[Ask the Tax Whiz] The Pharmally case: Breaking down tax and financial missteps

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The Philippine Tax Whiz discusses the information you need to know about the Pharmally case

The Office of the Ombudsman’s latest efforts to pursue graft charges against those involved in the Pharmally case have drawn attention to the purported serious financial oversight and governance shortcomings in relation to the case. 

In September 2019, Pharmally Pharmaceutical Corporation was a newly registered company in the Philippines. The company operates as a wholesaler of medicine and pharmaceutical products. With an initial starting capital of P625,000 in cash, Pharmally managed to secure P8.68 billion worth of government contracts in the year 2020.

How did Pharmally go from a seemingly promising start to facing major issues?

It all started when the Senate blue ribbon committee investigated Pharmally in 2021. Concerns arose regarding the company’s ability to fulfill such large orders, given that it was a small, newly created firm that lacked funds, track record, and the credibility to handle major government procurement. As the investigation progressed, they uncovered material misstatements and unsubstantiated expenses that compromised tax reporting. Furthermore, executives were found to have endorsed erroneous tax returns without a thorough understanding of their content or the potential consequences.

Is Pharmally not paying the right taxes? 

Yes, based on the tax returns and documents forwarded by the Senate blue ribbon committee from the BIR, there is an estimated total tax deficiency of P6.3 billion, inclusive of penalties, surcharge and interest. The major findings include unsupported purchases, undeclared purchases, undeclared sales and disallowed VATable purchases. Pharmally is also liable for claiming deductions exceeding 30% of the actual deductions and for failure to supply correct information. Pharmally was not able to present the documents during the audit. The identified discrepancies indicate a lack of due diligence, which jeopardizes financial transparency and erodes public trust.

Robust compliance measures are crucial for avoiding these hazards. The Pharmally case serves as a strong warning for businesses to improve their financial governance and ensure compliance with tax laws. As part of our advocacy, Asian Consulting Group provides competent tax solutions to assist businesses in effectively resolving tax concerns, ensuring that taxes are never their problem. 

The content provided in this article above is for general purposes only. If you want to know more about the Pharmally case, CONSULT ACG or email us at consult@acg.ph

– Rappler.com