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Evidence hidden from Bureaus of Customs and of Internal Revenue in Shell case? Evidence hidden from Bureaus of Customs and of Internal Revenue in Shell case?


TODAY Editor in Chief

20 Aug 04

As the fingerpointing among concerned parties and calls for investigations into the “bungling” of cases filed by the State against tax-credit scam culprits are mounting, the signs of where the paper trail for the government sleuths that were disrupted — owing to suppressed evidence — have begun to emerge.

In many instances, the Bureaus of Customs and of Internal Revenue, the top revenue collectors of the government that are now the easiest targets for blame tossing, were in fact not provided vital documents and information needed to successfully prosecute cases against the original holders and transferees of the fraudulently obtained tax-credit certificates (TCCs), both in the criminal and collection aspects.

This may be gleaned from the documents covering checks, payments and corresponding vouchers linking, for instance, the biggest transferee, Pilipinas Shell Petroleum Corp. (Shell or PSPC), to the 11 companies set up by Faustino Chingkoe who, with wife Gloria, are believed to have cornered the bulk, or P2.5 billion of the estimated P5 billion in fraudulently obtained TCCs.

Today obtained photocopies of the check payments and vouchers of Shell, showing the oil company paying for 90 percent (because of the discount) of the face value of the tax credit, to Chingkoe’s companies — many of them believed to be Shell corporations that simulated manufacturing activities (garments for export) in order to avail themselves of the tax credits.

The checks and vouchers are important in the BIR’s P685-million case against Shell — that won against the government last week in a ruling by the Court of Tax Appeals — because they would raise the simple question of why, if Shell had claimed in court it was delivering oil to Chingkoe’s firms in exchange for the tax-credit entitlement, was it still paying for 90 percent of the TCC’s value? Why would a giant corporation be so “generous” as to deliver a good (oil) for a tax-credit swap, yet still pay out so much money? All in all, at least 87 checks were issued in the course of the relationship between oil company and the Chingkoe firms.

Highly reliable information indicates that the interagency body that is supposed to serve as the fulcrum or nerve center of all government efforts to prosecute and recover lost revenue, the Special Presidential Task Force (sptf) 156, did not provide the BIR with the checks and vouchers — evidence so crucial to pinning down the oil giant. The task force had the evidence in hand since two years ago, investigation by Today shows.

The checks and vouchers later became part of a 4,000-page investigation report on 11 Chingkoe firms.

Because it was not provided with such crucial legal ammunition, all that complainant BIR could show in court were deeds of assignment and receipts covering oil deliveries in an apparent simulation of the swap. Earlier, such huge volume of oil deliveries to Chingkoe’s tiny corporations had sounded alarm bells in the Department of Finance, blowing the lid off the tax-scam case.

When the DOF’s One-Stop Shop Tax-Credit Center canceled the TCCs, the tax debit memos of the BIR were subsequently voided, leaving the BIR with the empty bag. Thus, the BIR filed a tax deficiency case against Shell, covering the liabilities it supposedly covered with the TCCs. The basic deficiency excise tax was originally P285,766,987; plus surcharge for late payment of P142,883,493.50; and interest of P256,042,401.43 — hence, a total of P685 million.

In ruling against the BIR last week, the Court of Tax Appeals said there was a “lack of clear and convincing evidence of actual fraud” and that the period for recovering the tax had prescribed; although the BIR insisted that the prescription period does not run from the time the deficiency was committed, but from the time of discovery of fraud. However, since the majority in the CTA ruled there was no fraud proven, the prescriptive period was also invoked for dismissing the case. The BIR said it will appeal.

The BIR’s loss caps a series of legal setbacks that have hounded the government’s efforts to prosecute the culprits and recover as much as possible the revenue lost from the tax-credit fraud. This week, Today ran a story indicating the losses from civil cases are reaching the P2-billion mark, an alarming figure for a cash-strapped government that is facing an uphill battle in Congress to legislate new taxes. The clamor for the government to first plug the tax leakage from incompetence and graft has been greatly boosted by the fresh revelations of deliberate bungling in the tax-credit scam prosecution.

Besides the BIR’s heartbreak loss in the CTA, the series of dismissals of civil cases filed by the Bureau of Customs has also come to light. But in many cases, customs officials claimed they were unable to prosecute because most of the respondents could not be tracked, considering many of the companies were “shell” companies. Sources said, however, that since 2002, the sptf 156 had information on the owners and addrresses of the companies — information that, it turns out now, may not have been given to Customs.

The interagency sptf 156, which has a P2-million budget and ample support from the NBI, has so far been shielded from blame, with the individual agencies like BIR and BOC getting much of the flak. But Executive Order 156, issued in 2001 by President Arroyo — extending the life of the task force that was first created by former President Joseph Estrada — had greatly expanded the mandate of the task force, making it the central agency for investigating and prosecuting cases, and recovering revenue lost by the government.

In February Today ran several exclusive stories on the undercurrent of tension among state lawyers and investigators tapped by the task force to carry out its mandate, amid allegations that some officials were taking a dive, hiding crucial evidence, and worse, “burning witnesses” by having them included in rap sheets even after they had helped the government build its case against Chingkoe.

On Wednesday, Finance Secretary Juanita Amatong was reported to have ordered two undersecretaries, Inocencio Ferrer Jr. and Noel Bonoan, to investigate the reported bungling. Ferrer, however, chairs the task force himself, raising questions about his impartiality.

Sen. Juan Ponce Enrile, who first blew the whistle on the tax scam in a privileged speech in the Senate in 1999, said this week that he wanted more attention focused on the interagency task force.

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