time may be cut to just 60 days from the current 120 days required to process a tax credit certificate.

To fund the interconnection, the Center is seeking the help of business chambers, particularly foreign business groups whose members are the ones who would benefit from the enhancement.

Plan said the center has also put in place 27 security features for the tax credit certificates to prevent the use of fake or fraudulent certificates.

So far, the center has issued P2.789 billion worth of tax credit certificates (TCCs) from January to September this year, 25.9 percent lower than P3.767 billion it issued in the same period last year.

This is a significant reduction from a high of P11.94 billion issued by the office at the height of the so-called tax credit scam in the early 1990s.

Plan, who took over the center in 2008, said the DOF has been continuously reengineering the center to prevent the repeat of the tax scam and to better assist the export industry.

The tax credit scam, which occurred in 1995 to the middle of 1998, defrauded the government of P2.5 billion in revenues from tax credit certificates.