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Trading company hit with tax evasion

The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against PKC INTERNATIONAL TRADING CORPORATION (PKC), its President JEREMY Z. KALAW, its Chief Operating Officer CHRISTIAN P. PINEDA, and Chief Financial Officer JOSEPH Z. KALAW for one (1) count of willful attempt to evade or defeat payment of Income Tax for taxable year (TY) 2011, three (3) counts of willful attempt to evade or defeat payment of Value Added Tax (VAT) for the first three quarters of TY 2011, one (1) count of willful failure to supply correct and accurate information in the Annual Income Tax Return (ITR) for TY 2011, and three (3) counts of willful failure to supply correct and accurate information in the VAT Returns for the first three quarters of TY 2011, all in violation of Section 254 and Section 255 of the National Internal Revenue Code of 1997, as amended (Tax Code).

PKC is a domestic corporation registered with the Securities and Exchange Commission engaged in the business of trading of goods such as sheet metal fabricating machine, tooling and other related products on wholesale and retail basis with business address at UG-4 Cityland Pioneer Condominium, No. 128 Pioneer Street, Mandaluyong City.

The investigation of PKC stemmed from a confidential information received by the BIR from a bona fide informer denouncing the company for tax evasion by deliberately underdeclaring its true and correct sales despite huge business transactions with its customers and by not regularly issuing sales invoices/official receipts.

Records of investigation showed that PKC submitted to the BIR lists of Sales Invoices and Delivery Receipts indicating total sales in the amount P42.14 million. Several PKC documents were also confiscated for failing to provide any entry in its books of accounts, in violation of the Tax Code.

Third Party Information provided by PKC customers – Genesis Integrated Projects, Inc., Pacific Glass Corporation, EBC Fabricators, Inc., ShrinpackPhilipines Corporation and Cornersteel Systems Corporation – disclosed the same amount of sales as reflected in the Sales Invoices and Delivery Receipts.

However, a comparison of the said amount (P42.14 million) with the declarations of PKC with the BIR revealed that PKC did not report its true and correct income. PKC underdeclared its sales by P40.45 million (2,389%) by reporting gross sales amounting to only P1.69 million in its ITR for TY 2011. It also underdeclared its sales in its VAT returns for the first three quarters of TY 2011 by P41.16 million by reporting sales of only P0.98 million.

For its acts and omissions in violation of the Tax Code, PKC was assessed an aggregate deficiency tax of P27.63 million, inclusive of surcharges and interests, broken down as follows: Income Tax (TY 2011) – P19.24 million; and VAT (first three quarters of TY 2011) – P8.39 million.

The case against PKC INTERNATIONAL TRADING CORPORATION (PKC), its President JEREMY Z. KALAW, its Chief Operating Officer CHRISTIAN P. PINEDA, and Chief Financial Officer JOSEPH Z. KALAW is the 128th filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares. It is likewise a RATE case of Revenue Region No. 7, Quezon City.