Blacklist contractors that fail to pay taxes – senator

MANILA, Philippines — A firm allegedly owned by the state of China, which bagged over P2 billion in contracts to supply personal protective equipment to the Philippines, as well other companies that fail to pay taxes should be banned from doing business in the country, according to Senate Minority Leader Franklin Drilon.

He said the government should immediately ban Xuzhou Construction Machinery Group and withhold any of its pending collectibles in the Procurement Service of the Department of Budget and Management (PS-DBM).

“It is clear, Mr. (Robin) Han, that you did not pay a single peso of income taxes in the Philippines, notwithstanding the fact that you were awarded with contracts worth P1.67 billion for the supply of medical supplies at PS-DBM,” Drilon told Han during the Senate Blue Ribbon inquiry on Tuesday. Han is the Xuzhou representative in the country.

Drilon said Xuzhou should be blacklisted over its nonpayment of income and other taxes and for clear violations of the National Internal Revenue Code (NIRC).

Drilon made the call after it was revealed during the inquiry that the company that bagged around P2.23 billion worth of contracts from the PS-DBM did not pay the mandated income taxes.

The senator recalled the pronouncement of President Duterte early this year that he would prevent any company from operating until they have fully settled their tax obligations to the government.

As of Sept. 21, 2021, official records revealed that Xuzhou bagged the fourth-highest contract in the amount of P2.23 billion out of the P41.46 billion in illegal and anomalous fund transfers to PS-DBM that is being investigated by the Blue Ribbon committee.

“You sold goods here and you made profits from commercial transactions. You are liable for income taxes. I now call on the BIR (Bureau of Internal Revenue) commissioner to take a look at this company, how you can collect taxes on the sales they made in the country,” Drilon said.

Drilon cited Section 23 of the NIRC, which states that “A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.”

He also cited Section 22 where the term “resident foreign corporation” clearly applies to a foreign corporation engaged in trade or business within the Philippines.

Xuzhou is a resident foreign corporation. Robin Han, who has been representing the company since 2012, admitted they did not pay income taxes in the Philippines, but paid taxes in China.

Drilon, however, said the country’s tax laws mandated that foreign corporations should pay income tax: “You entered into a transaction in the Philippines where you made income and therefore under Philippines laws, you are liable for income taxes.”

Certified public accountant Mon Abrea, who was present at the hearing, concurred with Drilon, saying that Xuzhou should have paid 25 percent income tax.

Drilon said Xuzhou’s admission “necessitates a deeper inquiry into tax liabilities of several foreign companies engaged by the PS-DBM in the supply of allegedly overpriced face masks and other medical supplies.”

Xuzhou also admitted that it is not registered with the country’s Securities and Exchange Commission or with the Bureau of Customs (BOC).

The BIR issued a “Certificate of No Records Available of Income Tax Return” on the corporation. The BOC also certified that it is not an accredited importer.

Xuzhou was never engaged in the transaction of medical supplies prior to 2020, Drilon noted.

Reforms at DBM

Senators also pushed for a measure to stop the PS-DBM from being cavalier with billions of taxpayers’ money.

During the DBM budget briefing at the Senate yesterday, Drilon said general provisions can be placed in the 2022 General Appropriations Act to at least prevent a recurrence of controversial deals between PS-DBM and Pharmally involving the alleged overpriced PPEs purchased with Department of Health funds.

“The reforms that should be instituted now… Can you (DBM) and Government Procurement Policy Board issue a circular which will address all these problems that we have encountered? All of the shenanigans that were made possible,” Drilon told DBM officer-in-charge and Undersecretary Tina Canda.

The PS-DBM was established in 1978 to be a self-sustaining agency as central procurement arm of the government for common-use supplies and materials used by agencies in their day-to-day operations, including pencils and bond paper.

Senators meanwhile described as “absurd” the claim of a lawyer that the Office of the Senate Sergeant-at-Arms (OSAA) has no authority to order the arrest of two more Pharmally executives over their refusal to submit documents subpoenaed by the panel.

Sen. Richard Gordon, chairman of the Blue Ribbon committee, said lawyer Ferdinand Topacio was mistaken when he stated that OSAA has no authority to arrest his clients, Pharmally corporate secretary and treasurer Mohit Dargani, and his sister, company president Twinkle Dargani, outside Senate premises.

“This will lead to a really stupid situation where a co-equal branch is rendered inutile because its supposed jurisdiction is restricted to where its building is situated,” Gordon said.

Activist group Bagong Alyansang Makabayan (Bayan), for its part, has called for the immediate blacklisting of Pharmally Pharmaceutical and the filing of criminal charges against its officials, following the initial findings of the Blue Ribbon committee on the supposed irregularities in the procurement of COVID supplies.

“With the Senate Blue Ribbon committee’s initial report on the Pharmally probe, it is necessary that immediate action be taken by concerned government agencies,” Bayan secretary-general Renato Reyes said in a press statement.

“The ombudsman can already take note of the committee report to initiate its own investigation. The Department of Justice (DOJ) can also do the same on the basis of the Senate report which already recommended criminal charges be filed,” he added.

Meanwhile, the National Privacy Commission (NPC) said that the Data Privacy Act (DPA) of 2012 could not be invoked to avoid questions during congressional hearings delving into matters of public interest.Privacy commissioner Raymund Liboro, in a statement issued yesterday, said the DPA “does not prohibit the disclosure of personal or sensitive personal information when MANILA, Philippines — A firm allegedly owned by the state of China, which bagged over P2 billion in contracts to supply personal protective equipment to the Philippines, as well other companies that fail to pay taxes should be banned from doing business in the country, according to Senate Minority Leader Franklin Drilon.

He said the government should immediately ban Xuzhou Construction Machinery Group and withhold any of its pending collectibles in the Procurement Service of the Department of Budget and Management (PS-DBM).

“It is clear, Mr. (Robin) Han, that you did not pay a single peso of income taxes in the Philippines, notwithstanding the fact that you were awarded with contracts worth P1.67 billion for the supply of medical supplies at PS-DBM,” Drilon told Han during the Senate Blue Ribbon inquiry on Tuesday. Han is the Xuzhou representative in the country.

Drilon said Xuzhou should be blacklisted over its nonpayment of income and other taxes and for clear violations of the National Internal Revenue Code (NIRC).

Drilon made the call after it was revealed during the inquiry that the company that bagged around P2.23 billion worth of contracts from the PS-DBM did not pay the mandated income taxes.

The senator recalled the pronouncement of President Duterte early this year that he would prevent any company from operating until they have fully settled their tax obligations to the government.

As of Sept. 21, 2021, official records revealed that Xuzhou bagged the fourth-highest contract in the amount of P2.23 billion out of the P41.46 billion in illegal and anomalous fund transfers to PS-DBM that is being investigated by the Blue Ribbon committee.

“You sold goods here and you made profits from commercial transactions. You are liable for income taxes. I now call on the BIR (Bureau of Internal Revenue) commissioner to take a look at this company, how you can collect taxes on the sales they made in the country,” Drilon said.

Drilon cited Section 23 of the NIRC, which states that “A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.”

He also cited Section 22 where the term “resident foreign corporation” clearly applies to a foreign corporation engaged in trade or business within the Philippines.

Xuzhou is a resident foreign corporation. Robin Han, who has been representing the company since 2012, admitted they did not pay income taxes in the Philippines, but paid taxes in China.

Drilon, however, said the country’s tax laws mandated that foreign corporations should pay income tax: “You entered into a transaction in the Philippines where you made income and therefore under Philippines laws, you are liable for income taxes.”

Certified public accountant Mon Abrea, who was present at the hearing, concurred with Drilon, saying that Xuzhou should have paid 25 percent income tax.

Drilon said Xuzhou’s admission “necessitates a deeper inquiry into tax liabilities of several foreign companies engaged by the PS-DBM in the supply of allegedly overpriced face masks and other medical supplies.”

Xuzhou also admitted that it is not registered with the country’s Securities and Exchange Commission or with the Bureau of Customs (BOC).

The BIR issued a “Certificate of No Records Available of Income Tax Return” on the corporation. The BOC also certified that it is not an accredited importer.

Xuzhou was never engaged in the transaction of medical supplies prior to 2020, Drilon noted.

Reforms at DBM

Senators also pushed for a measure to stop the PS-DBM from being cavalier with billions of taxpayers’ money.

During the DBM budget briefing at the Senate yesterday, Drilon said general provisions can be placed in the 2022 General Appropriations Act to at least prevent a recurrence of controversial deals between PS-DBM and Pharmally involving the alleged overpriced PPEs purchased with Department of Health funds.

“The reforms that should be instituted now… Can you (DBM) and Government Procurement Policy Board issue a circular which will address all these problems that we have encountered? All of the shenanigans that were made possible,” Drilon told DBM officer-in-charge and Undersecretary Tina Canda.

The PS-DBM was established in 1978 to be a self-sustaining agency as central procurement arm of the government for common-use supplies and materials used by agencies in their day-to-day operations, including pencils and bond paper.

Senators meanwhile described as “absurd” the claim of a lawyer that the Office of the Senate Sergeant-at-Arms (OSAA) has no authority to order the arrest of two more Pharmally executives over their refusal to submit documents subpoenaed by the panel.

Sen. Richard Gordon, chairman of the Blue Ribbon committee, said lawyer Ferdinand Topacio was mistaken when he stated that OSAA has no authority to arrest his clients, Pharmally corporate secretary and treasurer Mohit Dargani, and his sister, company president Twinkle Dargani, outside Senate premises.

“This will lead to a really stupid situation where a co-equal branch is rendered inutile because its supposed jurisdiction is restricted to where its building is situated,” Gordon said.

Activist group Bagong Alyansang Makabayan (Bayan), for its part, has called for the immediate blacklisting of Pharmally Pharmaceutical and the filing of criminal charges against its officials, following the initial findings of the Blue Ribbon committee on the supposed irregularities in the procurement of COVID supplies.

“With the Senate Blue Ribbon committee’s initial report on the Pharmally probe, it is necessary that immediate action be taken by concerned government agencies,” Bayan secretary-general Renato Reyes said in a press statement.

“The ombudsman can already take note of the committee report to initiate its own investigation. The Department of Justice (DOJ) can also do the same on the basis of the Senate report which already recommended criminal charges be filed,” he added.

Meanwhile, the National Privacy Commission (NPC) said that the Data Privacy Act (DPA) of 2012 could not be invoked to avoid questions during congressional hearings delving into matters of public interest.

Privacy commissioner Raymund Liboro, in a statement issued yesterday, said the DPA “does not prohibit the disclosure of personal or sensitive personal information when necessary for purposes of complying with validly issued subpoenas by government investigating bodies.”

The NPC’s statement came as Pharmally officials have cited the DPA as among the reasons for declining to provide documents to the Senate committee.

The Bank Secrecy Law and Corporation Code were also cited for the refusal to turn in documents.

At Tuesday’s Blue Ribbon hearing on government’s awarding of about P42 billion worth of contracts for the procurement of supplies for pandemic response, Gordon said the committee already has initial findings which warrant the filing of criminal charges against businessman Michael Yang, a former presidential economic adviser, Overall Deputy Ombudsman Warren Liong, former budget undersecretary Lloyd Christopher Lao and several executives of Pharmally including Linconn Ong, Mohit Dargani and Krizle Grace Mago.

Among the criminal charges recommended were violation of Republic Act 3019 or the Anti-Graft and Corrupt Practices Act, estafa, fraud, perjury and falsification of public documents under the Revised Penal Code. –  Elizabeth Marcelo, Rainier Allan Ronda, Louella Desiderio