GENERAL SANTOS CITY (MindaNews / 4 Dec) – Except on December 9, 2012 when Juan Manuel Marquez flattened him with one lethal punch, Manny Pacquiao – as “Rep. Emmanuel D. Pacquiao (Sarangani)”, the only active boxer elected as member of Congress or Parliament in the world who is more active in boxing than in lawmaking – has evaded punches to become the only world boxing champion of all time having won titles in eight weight divisions. Now he is facing one question: Can he evade paying taxes as skillfully as he has evaded punches?
His challenger, the Bureau of Internal Revenue, is collecting tax deficiency of about P2.2 billion for two years – in round figures, P0.760 billion for 2008 and P1.4 billion for 2009. From reports of the BIR and of Pacquiao and his camp, the evidence of tax evasion is clear. However, the BIR has not yet slapped a tax evasion case – just demands to pay the deficiency that includes the basic tax plus VAT plus surcharges (50%) plus interest (20%) until December 2012. But the tax evasion case will come if Pacquiao continues to play tough.
The BIR demand in a nutshell: The taxes paid by Pacquiao for 2008 and 2009 were way, way below the 32 percent of his income for 2008 and 2009 when audited in 2010. He has failed to submit the necessary valid documents to validate his ITRs (Income Tax Returns) including the originals of his ITRs to the IRS (Internal Revenue Service) in the United States. He failed or refused to settle in two years so his tax liability of about P2.2 billion after December 2012.
In his response, Pacquiao declared “his conscience is clear”: (1) he has honestly paid his taxes; (2) he has submitted all the documents asked for but the BIR would not honor them; (3) he is being harassed politically; (4) he appealed to the CTA (Court of Tax Appeals) and opened his case to the media.
He told media: “The IRS gave us a copy of the taxes deducted from my earnings covering that period. Unfortunately, BIR refused to honor the copy of tax deduction credited by the IRS.”
He claimed BIR has been demanding a certified true copy of the IRS document – a demand that is unreasonable due to differences in systems, explaining: “Iba ang sistema natin kumpara US. Hindi sila nagbibigay ng certified true copy kasi pag nagbigay ng public document ang alin mang government agency dun sa kanila, it is understood na authentic yon (The US has a different system. They don’t give a certified true copy because every time a public document is issued by any government agency in the US, it is understood that it is authentic).”
He implied the BIR does not understand the practice in the United States. (PDI, Nov. 26, 2013: Pacquiao reacts to P2.2B tax case: My conscience is clear)
The CTA will hear the case on Thursday, December 5. In the media, due to Pacquiao’s hero-image and popularity, the BIR is on the defensive and has to explain in the open how Pacquiao has incurred so big a tax deficiency.
Has the BIR the correct incomes of Pacquiao for 2008 and 2009? Has the BIR assessed correctly Pacquiao’s tax liability? What documents has Pacquiao submitted to support his ITRs? Are these valid according to BIR rules? These must be among the issues the CTA has to resolve.
Facts of the Case
What has the BIR revealed about Pacquiao’s case?
According to Commissioner Kim Henares and BIR Lawyer Claro Ortiz (PDI, Nov 28, 2013: Pacquiao given all chances to settle tax deficiencies for 2 years; PDI, November 28, 2013: Pacquiao told: Pay BIR or face tax rap; PDI, November 27, 2013: BIR explains why Pacquiao’s tax liability reached P2.2B):
Pacquiao was the top taxpayer in 2008 for having paid P125 million; in 2009, he paid only P7.4 million and was only the 113th top tax payer – sliding to the 30 percent highest taxpayers in 2009 from the top 10 percent from 2006 to 2008. The big drop of P117.6 million prompted the BIR to make an audit in 2010.
For 2008: His “gross income was estimated at P1.5 billion”. He paid P125 million tax; still, he “was obligated to pay P340 million in income tax to the BIR” after deducting “the P120 million he remitted to the US government”. Add P170 million as the 50 percent surcharge, the basic VAT due and P250 million in cumulative interest and other penalties for four years – the total tax liabilities by 2012 was around P760 million (P767M in Monsod’s account).
For 2009: Pacquiao “technically misdeclared” his income in 2009 stating in his tax return that he earned only less than P50 million in the Philippines; he failed to include his earnings from his two fights in the United States.
His “gross income was higher at about P2 billion”. Since he “did not report any income tax payment to the US government”, his basic income tax liability remained at P688 million. Add the 50 percent surcharge of P344 million, the P373 million interest for three years and the P26.7 million unpaid VAT plus surcharges and interest – the total tax liability by December 2012 was P1.4317 billion.
BIR: “The combined unpaid tax liabilities of Pacquiao for 2008 and 2009, therefore, is nearly P2.2 billion.” [Note: As reported in Philippine Daily Inquirer, Pacquiao declared in his SALN (Statement of Assets, Liabilities and Net Worth) P1.8 billion as his total assets and net worth. This must be his latest. For 2011, it was P1.352 billion.] ((PDI, Nov. 26, 2013: Pacquiao reacts to P2.2B tax case: My conscience is clear)
The Philippine Star November 28 (Arum comes to Pacman’s rescue; BIR open to compromise) reports that the total deficiency income tax for the years 2008 and 2009 is, to the last centavo, P2,229,020,905.50 (inclusive of 50 percent surcharge and 20 percent per year interest). This has increased to P3.2-billion due to additional penalties imposed by the BIR.
As Top Officials See It
What have President Benigno Simeon C. Aquino III, Vice President Jejomar Binay, and some Members of the Congress to say?
That the President and the Vice President have contrary positions should be noted well.
The President said: “If he did right, then I’m sure he will be able to prove that he did right, and therefore there is no issue. So the way to settle it is to answer all of these queries of the BIR and not to engage in a media war. The media will not decide who is right or wrong.” (PDI, Nov. 29, 2013: Aquino chides Pacquiao: Don’t bring tax case before media)
Vice President Binay, noting the claim of the BIR that it was asking proof from Pacquiao that he paid taxes for his earnings from his bouts in the US during the years 2008 and 2009, said: “They have been investigated for two years and it is not their (Pacquiao camp’s) fault. They presented evidence, but it was not accepted.” Pacquiao had confided to him that politics was BIR’s main reason in pursuing the tax claim against him. (The Philippine Star, Dec. 1, 2013: Pacman’s BIR woes not his fault – Binay)
In the Congress (The Philippine Star, Nov. 30, 2013: Pacman not being singled out – Palace):
Speaker Feliciano Belmonte Jr., advised Pacquiao to just provide all the documents requested by the BIR that would prove that he has paid all the necessary taxes from his income. “Why does he not just show his US tax receipts to the BIR? Was it that hard to do?” He would be sorry to lose Pacquiao if he decides to join the opposition bloc in the chamber.
Dasmariñas Rep. Elpidio Barzaga Jr. advised Pacquiao to settle his tax case and be the BIR’s poster boy again – setting an example on tax compliance.“I think the BIR has found enough ground to run after him. So he should settle his tax issues with the agency.” Being pictured as a billionaire boxing champion-lawmaker who is not able to pay the correct amount of taxes is not in Pacquiao’s interest. More Filipinos would idolize the boxing icon if he becomes the No. 1 individual taxpayer again.
A practicing accountant-lawyer before joining the Congress, he thinks Pacquiao’s tax case is more an issue of documentation than a large amount of unpaid income taxes. His earnings are mostly covered by documents like contracts, tax returns in the United States and withholding tax statements for his commercial endorsements here. It would be a matter of collating all those documents and reconciling the boxing champion’s tax payments and the BIR’s assessment of his alleged tax obligations for possible settlement or compromise.
Minority Leader Ronaldo Zamora, thinking Pacquiao’s problems are really documentary in character, advised him to get a good lawyer and a good accountant. (The Philippine Star, Nov. 30, 2013: Pacman not being singled out – Palace)
In the Media
What media have revealed media must be enough to understand the truth as well as to see and feed biases. Some of the country’s noted opinion makers have contrasting opinions.
Solita Collas-Monsod showed in her column (Philippine Daily Inquirer, November 29, 2013) the basic facts and time-line of the case – ostensibly based on BIR records. She believed BIR had acted correctly; “seemed to lean backward” in giving him “every opportunity” to settle; and had not filed “a tax evasion case”; and “did not try to name and shame him”. Pacquiao “acted like a spoiled brat” and “is acting more and more like a trapo”.
Neal H. Cruz wrote in his column (Philippine Daily Inquirer, November 28, 2013): “Manny Pacquiao is now engaged in a fight that he cannot win” even if the “whole country is watching” and “the people are cheering him on” – reminding that the “problem of boxers with the taxman is not unique to Pacquiao”, naming Joe Louis, Mike Tyson and Muhammad Ali as examples of “boxing greats who earned millions of dollars” and “have also been sucker-punched”.
He observed: “Boxers are not famous for managing their financial affairs. They leave that to their managers and hangers-on who suck up much of the money that they earned by giving and receiving punches. And many of these boxers who made millions wake up one day to find that the money is gone, that they are poor. Let’s urge Manny Pacquiao not to let that happen to him.”
While Pacquiao can easily settle his case by giving the BIR his “copies of his US tax returns for the years 2008 and 2009 that he showed reporters in General Santos City”, he said: “The admiration of the Filipino masses that Pacquiao enjoys may have spoiled him. He has begun believing that he can get away with anything, including not paying the correct taxes.”
Al S. Mendoza, in his sports column (Sun-Star, December 2, 2013), thinks that because Manny is a celebrity, the CTA will expedite the hearing of his case and decide it in his favor. He thinks, too, that President Aquino III “was very un-presidential” when he stated that “Pacquiao should not bring his tax fight to the media” but “face the BIR, instead.”
Amado Macasaet, in his column (Malaya, December 3, 2013), considered as “rash judgment” on the part of BIR Commissioner Henares to press the collection of P2.2 million taxes from the “world boxing icon” and having his bank accounts frozen. She should have first “obtained from the IRS information on how much taxes he paid” and conferred with the President as to what to do.
“It did not take deep thinking to predict that the whole nation of 97 million Filipinos will rally behind Pacquiao and condemn the BIR. … There appears to be no other reason for the BIR to say it is prepared to compromise with Pacquiao except the shame and embarrassment from the backlash … the futility of going against public opinion.” The BIR must have realized that “the Pacquiao incident can sink the President’s acceptability rating”.
Rigoberto D. Tiglao presented in his column (The Manila Times, December 1, 2013) a graph showing that in the five-year period, 2008 to 20012, Pacquiao topped the BIR list of eight biggest taxpayers – paying a total of P170 million against the P427 million aggregate totals of the seven others: M.V. Panganiban, P109M; Henry Sy, P81M; the Lopezes, P67 (average of three); the Ayalas, P64M (average of two); Lucio Tan; P52M; George Ty, P25M; and Jorge Araneta, P24M. Only Pacquiao, Panganiban and Sy were in every year of the five-year listing.
For this fact, he implied Pacquiao should not be asked to pay more taxes. He said, “I’d bet Pacquiao is even the country’s biggest taxpayer ever in our history.” Yet, the President and Henares “claim he is cheat”. They “should be pinning a medal on Pacquiao as the biggest taxpayer. Instead, they want more. And if he can’t cough up P2.2 billion, he and his family would be thrown out of their houses to the streets, and he could even be jailed for two years for tax evasion.”
And more: During his fights, he unites us as “members of this community we call a nation”. His “rags-to-riches saga inspires millions of young poor Filipinos, and even future generations, to strive for excellence, to believe that with sheer hard work they can break the country’s caste system”. He has “sent the message to the world that a Filipino can be among the greatest boxers on the planet”. He “is the most well-known living Filipino in the world” – included by Time magazine “in its list of the 100 most influential people of the world”.
He clarified: “Even if Pacquiao has been the country’s biggest taxpayer in our history that certainly doesn’t give him the right to reduce his taxes. But did he really cheat on his tax returns? … The elite or even the middle classes never really cared about Pacquiao. But he is the hero of the masses throughout the archipelago and abroad, and Aquino’s attack on him would prove to be his biggest blunder.” (Bold text supplied)
The facts and figures about the case tend to confirm tax evasion and show the severity of our tax laws. But the two years allowed Pacquaio to settle the case also showed leniency by the BIR.
Pacquiao cannot evade the blame for not giving the BIR the valid supporting documents. Two years were long enough to obtain these from the IRS. It should be noted that the BIR accepted as valid the IRS papers he submitted to support his 2008 ITR. Why were the documents he claimed he submitted in 2009 rejected? We agree that the BIR should have verified from the IRS the authenticity of these documents or whether Pacquiao had paid his taxes.
As his colleagues in the Congress have said, Pacquiao can easily settle the case by submitting to the BIR the correct documents. Why has he seemed to refuse to but instead fight? Monsod and Cruz can be correct in their observations. Mendoza, Macasaet and Tiglao emboldened him as the “world icon of boxing”, the “most well known living Filipino in the world today” and the “living national hero” basking in the support of 97 million Filipinos and public opinion.
Will Pacquiao be able to evade the lethal BIR punch? The CTA will hear the case tomorrow. As a footnote, the BIR has been offering a settlement based on the BIR Tax Code not because of the “backlash” of Henares’ “rash judgment” as Macasaet has claimed. What will there be at the CTA – a settlement, a split or unanimous decision, or a knock out?
(“Comment” is Mr. Patricio P. Diaz’ column for MindaViews, the opinion section of MindaNews. The Titus Brandsma Media Awards recently honored Mr. Diaz with a “Lifetime Achievement Award” for his “commitment to education and public information to Mindanawons as Journalist, Educator and Peace Advocate.” You can reach him at email@example.com.)