Internal Revenue Commissioner Romeo Lumagui Jr.
The Bureau of Internal Revenue (BIR) on Thursday filed criminal complaints at the Department of Justice against four “ghost corporations” selling fake receipts that deprived the national government of some P26 billion in revenues for the years 2019-2021.
Internal Revenue Commissioner Romeo Lumagui Jr. said in a statement that the amount of forgone income included P17.63 billion in income taxes and P7.91 billion in value-added tax (VAT) collection, plus surcharges and interest considering that taxes were not paid because fake receipts were used to evade payment.
“The companies [that were the subject of the BIR complaints] were only established for the sole purpose of selling fictitious sales invoices and/or receipts to their buyers for the latter’s claim of false and anomalous purchases,” Lumagui said.
Charged were Buildforce Trading Inc., Crazykitchen Foodtrade Corp., Decarich Supertrade Inc., and Redington Corp.
They are facing complaints for alleged violation of Sections 254 (attempt to evade tax), 255 (failure to supply correct and accurate information in tax returns), and 267 (declaration under penalties of perjury) of the National Internal Revenue Code of 1997, also known as the Tax Code.
Lumagui explained that the ghost companies sold fake receipts for bogus services or transactions, which their buyers, particularly businessmen, used to deduct from their taxable revenues or their VAT obligations.
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Under the law, taxpayers, especially businesses, may reduce their taxable income by showing receipts to prove that purchases were made.
He said the BIR already has a list of businesses that were found to have bought the fake receipts from these ghost corporations.
“We’re also filing and preparing cases against the buyers of these receipts,” he added.
“The taxpayers and businesses who used these fictitious receipts will be audited by our examiners,” he added.
“Our main goal here is to put these fraudulent activities to a halt with the high hopes of increasing voluntary tax compliance,” Lumagui said.
Modus operandi
“If you recall, we caught a company, actually a syndicate, selling fake receipts. That’s their business. They have no transactions, they put up corporations specifically to sell fake receipts,” said Lumagui.
“This syndicate establishes a corporation. So if you look into it, the corporation is registered. They obtain receipts that are actually registered, but the transactions are fake,” he added.
Lumagui said these corporations could not be found in their registered addresses and they have no properties and any transactions that would show that they sell products or offer services based on the issued receipts.
According to the BIR, the cases stemmed from a December 2022 raid on a condominium unit in Quezon City that led to the seizure of thousands of fictitious receipts.
The BIR said that after the raid, an investigation showed that the ghost corporations were only established for the sole purpose of selling fictitious sales invoices and receipts to their buyers for the claim of false and anomalous purchases.
“It is clear that this is in violation of our law on tax evasion. In addition to this, of course, is the tax liability with all the penalties and surcharges that will be imposed,” added Lumagui.
He warned similar ghost corporations to stop offering fake services for receipts, saying the BIR would file complaints against them.
He also urged the public to pay the right amount of taxes.
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“I hope that everyone doing this kind of illegal activity will stop because we will monitor this, we will arrest you, and we will file charges against you,” the BIR chief pointed out.
Intensified drive
Lumagui described the financial magnitude of the scheme of issuing fictitious receipts as alarming.
In 2022, BIR collections increased by 12.4 percent to P2.34 trillion from P2.08 trillion a year earlier.
However, last year’s collections fell short of the P2.4-trillion target by 2.4 percent or P56.9 billion.
“I wish the public to know, particularly those who pay their taxes appropriately, the importance of all BIR efforts, especially our intensified enforcement activities,” Lumagui said. “I will not allow these anomalies to continue.”
In November 2022, the BIR raided a warehouse in Manila where they found millions of pesos worth of illegal vape products.
The following month, the agency filed criminal complaints against five people allegedly selling the smuggled and untaxed vape products.
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Facing complaints for tax evasion and unlawful possession before the DOJ were Wei Fong Bao, also known as Sofi Chua, Christina Poa, Sandoval Severino Briones, Jimy Go, and Bibiano Lesaca.
In January, Lumagui supervised a coordinated raid of warehouses and stores where contraband cigarettes were sold or stored across 21 provinces and 69 cities.
The government is losing as much as P100 billion in tax revenues from the illicit tobacco trade, which is intended to fund basic services, including the Universal Health Care program and other national development goals.