Tax expert: Increase in assets of Pharmally ‘not normal’

A tax expert raised questions on the financial records of Pharmally Pharmaceutical Corporation, the firm implicated in the alleged anomalous purchases of medical supplies for the government’s COVID-19 pandemic response.

Mon Abrea, who was invited as a resource person during the Senate hearing on Friday, highlighted the sudden rise in Pharmally’s assets since it was founded in just two years ago.

Pharmally’s capital in 2019 was only ₱625,000, but its assets dramatically grew to over ₱7.2 billion in 2020.

‘Yung increase na 44,149% ay hindi ponormal. Sana lahat ng kumpanya ganyan ang nangyayari, na sa maliit na puhunan ay malaki kaagad ang capital. Hindi ko po sinasabi na ito ay illegal o suspicious,” said Abrea, a certified public accountant.

[Translation: The increase of 44,149% is not normal. I hope this happens to all companies, where you grew such a big capital from a small investment. I’m not saying this is illegal or suspicious.]

Abrea said with a ₱625,000 capital, Pharmally invested ₱13 million worth of motor vehicles, ₱250,000 worth of container vans, and ₱276,000 worth of computers.

He added that Pharmally registered as a wholesaler of medicinal and pharmaceutical products on Sept. 4, 2019, which means it can have the capacity to import goods.

However, the tax expert disclosed deficiencies based on Pharmally’s financial records and articles of incorporation such as non-disclosure of importer’s license; lease agreements and rent expenses in their listed office in Taguig City and required resources such as warehouse, equipment, and inventory; bank and letter of credit of their initial ₱625,000 capital; products/services; and customer/clients.

This led to Abrea questioning why a total of ₱121,435,069 was declared in the total reported assets of Pharmally in 2020.

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Financial analysis of Pharmally

Abrea said Pharmally earned over ₱265 million in one year or a whopping 42,344.24% return on investment. This came from a total of ₱7.5 billion worth of sales.

Kahit maliit ang puhunan, pwedeng mag-transact ng malaki. Pero hindi naging malinaw kung paano nila fininance or pinatakbo ang kanilang operasyon, (Even if you invested small, it is possible to transact for bigger money. But in this case, it is unclear how they financed or ran their operations,)” said Abrea.

The tax expert also noted the following about the company:

*its almost ₱100 million worth of foreign exchange gains,

*it paid a total of ₱95 million out of the ₱113 million needed for income tax, which Abrea said the firm claimed excess tax credit,

*Pharmally failed to disclose when the ₱7.2 billion purchases were made, and if the purchased medical goods for the pandemic are really exempted from taxes as prescribed under Republic Act 11494 or the Bayanihan to Recover As One Act. The Bayanihan 2’s effectivity period was from June 25 to Dec. 19, 2020.

*possible discrepancy on Pharmally’s liabilities, where the company declared a loss of ₱61 million in its cash flow statement but decreased to only ₱1.75 million in its balance sheet.

Involvement in money laundering?

Senator Richard Gordon, chairperson of the Blue Ribbon Committee, said Pharmally may be involved in money laundering with the questionable expansion of assets without properly declaring the source of their funding.

Gordon added that based on laws, it will take three years for a company to secure an importer’s license but Pharmally bagged the government contracts for the procurement of medical supplies six months after its incorporation.

Para makapagkpasok ng malaking face masks, PPEs, kailangan ipakita saan galing ‘yung pera para makapag-import ka ng ganyan. So kung walang pwede ipakita, pwede ba ipasok sa tinatawag nating money laundering?” Gordon asked after Abrea’s explanation about Pharmally’s financial status.

[Translation: For them to procure face masks and PPEs, they (Pharmally) need to show where they got the money to import such number of goods. So if they cannot show their money sources, is it considered money laundering?]

Gordon then ordered the Anti-Money Laundering Council to inspect Pharmally’s bank transactions.

“The Anti-Money Laundering Council will be asked if there is a money trail to be proven here because there are billions of pesos that have occurred,” said Gordon.

Pharmally chairman and president Huang Tzu Yen defended the goods imported into the country.

“During the pandemic, what we determined is access to the supplies. We do not disagree that the company at that point in time, did not have assets but all the supplies, we were able to source it from suppliers, and we delivered before any payments were made to us,” said Huang, who said Pharmally is a startup company.

Among the questioned contracts between Pharmally and the government was the purchase of 2.5 million face masks worth over ₱54 million.

“We have access to inventories of our suppliers. We negotiate preferential term to these buyers to get these stocks on hand,” Huang said.

Reporting by Albert Rovic Tan

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