BIR places P1.7 billion tax evasion cast on metal and plastic products manufacturer for using sham companies and claiming fictitious deductions

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GAMMON METAL PRODUCTS, INC. (GAMMON), a duly-registered domestic corporation engaged in the manufacture of metal, plastic, electrical and industrial products, was charged today with tax evasion at the Department of Justice (DOJ) after the Bureau of Internal Revenue (BIR) filed a criminal complaint against it for willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information in its income tax returns (ITR) and Value Added Tax (VAT) returns during taxable years 2007 and 2008, in violation of Sections 254, 255 and 267 of the Tax Code of 1997, as amended.

Likewise included in the charge sheet was JOAQUIN CHUA (CHUA) in his capacity as President of GAMMON.  CHUA signed the income tax and VAT returns in question.

Records of investigation showed that GAMMON filed its ITRs and VAT returns for 2007 and 2008. As a matter of audit procedure, investigators checked the suppliers of GAMMON with the BIR’s Integrated Tax System.

The random check made by the BIR revealed that some of the GAMMON’s suppliers did not file any tax return for 2007 and 2008. The suppliers were in fact non-existent and thus, sham companies. Moreover, GAMMON failed to substantiate its claim of purchases from said suppliers when asked by the BIR, prompting the latter to disallow the VAT input taxes claimed by the company from said purchases in question.

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

Such 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.

GAMMON was assessed an estimated total deficiency tax liability of P1.7 billion for the two year period 2007 to 2008, including surcharges and interests, broken down as follows: IT – P1.2 billion; and VAT P.5 billion.

The case against GAMMON METAL PRODUCTS, INC. and its President JOAQUIN CHUA is the sixtieth (60th) filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.