BIR urged to check PS-DBM deals with China firm over possible 'unpaid' taxes

The Bureau of Internal Revenue main office in Quezon City. (File photo from Philippine Daily Inquirer)

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is investigating the 45 suppliers that bagged a total of P42 billion in government contracts for the purchase of pandemic-related supplies in 2020 to see if they paid the proper income taxes on the transactions.

“Investigation of identified 45 suppliers is being undertaken by concerned revenue district offices per memos of the commissioner issued in September,” Sen. Sonny Angara during Wednesday’s plenary debates on the 2022 budget, quoting the BIR’s submission to the Senate.

Angara, chairman of the Senate finance panel, was defending the proposed budget of the Department of Finance (DOF). The BIR is under the DOF.

The BIR probe comes in light of the investigation of the Senate blue ribbon committee into the government’s pandemic-related purchases last year.

In the course of the inquiry, senators repeatedly questioned the Department of Health’s transfer of P42 billion to the Procurement Service of the Department of Budget (PS-DBM) and Management for the purchase of pandemic response supplies.

READ: Gov’t entitled to around P7.5B in taxes from PS-DBM deals, says Drilon

A portion of this amount went to over P8.6 billion worth of contracts awarded to Pharmally Pharmaceutical Corp. in 2020. Senators doubted the financial capacity of the firm since it was only established in 2019 with a small capital of P625,000 when it secured the supply deals.

The BIR, in its submission, said the PS-DBM haD so far remitted withholding taxes worth P736.992 million in 2021.

In 2020, the PS-DBM remitted P1.07 billion in withholding taxes, according to the BIR.

Meanwhile, Drilon noted that the BIR had tasked its district offices to conduct the investigation when the bureau’s head office should instead hold a special tax audit.

“We are surprised by that. Can we have a special tax audit of these companies since these are very substantial amounts? And you know, if you pass this on to the regional offices nothing will happen,” he said, speaking in a mix of English and Filipino.

According to Angara, BIR Commissioner Ceasar Dulay told him that the companies were located in different revenue districts.

“Thus, the information is deposited or contained in those particular districts so it would be very complicated to have a single investigation of all of them,” Angara said.

But Drilon said the situation described by Angara was “not impossible to remedy in order to make the examination more efficient.”

“I cannot understand and I cannot accept the proposition that you spread out the examination to the regional offices when in fact, if I recall [correctly], a special tax fraud investigation can be done. Why are we not doing that?” the minority leader asked.

Citing Dulay, Angara said the reports from the districts would be consolidated and given to the Senate.

“The earliest possible [time] would be the end of the year. That’s the earliest possible because it’s quite a laborious exercise according to the commissioner,” Angara said.

Audit investigation

Angara also said he received a copy of Dulay’s internal memorandum alerting the BIR regional and district directors for the conduct of an audit investigation to assess the possible tax liabilities of individuals tagged in the investigation of the blue ribbon panel.

READ: Yang, Lao, firms linked to Pharmally didn’t file ITRs for several years — Drilon

“Commissioner [Dulay] has also given us a copy of this his internal memo to at least 11 regional directors of the BIR and attention to at least 20 revenue district officers for the conduct of an audit investigation for taxable years 2019 and 2020 with the list of the taxpayers to assess their potential liabilities and any potential penalties that could be levied,” Angara said.


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