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BUSINESS
groups have quietly alerted Malacańang Palace to an
open-ended congressional inquiry that they consider a
risk to their operations because it is forcing the
Department of Finance (DOF) to release its sensitive
database on the operations of companies applying for tax
credits.
While
Congress has the power to require an Executive office to
submit records and pertinent documents when Congress
performs policymaking and oversight functions, the
demand by Rep. Arnulfo Fuentebella for the DOF’s
One-Stop Shop (OSS) Tax Credit and Duty Drawback Center
to release to his office its entire database could
jeopardize the welfare of private businesses, according
to highly reliable sources.
Efforts
to reach the center’s executive director Ernesto Hiansen
at the weekend were in vain, but the sources said
Hiansen was reluctant to release the database to the
committee because Fuentebella had made very sweeping
claims of “continuing anomalies” in the tax-credit
system without giving specifics.
Giving
the database and the companies’ sensitive data could
open up the Executive to lawsuits, according to sources.
The
release of the database could only further shake
business confidence in the country, sources explained to
the BusinessMirror. The database contains confidential
and intimate details about the operational and financial
aspects of companies applying for tax-credit
certificates (TCCs). These data
are important in the evaluation by the DOF’s one-stop
center of the claims for TCCs of the claimant-firms, and
are the very bases of any TCC issuance or rejection of
claims. But while the center may demand these data from
the applicant firms, it is mandated by law to keep these
data confidential/ These details include financial
statements, list of foreign and local buyers and
suppliers, income statements, balance sheets, tax
returns, and other pertinent details—and revelation to
non-DOF parties can make a claimant-firm vulnerable to
competition and shakedown, sources explained.
The code
of conduct and ethical standards law requires all public
officials to keep secret the confidential information
submitted by private entities in the performance of
their mandate.
Other
sources said Finance Secretary Gary Teves, harassed by
the congressional demands, had given the go-ahead for
the release of the database, even though there are no
clear guidelines on how to release and use the data
contained in the center’s database. This unilateral
release could lead to its misuse.
At a May
13 public hearing called by the House ways and means
committee of Rep. Exequiel Javier, Fuentebella
reportedly followed up to the committee his motion for
submission of the database. This was followed by a
letter from the committee secretary, Mauricio Pulhin,
asking the DOF-OSS to submit as soon as possible a “soft
copy” of the center’s database of transactions for
1998-2008, specifically the issuances and transfers, and
status of cases filed against officials and employees of
the center.
The
congressional inquiry is apparently premised on
allegations that there are “continuing anomalies” in the
conduct of operations at the DOF-OSS, similar to the
messy setup that made it possible for unscrupulous
parties, with connivance from certain center personnel,
to carry out the infamous “tax-credit scam” during the
Ramos administration that drained the government of an
estimated P5 billion to P8 billion from 1994 to 1998.
Reforms
were carried out after then-President Estrada set up a
task force in 1998; further reforms were put in place
under President Arroyo in late 2003.
Besides
the OSS, the Bureau of Internal Revenue (BIR) and Bureau
of Customs also issue their own TCCs, and finance
department sources said the focus is unfairly zeroing in
on just the OSS, where reforms had brought down the
total amount of tax credits processed annually from a
high of P12 billion before the scam was unearthed in
1998 to only P3 billion.
At the
House hearing, Fuentebella reportedly alluded to
allegations of serious anomalies but did not provide
specifics, prompting fears that the inquiry may become
just a “fishing expedition.”
The
inquiry by Javier’s panel was based on the February 6,
2008, Resolution 442 of Fuentebella, directing the House
ways and means committee, chaired by Rep. Javier, to
conduct an inquiry “in aid of legislation” on the
“reported irregularities” on the issuances of TCCs by
the DOF-OSS.
Such
anomalies must be stopped, said the resolution, because
the cash-strapped government badly needs to plug all
revenue leaks to maintain its to fiscal program,
especially the 2008 national government total obligation
budget of P1.226 trillion.
It noted
how, over the past few years, tax credit irregularities
had been “suspected as a major source of revenue
leakages, resulting in the loss of billions of pesos in
potential revenues.”
Fuentebella’s resolution added: “Whereas, the assurance
of full integrity in the tax credit scheme of the One
Stop Shop Tax Credit and Duty Drawback, an office under
the Department of Finance, which is mandated to
formulate fiscal and financial policies and generate
revenues, will provide the best means to national
government to achieve a balanced budget without
resorting to new tax impositions nor increase on tax
rates.”
In a
slide presentation made at the congressional hearing,
Hiansen said that based on the official data of the
National Tax and Research Center (NTRC), the Philippine
government has issued a total of P1,420.19 billion in
fiscal incentives to various firms for the period
2001-2006, but the Center has issued TCCs amounting to
only P19.19 billion for the same period, or 1.35 percent
of the total amount. The rest were issed by BIR and
Customs.
Moreover, while the national government incurred a total
budget deficit of P956.26 billion for the entire
2001-2006, the center had issued only TCCs amounting to
P19.19 billion, barely 2 percent of the total budget
deficit for the same period.
Still,
Hiansen conceded that regardless of the amount, the
center should avoid committing any irregularity because
its mandate is to prevent the recurrence of any scam in
that agency.
That TCC
issuance has dramatically declined from an annual
average of P12 billion from 1995 to 1998 to an average
of P3 billion indicates that effective safeguards have
been installed, according to Hiansen, to prevent any
irregularity. |
