Senate Minority Leader Franklin Drilon said on Sunday, September 5, that he will look into the possible tax liabilities of Pharmally Pharmaceutical Corporation in relation to its multi-billion pandemic contracts with the government.

In a statement, Drilon said that it is “not clear” whether the company had paid the correct taxes.

“Bayanihan 1 and 2 does not exempt from VAT (value added tax) 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,” said Drilon.

Bayanihan 1 and Bayanihan 2 are the laws that set some guidelines and funded various programs for the country’s COVID-19 response.

The senator added that Pharmally’s sale of personal protective equipment (PPE) to the 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 the Procurement Service of the Department of Budget and Management (PS-DBM).

Pharmally only had P625,000 in paid-up capital, according to government documents obtained by Rappler. The documents also showed that Pharmally did not have any activity in 2019 except payment of taxes and licenses. But in 2020 alone, it bagged P7.9 billion in government contracts even if it did not meet the financial capacity requirement in line with the country’s procurement law.

In 2021, Pharmally won more contracts worth P2.3 billion.

“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 said.

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The senator also contended that a company should have a tax clearance from the Bureau of Internal Revenue (BIR) before it could participate in a government bidding. “However, there are reports that there was no record of Pharmally obtaining any tax clearances,” said Drilon. 

The controversy should trigger a tax audit by the BIR, he added.

Drilon also questioned how the company obtained over P7 billion to fund its inventory supplies, given its P625,000 paid-up capital.

“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,” argued Drilon.

The Commission on Audit on Friday, September 3, said it will also take a closer look into Pharmally’s contracts with PS-DBM. – Rappler.com