Witness bares Pharmally’s P3.4B tax ‘false entries’

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PHARMALLY Pharmaceutical Corporation has P3.4-billion worth of undocumented purchases, which the embattled firm could have allegedly listed in its audited financial statements submitted to the Bureau of Internal Revenue (BIR) so it can pay lower income taxes, a tax expert yesterday told the Senate Blue Ribbon committee.

Tax expert and BIR consultant Mon Abrea said Pharmally declared purchases of P7.2 billion but only P3.8 billion were documented, while P3.4 billion did not have supporting documents.

Abrea examined the financial records of Pharmally that the BIR forwarded to the Senate panel, which has started an inquiry in aid of legislation into the firm’s allegedly questionable transactions with the government after records showed that the Department of Budget and Management’s Procurement Service (PS-DBM) awarded billions-worth of contracts to the company that only had less than a million pesos in paid-up capital.

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Testifying at the 14th hearing of the Senate Blue Ribbon committee, Abrea said the firm’s audited financial statement indicated P3.2 billion in its summary list of purchases and P600 million in its list of importation.

“Ibig sabihin, P3.4 billion ang hindi nakadeklara sa BIR pero dineklara nila sa kanilang audited [financial statement] bilang audited… kaya po siguro ang tanungin natin ang gumawa ng FS, saan nanggaling ‘yung P3.4 billion? (This means that P3.4 billion was not declared to the BIR but they declared it to their audited financial statement. We should ask the one who made the financial statement, where did the P3.4 billion come from?” Abrea said.

Abrea said unsupported purchases are ones which do not have any declared suppliers or amount of purchases on record.

“Overstatement po ‘yan. Ibig sabihin po madalas po hindi po talaga totoo ‘yung expenses, wala po talagang resibo, ginagawa lang ng iba ‘yun para makapandaya or para mapababa ‘yung buwis na babayaran (That is an overstatement. More often than not, the expenses are fictitious, there are no receipts. It is done to cheat the government or to lower the income tax to be paid),” he added.

Sen. Richard Gordon, Blue Ribbon committee chairman, asked Abrea if Pharmally could have falsified the P3.4 billion unsupported purchases, to which the tax expert said it was possible.

Aside from explaining the undocumented purchases, Abrea also said that Pharmally should clarify its claim that it paid P95 million in income taxes but has actually paid only P21 million.

Senate Minority Leader Franklin Drilon said Pharmally’s records could be considered as “false entries” which is punishable by imprisonment. Foreigners involved can also be deported.

“The support documents for the financial statements should be produced… (Pharmally president Twinkle) Dargani has refused to produce them because doon po lalabas ang kalokohan, kapag nakikita natin kung wala namang purchases na nagkakahalaga ng P3.4 billion (Dargani refused to produce them because that’s where they could be caught, when we see there are no purchases worth P3.4 billion),” Drilon said.

He added: “Ibig sabihin, dinadaya nila ‘yung kanilang income taxes, dinadaya nila ang taumbayan. Ang laki na nga ng nakuha nila, dadayain pa. Kumita na nga sa overpricing, kumita pa sa [hindi] pagbabayad ng buwis (This means that they are cheating their income taxes and the Filipino people. They already got a huge amount of money and they still have the gall to cheat their taxes.)”

The Senate panel has earlier cited Dargani and her brother Mohit in contempt for refusing to submit documents that have been subpoenaed by the committee.

Drilon complained the Senate panel cannot exhaustively look into the firm’s “cost of sales” worth P7.2 billion because they do not have the necessary documents from Pharmally.

During yesterday’s hearing, the Senate Blue Ribbon committee cited former PS-DBM head Lloyd Christopher Lao in contempt for his failure to attend the hearing for the fourth time.
Records from Gordon’s office showed Lao was a no-show at Senate hearings on October 5, 19, and 28, and November 4.

The motion to cite Lao in contempt was raised by Sen. Francis Pangilinan, which was seconded by Sen. Risa Hontiveros.

Gordon said Lao has been skipping the hearings even if he was no longer covered by President Duterte’s order for his Cabinet members not to attend the hearings anymore.

“Wala ka na po sa gobyerno, kailangan humarap ka (You are are no longer with the government so you must attend the hearings),” Gordon said of Lao.

Gordon’s panel has been investigating the P42 billion COVID-19 funds of the Department of Health which was transferred to the PS-DBM which then awarded more than P10 billion worth of contracts to Pharmally, that only has a P625,000 paid-up capital.

In the course of the investigation, senators have discovered the link of Michael Yang, former presidential economic adviser to Pharmally.

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