Senate Minority Leader Franklin Drilon on Sunday said he would look into tax records and tax liabilities of Pharmally Pharmaceutical Corp., the company that bagged over P10 billion in deals from the Procurement Service of the Department of Budget and Management.
“From what has been shown, it is not clear that Pharmally has paid the correct taxes,” said Drilon, as he cited the glaring red flags found by the Commission on Audit in the Department of Health’s financial statements that included the disbursements to PS-DBM to buy medical equipment to battle COVID-19.
Drilon said PS-DBM was headed by resigned Undersecretary Lloyd Christopher Lao, who had worked under Senator Christopher “Bong” Go, the longtime aide of President Rodrigo Duterte.
In a related development, Vice President Leni Robredo has called Malacañang’s move to question the past administration’s purchase of personal protective equipment (PPE) a “lame attempt” to divert the issue hounding the Duterte government.
Robredo’s remarks came after Malacañang said the Aquino administration bought PPEs at a costlier P3,500 to P3,800 per set, just as senators questioned the current administration’s purchase of medical supplies, including allegedly overpriced PPEs at P1,700 per set, for the pandemic.
According to Drilon, Bayanihan 1 and 2 did not exempt local purchases from Value Added Tax. Due to this, he said the amount paid to Pharmally should have been subject to a 2 percent withholding tax on government payments, and a 5 percent VAT withholding.
Furthermore, he said the sale of the PPE to government was subject to an output VAT of 12 percent because the product they imported were exempt therefore, they would not have any input VAT to deduct except for the 5 percent VAT withheld if this was properly withheld from the payment to Pharmally by PS-DBM.
“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 asked.
Based on records, Pharmally is classified as a domestic corporation subject to the provisions of Section 27 of the Tax Code, he noted.
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, reports said there was no record of Pharmally obtaining any tax clearances, according to Drilon.
The opposition senator 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 P7,092,274,180 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.
Robredo said the procurement of the pricier PPEs during the Aquino administration was aboveboard, unlike the Duterte administration’s purchase which was done without public bidding and whose suppliers and background are being questioned.
President Duterte last week said the Senate should not investigate ongoing programs, accusing senators of using the probe “for no purpose at all but to create noise.”
Robredo belongs to the same political party as the late former President Benigno Aquino.