TAX NEWS - June 2010

Philippines Tax: Chingkoes also facing charges for tax evasion

MANILA, Philippines — The Department of Justice has decided to file separate tax evasion charges against businessman Faustino Chingkoe and three others accused of plunder in connection with a controversial multi-billion peso tax credit scam.

A DoJ resolution dated May 14 ordered the Office of the State Prosecutor to file a criminal case for violation of the tax code against Chingkoe and his wife Gloria.

The DoJ was acting on a complaint filed by the Bureau of Internal Revenue, accusing Chingkoe and other officers of the Diamond Knitting Corp. of not paying P104.5 million in taxes, including penalties and interest, from 1994 to 1997.

Chingkoe and his wife were chairman and treasurer, respectively, of the Diamond Knitting Corp. Also named were Benick Soriano and Reynaldo Andaya, who served as accountant and general manager, respectively, of the textile and clothing firm.

Deputy Revenue Commissioner Gregorio V. Cabantac said this will be "the first tax evasion case related to the tax credit scam."

"We have 20 other such cases awaiting DoJ decision," he added.

The tax case is separate from the plunder charges already filed against the Chingkoes for allegedly defrauding the government of a total of P2.5 billion through the sale of fake tax credit certificates (TCCs) in the mid-90s.

The amount represents half of some P5.3-billion worth of fraudulent TCCs sold to local oil giants Petron Corp. and Pilipinas Shell Petroleum Corp., among others.

A TCC is usually issued by the government to firms that import raw materials and then export the finished products. As an incentive, holders may use TCCs in paying taxes or they can sell them at a discount.

The Chingkoe's network of companies is believed to be the single biggest group that fraudulently acquired TCCs then sold them to big companies.

"The BIR is also requesting the issuance of warrants of distraint and levy against the properties of the respondents," Cabantac said.

The Chingkoes left the country last year after a DoJ Resolution found probable cause for the filing of plunder charges against them before the Sandiganbayan.

Warrants for their arrest in connection with the plunder case have already been issued.

The BIR expects new warrants to be issued in connection with the new tax evasion case.