Fraudulent tax credits to reach P8B - report

The inter-agency One-Stop Shop Tax Credit and Duty Drawback Center (OSS) has revealed that government losses from the fraudulent issuance of tax credit certificates (TCCs) from 1992 to 1998 could reach over P8 billion.

OSS executive director Alberto Salanga, in his official report to Executive Secretary Zamora, outlined the modus operandi of private individuals and former officials of the Center in what he described as a "multi-billion peso conspiracy between ranking government officials and private firms."

Zamora is the chairman of the inter-agency Presidential Task Force 156 which is investigating the tax credit scam.

Salanga also reported the problems being encountered by the OSS in running after those responsible for the fraudulent TCCs.

"The Center has inadequate legal support. This, aside from the fact that former officials and personnel involved destroyed most records to cover their tracks," he said.

From 1992-1998, the OSS issued 18,748 TCCs involving 1,527 individual claimant-firms with an aggregate amount of P52.1 billion.

The investment incentive group, composed of private groups under the Board of Investment (BOI), was responsible for the issuance of 12,279 of the total TCCs to 957 firms involving some P20 billion.

Salanga said the OSS has already uncovered, and is now in the process of completing documentation on at least 1,430 fraudulent issued TCCs involving P4.5 billion.

"The OSS has conducted a post-audit of not less than 50 percent of the TCCs issued by the investment incentive group. We estimate the figure could easily reach P8 billion once the audit is completed," he said.

The OSS official pointed out that the TCCs issued under the tax and revenue group and the duty drawback group involving 5,794 dockets have yet to be opened.

TCCs allow export firms involved in supply agreements to avail of certain tax refunds. Some of the TCCs, however, were found to have been acquired using fraudulent documents. They are either used by the claimants themselves or sold to other BOI-registered enterprises.

As part of the modus operandi, claimant-firms registered their corporations with the Securities and Exchange Commission (SEC) using dummies and nominees to hide the true owners of the firms.

The claimant-firms had set up small manufacturing operations to obtain BOI registration with very large-rated capacities.

"The firms then started filing claims for tax credit with the OSS using fictitious export documents like bills of lading, bank credit memos, and sales invoices," Salanga pointed out.

Claimant-firms, he pointed out, worked with consultants, who acted as fixers in the preparation of claims and facilitation of an evaluation.

"These consultants handled the payment of the facilitation fees to former OSS officials," Salanga said.

For TCCs issued to the mass transport sector, the modus operandi included the submission of fake or tampered commercial invoices, delivery receipts and registration papers to justify the granting of bigger tax credits.

"Once the fraudulent TCCs were released, they would be sold to other registered enterprises. To circumvent existing regulations governing the transferability of TCCs, the claimants, in connivance with former OSS officials, entered into fictitious supply agreements with the party to whom the TCCs were transferred," Salanga said.

He said various sources have confirmed that the prevailing rate charged by the former OSS officials was anywhere from 30 percent to 40 percent of the face value of the TCCs approved.

Salanga said that prior to his assumption of office, some officials and personnel were involved in the removal and destruction of vital records.