Point of Law

Taxpayers beware!

/ 03:34 AM December 12, 2013

By any standard, the tax problem of boxing icon Manny Pacquiao is the most popular tax case in the recent past. Not only does it involve a “National Treasure” (Pambansang Kamao); it also leaves people speculating on the timing of the freezing of Pacquiao’s assets, which was done virtually on the eve of his fight against Brandon Rios on Nov. 24.

Undoubtedly, Pacquiao’s victory over Rios was much needed to rekindle the hopes and dreams of a people devastated by Supertyphoon “Yolanda.”


According to Revenue Commissioner Kim Henares, Pacquiao misdeclared his 2009 income when he failed to include in the computation his earnings from his two fights in the United States that year. These were the fights against Ricky Hatton and Miguel Cotto in May and November 2009, which Pacquiao won.

The BIR computed Pacquiao’s tax obligations for 2009 at P1.433 billion.  This, it said, was based on “public information” on his fights in the United States, his shares from pay-per-view and online ticket purchases and endorsements. At the time Pacquiao’s bank assets were frozen, his tax liability had reportedly hit P2.2 billion.

What is apparent from the public pronouncements from his camp is that Pacquiao does not dispute that he failed to include his 2009 earnings from his two US fights in his Philippine income tax return for that year. Neither does it appear that he subsequently amended his Philippine income tax return to include his US income.

Instead, when the BIR audited him in 2010-2011, he responded by executing an affidavit declaring his US income and later on, giving the BIR copies of his US tax returns and other documents to show that he paid his US tax.

The BIR did not accept these documents. Apparently, what the BIR wanted were original or certified true copies of documents showing that he actually paid income taxes to the US government, which Pacquiao allegedly failed to do.

The BIR then issued a Notice of Assessment for Pacquiao’s tax obligations in May this year. Because he did not protest the Notice of Assessment, it became final in June.

Consequently, on July 1, the BIR issued a Warrant of Levy and Distraint on Pacquiao’s properties to secure the payment of his tax liabilities.

Pacquiao went to the Court of Tax Appeals (CTA) to seek a review of the BIR assessment and the lifting of the warrant. Based on newspaper reports, the CTA issued a status quo ante order. No less than Commissioner Henares appears to have admitted the existence of this order when she was quoted as saying that she “had not issued more warrants after the CTA came up with a status quo ante order.”

CTA case still pending


In the meantime, the BIR implemented the July 1 Warrant of Levy and Distraint  by freezing Pacquiao’s bank accounts.

There are several issues—factual and legal—surrounding the case.

But the principal issue seems to be: whether Pacquiao can still credit his US tax payments against his Philippine income tax considering that he failed to declare his US income in his Philippine income tax return for 2009.

I see some constitutional dimension in the problem. Pacquiao’s lawyers may claim that the right to claim tax credits is a substantive right under the law and is recognized in no less than the Philippines-US Tax Treaty. Obviously, this is to avoid double taxation. Depriving Pacquiao of his right to claim the tax credit and collecting the full tax with delinquency surcharges and interest from him would be too onerous and unduly oppressive, and would amount to unlawful taking of property, which are prohibited by the due process clause of the Constitution.

But I see the BIR taking the opposite view. It may claim that declaring the US income in his income tax return as required by the Tax Code is a condition precedent for Pacquiao’s entitlement to the tax credit. This is a substantive requirement imposed by law to maintain order in the administration of tax laws. Adopting Pacquiao’s position will set a bad precedent for the government’s tax collection efforts, which constitute the lifeblood of the government.

Obviously, these conflicting views will not be finally decided at the CTA level.

Unless the case is amicably settled, the Supreme Court, as the final arbiter of legal disputes, will have to decide this legal issue for the guidance of the BIR and tax-paying public.

In the meantime, the BIR has been stepping up its tax drive against the tax-paying public, regardless of their status in society and time of the day. Some of the more notable names covered in the drive in the recent past are actor Richard Gomez, basketball star Jimmy Alapag, fashion director Robbie Carmona and model and TV celebrity Solenn Heussaff. The Pacman is the latest addition to the BIR’s growing list.

The clear and resounding message from the BIR: Taxpayers beware!

(The author is the co-managing partner  nd head of the corporate and special projects department of the Angara Abello Concepcion & Regala Law Offices. He can be reached through [email protected] The views in this column are solely the author’s and should not in any way be attributed to Accralaw.)

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TAGS: Bureau of Internal Revenue (BIR), Manny Pacquiao, Philippines, taxes
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