The Silka Papaya Tax Evasion Scandal

In our first four articles in this series, we demonstrated glaring indications that Cosmetique Asia Silka Papaya was manipulating the figures in its Financial Statements from 2008 to 2011.

We demonstrated that its consistent 90% annual growth in Net Sales was implausible and irregular given that the average Net Sales growth of larger firms in the same business  was only between 5% to 15%.

We also demonstrated that its 75% to 80% Cost of Sales was unbelievable, after comparing it to the cost of sales of larger firms in the same business which only amounted to about 45% to 50%.

Digging deeper, our investigation into Cosmetique Asia Silka Papaya’s  tax evasion scandal we uncovered data from a reputable market research firm showing that the company’s sales were actually 35% to nearly 50% higher.

Cosmetique Asia Silka Papaya was caught lying about the Net Sales declared in its Financial Statements.

Adding it all up, according to its Financial Statements from 2007 to 2011, Cosmetique Asia Silka Papaya’s Net Sales amounted to P2,661,288,237.  But according to market research data, its actual net sales amounted to P 4,490,682,515.

Cosmetique Asia Silka Papaya under reported its real Net Sales by P1,829,394,278! Or nearly P2 Billion!

The thing is, the market research data we got from a reputable market research firm comes only from the Point-Of-Sales systems (cash register systems) of large supermarkets like Savemore, Puregold, and others.

Cosmetique Asia Silka Papaya’s actual net sales could actually be 50% higher, possibly reaching as high as P2.5 Billion to P3 billion if sales from small groceries as well as sari-sari stores were included.

In any case, based on these figures, the total estimated under payment of basic tax is around P350 Million and the total estimated potential deficiency in taxes including penalties may range from P600 Million to P700 Million.

Cosmetique Asia Silka Papaya’s total tax liabilities could reach as high as P1.5 Billion if its sales from mini-groceries and sari-sari stores were included.

One question on our minds is how could the BIR have overlooked Silka Papaya?  We thought about it and what we figured was somewhat close to something like this:

A few of them seem to hold the belief that taxpayers should just pay the right taxes and everything will just be peachy. I agree it could be argued that taxpayers are also to blame for all the graft and corruption going on in the BIR. It could be said that graft and corruption would not exist in the BIR if taxpayers just paid what is due to the government and refrained from offering bribes.

+Kim Henares +Noynoy Aquino