BIR files P1.7-B tax evasion case vs manufacturing firm

MANILA, Philippines - The Bureau of Internal Revenue (BIR) has filed a P1.7-billion tax evasion case against a manufacturing firm.

In a filing before the Department of Justice yesterday, BIR Commissioner Kim Henares charged Gammon Metal Products Inc. for allegedly evading P1.7 billion in taxes in 2007 and in 2008.

The BIR sued Joaquin Chua, the company’s president. Gammon Metal is registered as a metal and plastics manufacturing but Henares said that based on the BIR’s investigation, the company had no factory in the province and instead operates in Binondo, Manila.

Henares said that manufacturers like Gammon Metal generally have suppliers and their transactions can be tracked by the BIR through the integrated tax system.

Based on the BIR’s findings, Gammon Metal has been submitting a list of fictitious suppliers from whom it was supposed to be getting input value added tax (VAT) from its bogus manufacturing operations.

As such, Henares warned businesses not to use fake receipts or fake suppliers as the BIR has a way of verifying this.

Henares said the agency is already doing a massive clampdown against an organized syndicate found to be attacking the billion-peso VAT system.

Henares said billions of pesos are lost because there are companies selling invoices to legitimate businesses.

The fake invoices allow the legitimate businesses to avail of the tax credit allowed for input purchases.

Under the amended VAT law of 2005, businesses can avail of tax credit on input purchases. These are the VAT paid for purchases of raw materials, supplies and capital goods. There is a cap on VAT credit for inputs up to 70 percent of output VAT. To claim the tax credits, companies must present to the BIR invoices, which would detail their purchases.

VAT is the tax slapped on consumption and is levied on the sales of goods and services at each stage of production and distribution process.

It is collected using the invoice of the tax credit method. In computing for one’s VAT liability, a VAT-registered taxpayer can deduct input tax from output tax. Output tax is the VAT due on the taxpayer’s sale of goods and services.

Henares said that the fake invoices sold by the syndicate come in very handy for businesses especially if they smuggle their raw materials and supplies.

The BIR also filed cases against Silver Trumpets and its president, Ma. Luz Pangilinan, for violating provisions of the tax code in 2003 and evading P9.15 million in taxes.                        

Silver Trumpets claimed that it was not in operation in 2003 but data from the BIR showed that it actually had several transactions with Warner Bros, Henares said.