Drilon bares tax returns of Pharmally officials, other PS-DBM contractors

Senate Minority Leader Franklin M. Drilon bared the income tax returns of executives of Pharmally and of other suppliers that bagged multi-billion contracts from the Procurement Service of the Department of Budget and Management (PS-DBM).

Drilon made the disclosures after moving to make public, in accordance with Senate Rules, the tax records of the suppliers and their officials that bagged the bulk of the P42 billion fund transferred by the Department of Health to PS-DBM. These tax returns were submitted by the BIR to the Blue Ribbon committee in executive session.

Despite bagging over P10 billion worth of supply contracts in 2020 alone, the income tax returns (ITRs) of Pharmally revealed that the company claimed a tax credit of P96,089,293 in 2020 and listed an overpayment of P589,163 in same year, according to Drilon.

"May utang...may reimbursement pa," Drilon quipped in disbelief.

Drilon also urged the Bureau of Internal Revenue (BIR) to form a task force for the specific purpose of special audit on the tax returns made by suppliers, which he estimated to yield P7.5 billion in potential tax.

"Apart from the overpricing, apart from the unqualified suppliers and apart from the preference on foreign suppliers, it is incumbent upon this committee to look into the tax liabilities of these companies. This is something that we have to look at, " Drilon said.

Drilon's move was prompted by the admission of the country representative of Xuzhou Construction that the company did not pay any income tax. The company bagged over P2.23 billion worth of contracts from PS-DBM but did not pay a single peso of income tax.

Some of these are Pharmally that cornered over P10.40 billion, Element Trade Limited with P6.99 billion, Sunwest Construction and Development Corp. with P5.22 billion, Xuzhou, P2.23 billion, and Hafid N' Erasmus Corp. with P1.91 billion.

"Ang tanong: nagbayad po ba ng buwis? Magkano po ang ibinayad nila?" Drilon asked.

"How much income taxes were paid by these suppliers?" he asked.

"It appears like there could be violations of our tax laws. We should examine the potential tax liabilities of these companies, officials and employees," Drilon emphasized.

Drilon also bared the tax returns of the company's key officials. Its president, Twinkle Dargani, paid only P29,187 in 2018 and P1,000 in 2020. There was no information available for 2019.

Her brother, Mohit Dargani, paid P97,241 in 2020 but the BIR record marked it "suspended status." In 2019, the record revealed that Mohit paid P22,062 income tax.

Drilon recalled that it was in 2020 and 2021 when Pharmally officials including Twinkle Dargani bought several luxurious cars.

Drilon also bared the tax returns of Davao-based businessman Michael Yang, who the officers of Pharmally admitted to have funded their initial contracts with PS-DBM. Based on the BIR submissions, it appeared that Yang did not file his ITRs for taxable years 2014 to 2017. For the year 2018, Yang declared a taxable income of P208,000 and paid P7,600 tax. His records for 2019 and 2020 are unreadable.

Meanwhile, there was no record of tax returns for the year 2019 for Pharmally's chairman, Huang Tzu Yen, Drilon noted.

Drilon said that based on his own computation, there is a potential income tax of approximately P7.5 billion, out of the P42 billion funds, that should have been remitted to the government. Drilon clarified that his computation is subject to further verification.

Assuming the entire amount of P42 billion was fully obligated and disbursed, the government can collect as much as ?P7,560,000,000 in income taxes. The amount is based on the allowable 40% optional standard deductions of the gross sales or receipts, under Sec. 32 (L) of the NIRC providing for the Optional Standard Deduction, Drilon explained.

Section 32 (L) provides that "In lieu of the deductions allowed under the preceding Subsections, an individual subject to tax under Section 24, other than a non-resident alien, may elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or gross receipts, as the case may be. In the case of a corporation subject to tax under Sections 27(A) and 28(A)(1), it may elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32 of this Code."