Press Release
September 5, 2021

Drilon sees potential tax liabilities of Pharmally
Drilon also questions how Pharmally got P7 billion to buy its inventory of supplies. Did the P7B just fall into its lap?

Citing glaring red flags in its financial statements, Senate Minority Leader Franklin M. Drilon said he will look into tax records and tax liabilities of Pharmally Pharmaceutical Corp., the company that bagged over P10 billion deals from the Procurement Service of the Department of Budget and Management headed by resigned Undersecretary Lloyd Christopher Lao.

"From what has been shown, it is not clear that Pharmally has paid the correct taxes. Bayanihan 1 and 2 does not exempt from VAT local purchases, therefore, the amount paid to Pharmally should have been subject to a 2% withholding tax on government payments, and a 5% VAT withholding," Drilon said in a statement on Sunday.

"Furthermore, the sale of the PPE to government is subject to an output VAT of 12% because the product they imported are exempt therefore, they would not have any input VAT to deduct except for the 5% VAT withheld if this was properly withheld from the payment to Pharmally by PS-DBM," Drilon said.

"Apart from the issue of overpricing, there could be violations of our tax laws by Pharmally. We should examine the potential tax liabilities of this dubious trading firm. Did Pharmally pay any percentage tax? Did it pay any excise tax and documentary stamp tax payments?" Drilon stressed.

Based on records, Pharmally is classified as a domestic corporation subject to the

provisions of Section 27 of the Tax Code, he noted.

In order for a company or entity to participate in government bidding, the companies need to get a tax clearance from the Bureau of Internal Revenue. However, there are reports that there was no record of Pharmally obtaining any tax clearances, according to Drilon.

Drilon said the controversy should trigger a tax audit by the BIR.

"The BIR should review possible violations of the tax laws committed by this dubious and shadowy company that bagged billions of pesos in government contracts. They should zero in on potential tax crimes and tax fraud by Pharmally," he added.

Drilon also labelled as mysterious and highly questionable how Pharmally acquired over P7 billion to fund its inventory supplies.

Based on its financial statement, Pharmally has P7,485,401,046 sales and P7,092274,180 cost of sales. It reported a cost of inventory of P7 billion while its liabilities only stand at P1,748,879.

"Where did it get the P7 billion to buy their inventory of supplies with only P625,000 paid up capital? How did they acquire the inventory?" Drilon asked. "There is none on record that will show a payable or equity close to P7 billion. It remains a mystery."

"There is no indication where the P7 billion came from. Without any explanation, it appears that it just fell into its lap. Pharmally executives should come out and explain this among other things," Drilon said.

With a paid-up capital of only P625,000, Pharmally recorded a gross income of P384.04 million and a net income of P264.65 million in 2020 from a zero income in 2019.

Drilon had earlier urged the officials of Pharmally to face the Senate and testify about the over P10 billion supply deals they got from Ps-DBM.

"Kung wala kang itinatago, bakit ka magtatago? Where are the officials of Pharmally?" Drilon said.

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