BIR files tax evasion case vs ‘ghost’ companies in fake transactions

SEVERAL months before Halloween, four “ghost” companies were discovered by the Bureau of Internal Revenue (BIR) that sued their respective executives for tax evasion.

This is the first tax rap made by the bureau under its recently-launched “Run After Fake Transactions,” or “RAFT,” program, BIR Commissioner Romeo D. Lumagui Jr. said. (Related story:

The case was filed against the corporations that the BIR discovered as engaging in fake transactions during a December 2022 raid at a condominium unit in Quezon City. The BIR said such transactions cost the government at least P25.5 billion in lost revenues.

Lumagui, who led the filing of the case, said this is just the start of a string of cases that the BIR would pursue against companies involved in fake transactions or issuance of fake receipts.

The BIR chief explained that the modus involves registered companies issuing receipts to another company for a non-existent product or service in order for the latter to avail of tax deductions.

Lumagui added the government’s possible losses due to this malpractice could reach about P100 billion, since the operations extend nationwide.

“We are just getting started. The financial magnitude of this syndicate issuing fictitious receipts is alarming. They are profiting from businesses through convincing their clients to ghost our tax authority,” the BIR chief said on March 16.

Case vs. buyers

ACCORDING to Lumagui, “taxpayers and businesses who used these fictitious receipts will be audited by our examiners.”

“I assure the whole force of the BIR that I will be with them every step of the way. We have a list of both buyers and sellers of these fictitious receipts,” he added.

The BIR said the four companies, which are all owned by Filipinos, did not have “any legitimate business activity” and were only established “for the sole purpose of selling fictitious sales invoices and receipts.”

“As a result of these companies’ fraudulent tax schemes, the government is losing an estimated total deficiency income tax amounting to P17.63 billion and total deficiency value added tax amounting to P7.91 Billion, for taxable years 2019-2021, inclusive of surcharges and interests,” the bureau said.

Lumagui said the BIR will also file a case against those who bought fake receipts from the four corporations since they are considered accomplices to the fraud.

“They know that they are not buying any legitimate services or products from these [ghost] companies. We will disallow their expenses because we know that they buy the fake receipts in order to be used in claiming tax deductions,” he said.

‘Strong’ case

LUMAGUI believes that the case they filed is “strong” given that they have submitted “complete” evidence to establish that the four “ghost” companies did not really have any legitimate business transactions.

“They do not even have a property. They do not exist in their addresses,” he said.

Among those charged were the Buildforce Trading Inc., Crazykitchen Foodtrade Corp., Decarich Supertrade Inc., and Redington Corporation and their officers.

They will undergo preliminary investigation for violation of Sections 254 (Attempt to Evade or Defeat Tax), 255 (Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation), and 267 (Declaration Under Penalties of Injury) of the National Internal Revenue Code of 1997 (Republic Act 8424).

Under Section 254, an attempt to evade or defeat tax is punishable by a fine not less than P30,000 but not more than P100,000 and imprisonment of not less than two years but not more than four years.   

It further states that the “conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for the collection of taxes.”  

Eyes 100 more

MEANWHILE, violation of Section 255 is punishable by a fine of not less than P10,000 and suffer imprisonment of not less than one year but not more than 10 years.   

Section 267, on the other hand, states that “any declaration, return and other statement required under this Code, shall, in lieu of an oath, contain a written statement that they are made under the penalties of perjury.”

It added that “any person who willfully files a declaration, return or statement containing information which is not true and correct as to every material matter shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised Penal Code.” 

Last week, Lumagui disclosed that the BIR plans to file cases against more than a hundred corporations involved in fake transactions within the year.

In the last week of January, the Commissioner himself orchestrated and supervised the nationwide raid by BIR regional officials in 21 provinces and 69 cities that targeted warehouses and stores where illicit cigarettes were sold or stored. The most recent nationwide enforcement activity was last February 2023, during the filing of tax evasion cases against 74 erring individuals and corporate taxpayers with total tax liabilities, inclusive of increments, amounting to approximately P 3.58 billion.

Webinars offered

MEANWHILE, the BIR announced also last Thursday that it will be conducting a series of webinars open to the public.

The webinar would focus on the Annual Income Tax Return (AITR) filing and payment of taxes for three cohorts.

The first webinar is for employees earning purely compensation as well as for mixed income earners to be held on March 16.

The webinar on the AITR filing and payment of taxes of self-employed and professionals would be held on March 22. The webinar for corporations and partnerships is scheduled on March 29.

The BIR said all interested taxpayers are requested to scan the respective QR Code for their preferred topic prior to the date of the scheduled webinar in order to register and join the discussion via the Zoom platform. The details with Zoom link will be provided to the taxpayer’s registered e-mail address since there will be limited slots available for each webinar, the BIR said.

Taxpayers who will not be accommodated via Zoom may still watch the webinars via Facebook Live at the BIR’s official Facebook page, the bureau added.


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