Receipts for sale

THE recent weeks before the close of the year 2022 had several newspaper accounts disclosing the discovery by government authorities of the nefarious sale of fake official receipts by scheming entities. National Bureau of Investigation and Bureau of Internal revenue (BIR) agents raided several establishments possessing printed documents, including official receipts, invoices, and other business documents. Apparently, these printed fake documents were being sold by the printers of these papers to business enterprises attempting to evade the payment of taxes and customs duties by padding up their deductible expenses and value-added tax credits.

Newspaper accounts revealed that these illegal activities were being conducted in such establishments as condominiums, including one in Eastwood City, and printing presses. BIR officials estimate that the losses arising from these activities amount to billions of pesos of foregone tax collections.

This should be a cause for concern for our tax-collecting bureaus and the business community. The tax revenues being lost due to these practices represent a significant amount that should have been part of the government coffers to support the public expenditure requirements. This also shows the extent that some businesses will resort to in order to cut back on their payment of taxes. These entities can very well be capable of pursuing other irregular activities, including the conduct of unfair business competition and even deceiving their customers who may be buying their sub-standard products and services.

Apparently, this practice of selling fake receipts and invoices has been in place for some time already. A random search on the Internet for information on the sale of official receipts indicates that these irregularities have been happening not only in the Philippines but also in other countries.

In 2011, a BIR press release disclosed that it had filed tax evasion charges against Gammon Metal Products Inc. (Gammon), a duly-registered domestic corporation engaged in the manufacture of metal, plastic, electrical and industrial products. The BIR discovered that Gammon had fabricated its claimed purchase receipts from certain suppliers. It was verified that these suppliers did not file any tax returns, or were non-existent entities. As a result, BIR filed tax fraud charges against Gammon for its failure to “substantiate purchases from simulated transactions with sham companies that resulted in over-claim of VAT input taxes, and thus, substantial under-declarations of taxable income.” The BIR computed that tax deficiency assessments of over P1.7 trillion were due from Gammon.

Newspaper accounts revealed that these illegal activities were being conducted in such establishments as condominiums, including one in Eastwood City, and printing presses. BIR officials estimate that the losses arising from these activities amount to billions of pesos of foregone tax collections.

Information from the Internet also indicates that these practices of selling official receipts to defraud the government of tax revenues also have happened in Australia, the United Kingdom, and China.

Government authorities should be vigilant that this selling of receipts crime is mitigated. The BIR has several digital tools and technology to deter and detect these practices. Its Reconciliation of Listings for Enforcement makes use of third-party information that the BIR receives to counter-check the veracity of claimed receipts and expenses of taxpayers. The BIR launched the Electronic Invoicing/receipting System in July 2022, which requires taxpayers to issue digital receipts instead of the manually issued invoices. I just hope that the cases filed against Gammon and other similar cases will soon result in the conviction of the perpetrators.

The Certified Public Accountant external auditors also have their stake and responsibility in combatting the receipts for sale practice. Though it is difficult for CPAS to detect a well-orchestrated fraud in business transactions, the external auditors should exercise more diligence and effort in assessing these risks.

In the end, we all wish that the crime of receipts for sale does not pay.

Joel L. Tan-torres was the former Dean of the University of the Philippines Virata School of Business. Previously, he was the Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy, and partner of Reyes Tacandong & Co. and the Sycip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979. He is now back to his tax practice with his firm JL2T Consulting. He can be contacted at joeltantorress@yahoo.com