Pharmally: P625,000 capital won P10 billion in COVID deals — and a P402M VAT question

In September 2021, certified public accountants Jahleel-AN Burao and John Michael Lava released a 13-page analysis — with research support from the Citizen's Budget Tracker and the Right to Know, Right Now! Coalition — of Pharmally Pharmaceutical Corporation's audited financial statements. It found the foreign-led firm may have underdeclared its input VAT and may have incurred a tax deficiency of P402.2 million, giving the input-VAT position a 'high' risk rating: substantial possible losses to the government and possibly serious regulatory violations.

The arithmetic was simple: Pharmally declared P465.4 million of input VAT on goods purchased, implying a P3.9 billion taxable base at the Philippines' uniform 12 per cent rate — but its financial statements showed merchandise purchases of P7.2 billion. That P3.3 billion gap implied a P401.9 million deficiency, and applying the same formula to property and equipment added P361,500, for a total of P402.2 million.

The tax question sat on top of a larger scandal: Pharmally was the biggest winner in the Duterte government's pandemic procurement programme, taking about P10 billion in deals — mostly for personal protective equipment — despite being incorporated in 2019 with a measly P625,000 in paid-up capital and no track record in government procurement. Its major stockholder, Singaporean Huang Tzu Yen, was wanted in Taiwan alongside his father Huang Wen Lie for several financial crimes; the elder Huang was connected to Rodrigo Duterte's former economic adviser Michael Yang.

The declared input VAT implied purchases of P3.9 billion while the audited statements showed P7.2 billion — a P3.3 billion difference the company had not explained.

A firm with P625,000 in capital and no procurement history won P10 billion in government deals, raising eligibility and competence questions from the start.

Purchasing imported goods when local alternatives exist requires DTI certification for VAT exemption — and the accountants asked why the imports happened at all.

The company's ownership trail ran through executives wanted for financial crimes abroad and a link to the former president's economic adviser, compounding the transparency concerns.

Audited statements are arithmetic that can be checked by anyone: when purchases say P7.2 billion but input VAT says P3.9 billion, someone must explain the P3.3 billion.

The accountants called on Pharmally to release its monthly and quarterly VAT returns and to present a DTI certification on the imported goods. The Philippine Senate was seeking access to Pharmally's tax records, though confidentiality laws could hinder that; the analysts acknowledged valid exemptions were possible, especially on imports. As of the article, the Bureau of Internal Revenue had not made any assessment public.