YES, the supporters of Manny Pacquiao are right — the freezing of some of his bank accounts couldn’t have come at a worse time, just days after the Pambansang Kamao gave such a big boost to the morale of Filipinos after Super Typhoon Yolanda ravaged Central Philippines.
After all, this was the boxing icon’s return to victory after suffering two straight losses in a very critical time in his sports career.
The reported “garnishment” of Pacman’s assets was also received negatively by many kababayans, who depend on the boxer/congressman’s promise to help the victims ravaged by Yolanda rebuild their lives . How could he possibly fulfill this promise now?, asked Manny Pacquiao.
Of course , Bureau of Internal Revenue Chief (BIR) Kim Henares was demonized by Pacquiao fans, who also worry about how such tax mess news could negatively affect their hero’s image around the world after that much talked about historic victory over Bambam Rios.
Tax authorities in the Philippines said if Pacquiao fails to pay what he reportedly owes, they could end up seizing his properties.
Pacman said he’s ready to defend himself and his hard-earned wealth. Aling Dionisia made a “sumpa” (curse) against the BIR for what the agency did to his son. She said her son is not a “magnanakaw.” She contended that his son invested blood, sweat, and tears to earn his money, not only for himself but to help the poor Filipinos.
Their supporters likewise questioned why Pacquiao was being “singled out,” when billionaires and thieves could get away with evading equitable tax payment, with some even getting tax refunds.
Having said these and setting emotions aside, questions remain: does Pacquiao really owe the Philippine government two years in unpaid taxes (for tax years 2008 and 2009), during the years when the Pambansang Kamao was one of the top paid athletes in the world?
Did the Philippine Congressman/icon/hero fulfill his duty as a responsible citizen, pursuant to the rules of the country? The country which he has vowed to serve as a public official for?
P2.2 billion in tax liabilities
The Philippine Daily Inquirer presented a break down of Pacquiao’s tax liabilities with Claro Ortiz, the BIR lawyer handling Pacquiao’s tax-deficiency case, as its source. Quoting the report:
For 2008: Pacquiao’s gross income was estimated at P1.5 billion. The amount took into account earnings from his fights abroad, his share in income from “pay-per-view” cable services that aired his fights, and his endorsements of various brands.
Based on the estimated amount of Pacquiao’s gross income for 2008 and on the 32-percent income tax rate [per tax code], Ortiz said, the boxer was obligated to pay P340 million in income tax to the BIR ON TOP OF THE P120 MILLION HE REMITTED TO THE US GOVERNMENT.
Ortiz said the BIR imposed a 50-percent surcharge, or P170 million, on Pacquiao’s basic income tax liability.
In addition, the BIR imposed a cumulative interest of P250 million for the four years that the boxer failed to pay the income tax liability.
The lawyer explained that under the Tax Code, the BIR might impose a 50-percent surcharge if a tax-deficiency case involved fraud. Ortiz said that in the tax deficiency case of Pacquiao, the BIR believed Pacquiao committed fraud when he deliberately withheld some of his earnings from the BIR.
But in cases where there is no fraud involved, Ortiz said a tax deficiency case is slapped a surcharge of only 20 percent.
The Tax Code also states that the BIR shall impose an interest of 20-percent per annum on unpaid tax obligations.
On top of his income tax liabilities (the basic income tax due, plus surcharge and interest) Ortiz said Pacquiao also had an unpaid VALUE ADDED TAX of P4.3 million.
The amount of VAT liability also includes surcharge and interest, the lawyer said.
Thus, for 2008, Pacquiao’s total unpaid tax liabilities (combining basic income tax due, basic VAT due, and the penalties) amounted to P760 million.
For 2009: Pacquiao’s estimated gross income was higher at about P2 billion. Based on this, the lawyer said, the BIR has been running after P688 million in basic income tax liability.
For this year, Ortiz said, Pacquiao did NOT report any income tax payment to the US government. As such, the lawyer said, the BIR had nothing to deduct from the income tax liability.
Again, Ortiz said, the BIR imposed surcharge and interest to the unpaid income tax obligation. The surcharge amounted to P344 million, while the cumulative interest for the three years that the liability remained unpaid amounted to P373 million, he said.
The lawyer said Pacquiao again did not pay VAT in 2009. The unpaid VAT liability, including surcharge and interest, was P26.7 million.
Thus, Pacquiao’s total unpaid tax liabilities for 2009—including the basic income tax plus the surcharges and interest—stood at P1.4 billion.
The combined unpaid tax liabilities of Pacquiao for 2008 and 2009, therefore, is nearly P2.2 billion.
Proof of payment: US taxes
Balitang America reported that just days after his return to Philippines (following his win against Brandon Rios), Pacquiao showed a copy of his US non-resident alien income tax return and documents sent by his accountants from the US, reportedly proving he paid his taxes.
Our Las Vegas correspondent who’d been following the boxing camp’s fight said Pacquiao admitted they were only copies of the original. “That’s why it includes a letter from Bob Arum (his promoter/Top Rank CEO), so they will believe that the documents are authentic,” Pacquiao pointed out.
But according to a Nevada tax expert, Pacquiao’s tax troubles should have been taken cared of his by accountant and legal counsel in the US.
“Whoever is helping him is not doing a good job,” Nadia Jurani (a certified public accountant and attorney-at-law) told Bev Llorente on Balitang America.
Before Pacman’s latest bout in Macau, his previous winnings and earnings from boxing and other product endorsements took place in the US. Therefore, Jurani said, taxes were paid in America, as the US government immediately withholds 35 -40 percent of his net income, for each transaction.
Only the taxpayer himself can secure the release of his tax forms from the US Internal Revenue Service (IRS) — the 1040NR form, which is the tax form for non-resident aliens in the US [and not the Philippine government, as Pacquiao’s camp suggests].
Jurani added that Pacquiao’s accountant or lawyer could go to the IRS and get an original copy of the tax returns that were prepared. “The taxes he paid would be credited to whatever tax he would pay in the Philippines. So he will not be charged of double taxation,” Jurani stated.
Balitang America quoted the IRS website, which states :“If you need an exact copy of a previously filed and processed tax return and all attachments (including Form W-2), you should complete Form 4506 (PDF), Request for Copy of Tax Return, and mail it to the address listed in the instructions, along with a $50 fee (fee change effective 10/1/2013) for each tax return requested.”
“The check or money order for the fee should be made payable to the ‘United States Treasury,’ also enter your SSN or EIN and ‘Form 4506 request’ on your check or money order. Copies are generally available for returns filed in the current and past six years. Copies of jointly filed tax returns may be requested by either spouse and only one signature is required. Allow 60 calendar days to receive your copies.”
Role model
The BIR’s charges against Pacquiao’s alleged nonpayment of taxes on his US earnings is indeed a simple issue to resolve. It is just a matter of submitting the proper documents, pursuant to the requirement of the Philippine government.
Top Rank’s letter verifying copies of his tax returns does not legally satisfy BIR’s requirements. The boxing champ could have complied with the BIR’s requirements on time (the IRS states that the requested documents will be available within 60 days). Why did he wait for BIR to freeze his assets?
When he has submitted all the required proof of tax payment from the IRS, the the tax courts will recalculate his tax obligations. He is duty-bound to pay for what he owes the Philippine government, or settle to lower the total amount due, in accordance to Philippine tax laws.
But to insist that he should be accorded special consideration in following simple rules and procedures, just because he is a Congressman and boxing icon who has brought so much honor and pride to the Philippines, denigrates the very honor bestowed upon him by the Filipino people.
In fact, because he is a Congressman and a boxing icon revered as a hero of his kababayans, Pacquiao has the responsibility to follow the laws of the land, no matter how inconvenient they may be. People who look up to him take his lead as an example.
Not doing so would only reinforce a sense of entitlement — the very attitude which has made some of our public officials corrupt.
I hope Manny Pacquiao will not blow this chance to prove that he is different from the crooks he vowed to fight against — both in government and in the private sector.
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Gel Santos Relos is the anchor of TFC’s “Balitang America.” Views and opinions expressed by the author in this column are are solely those of the author and not of Asian Journal and ABS-CBN-TFC. For comments, go to www.TheFil-AmPerspective.com, https://www.facebook.com/Gel.Santos.Relos
