BIR loses bid to collect P3-b Pacquiao tax deficit

The Court of Tax Appeals has ordered the Bureau of Internal Revenue to stop from collecting from world’s boxing icon and Senator Manny Pacquiao and wife Jinkee their alleged tax deficiencies amounting to P3.3 billion covering the years 2008 and 2009.

In a July 27, 2018 resolution, the CTA’s First Division through Presiding Justice Roman del Rosario directed the BIR to cease and desist from collecting the tax deficiencies of the Pacquiao couple pending resolution of the ongoing civil case.

“Respondent is hereby ordered to cease and desist from implementing the subject FDDA [Final Decision on Disputed Assessment] and from collecting the subject deficiency tax assessments issued against petitioners for taxable years 2008 and 2009 for lack of merit,” the appellate tax court ruled.

The CTA also lifted the warrants of distraint and/or levy and garnishment on the disputed tax assessments pending the finality of the case.

The appellate tax court stressed the BIR’s preliminary investigation failed to establish evidence that Pacquiao and his wife committed fraud or tax evasion.

Court records showed that in July 2013, then BIR commissioner Kim Jacinto-Henares issued a freeze order against the Pacquiaos’ earnings for their tax liability worth P2.26 billion, which ballooned to P3.3 billion arising from penalties and surcharges.

A tax lien was also issued against the couple, which prevents a respondent from selling or disposing of his properties to protect the interest of the State on which the BIR aims to recover.

The Pacquiaos appealed to the CTA to reduce the assailed tax deficiency and the surety bond of P4.9 billion, but the appellate tax court denied their motion for reconsideration, prompting them to elevate the issue before the Supreme Court.

In a decision dated April 6, 2016, the SC issued a writ of preliminary injunction enjoining the CTA from requiring the Pacquiao couple to deposit P3.2-billion cash bond or P4.9-billion surety bond as a condition to suspend the garnishment order against his assets that was issued due to his alleged failure to pay his tax obligations.

The high court also remanded the case to the CTA’s First Division and ordered the latter to conduct a preliminary hearing to determine whether the dispensation or reduction of the required cash deposit or bond provided under Section 11 of Republic Act 1125, or An Act Creating the Court of Appeals, is proper to restrain the collection of deficiency taxes assessed against the couple.

Upon hearing the arguments of both parties, the CTA ruled that the BIR could dispense with the bond requirement after it found irregularities in the investigation and collection of the Pacquiaos’ tax deficiencies.

The appellate tax court noted that the defense received no notice of informal conference, a document informing a taxpayer of the discrepancies in the payment of his taxes. 

It said the BIR only presented a photocopy of the notice during court proceedings and there was no record the Pacquiaos responded.

“Clearly from the foregoing, respondents have not sufficiently shown that a NIC was validly served to petitioners or than an informal conference was conducted in the presence of petitioners or their authorized representative,” the resolution stated.

The CTA assailed the BIR on how it computed the bond requirement for the Pacquiaos in its formal letter of demand, saying the computation is “without sufficient foundation” since the letter did not even state where the figures originated.

The warrants of distraint and levy and garnishment against the Pacquiaos was also prematurely executed and the defense was not furnished a copy on the withholding of their bank accounts, it said.

“Taking all the foregoing into consideration, this Court therefore finds that respondent, in its assessment of petitioners’ tax liability, and its efforts of collecting the same, utterly failed to comply with necessary requirements under pertinent laws and issuances,” the CTA resolution ruled.

Associate Justices Erlinda Uy and Cielito Mindaro-Grulla concurred with the ruling.

Topics: Manny Pacquiao , Court of Tax Appeals , Erlinda Uy , Cielito Mindaro-Grulla , Roman del Rosario
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