BIR files P1.7B tax evasion suit vs metal manufacturer

BIR files P1.7B tax evasion suit vs metal manufacturer

Home Updated August 18, 2011 02:00 PM


MANILA, Philippines - The Bureau of Internal Revenue (BIR) filed today a P1.7-billion tax evasion case against a metal and products manufacturer for using sham companies and claiming fictitious deductions.

Charged was Gammon Metal Products Inc. (Gammon), a duly-registered domestic corporation engaged in the manufacture of metal, plastic, electrical and industrial products.

Names as respondent was Joaquin Chua, president of Gammon.

BIR Commissioner Kim Henares said in a press conference that Gammon was charged with tax evasion for its willful attempt to evade tax payment and deliberate failure to supply correct and accurate information in its income tax returns (ITRs) and value-added tax (VAT) returns in 2007 and 2008, which are in violation of Sections 254, 255 and 267 of the Tax Code of 1997.

Henares said that Chua was also charged in his capacity as president of Gammon who signed the income tax and VAT returns in question.

Investigation showed that Gammon filed its ITRs and VAT returns for 2007 and 2008. As a matter of procedure, investigators checked the suppliers of Gammon with the BIR's Integrated Tax System.

The random check made by the BIR showed that some of Gammon's suppliers did not file any ITRs for 2007 and 2008. The suppliers were in fact non-existent and thus considered as sham companies.

Moreover, Gammon failed to substantiate its claim of purchases from said suppliers when asked by the BIR, prompting the revenue collecting agency to disallow the VAT input taxes claimed by the company from said purchases in question.

Such failure to substantiate purchases from simulated transactions with sham companies resulted to over-claim of VAT input taxes and thus, substantial under-declarations of taxable income in the years 2007 and 2008.

The consistent and repeated acts of Gammon in using sales invoices from fictitious suppliers manifested its propensity to evade payment of taxes due to the government.

Henares said that Gammon was assessed an estimated total deficiency tax liability of P1.7 billion for the two-year period, including surcharges and interests such as P1.2 billion in income tax and P500 million in VAT.

The case against Gammon and Chua is the 60th filed under the BIR's Run After Tax Evaders (RATE) program.

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