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P1-B tax evasion complaint filed vs PH franchisee of Dunkin Donuts

MANILA, Philippines (UPDATED) – The Bureau of Internal Revenue on Friday, February 23, filed a P1-billion tax evasion complaint against Prieto-owned Golden Donuts, Incorporated (GDI), the Philippine franchisee of international brand Dunkin Donuts.

The BIR filed the complaint before the Department of Justice (DOJ), the result of President Rodrigo Duterte’s marching order to investigate the company for non-payment of taxes.

GDI is owned by the Prietos, who also own the majority shares of broadsheet Philippine Daily Inquirer. Business tycoon Ramon Ang, Duterte’s campaign donor, has been in talks to buy the Prietos' shares in Inquirer since July 2017.

The BIR alleged that GDI had a tax deficiency of P1,118,331,640.79 covering taxable year 2007.

“Investigation likewise revealed that Golden Donuts substantially underdeclared its sales by 39%,” the BIR said.

Tax evasion

The BIR filed the complaint against GDI president  Walter Spakowski and officers Miguel Prieto, Pedro Paraiso, Jocelyn Santos for willful attempt to evade or defeat tax.

The BIR said its investigation showed there was deliberate failure to provide correct information in the company’s Income Tax Returns (ITRs).

“(It is) in violation of Sections 254 and 255 in relation to Sections 253 (d) and 256 of the National Internal Revenue Code (NIRC) of 1997, as amended (Tax Code),” said the BIR. 

GDI is entitled to a 6.6% continuing royalty fee of the gross sales of its franchisees. 

“Further investigation also disclosed that Golden Donuts underdeclared its Royalty Income by P38,963,462.56,” said the BIR.

BIR said that they also found that “sales invoices issued by various suppliers were intentionally altered, in a desperate attempt to conform to substantiation requirements.” 

“Through this scheme, Golden Donuts was able to claim the altered invoices as deductions from its income and as input VAT credits in the amount of PhP99,297,036.47 and PhP11,915,644.38, respectively,” the BIR said.

Based on its finding that 39% of its income was supposedly undeclared, the BIR found basis to file a complaint against Golden Donuts. 

“An underdeclaration of income or overstatement of deductions is substantial when it exceeds 30% of that declared. Such substantial underdeclaration constitutes prima facie evidence of a false or fraudulent return under the Tax Code,” the BIR said. 

'Compliant with tax laws'

In a statement, GDI denied it evaded tax liabilities.

"Golden Donuts, Inc (GDI) categorically denies the accusations of tax evasion for the year 2007. As a matter of fact, the tax liability of GDI for the said year had been settled with the Bureau of Internal Revenue (BIR) as of 2012," it said.

GDI said it had yet to receive a copy of the complaint but based on news reports, the supposed 36% underdeclaration of sales was apparentry computed based on the sales of GDI franchises.

“All GDI frenchisees are business entities separate from GDI that are responsible for paying their own taxes," it said.

“GDI is prepared to answer the tax evasion case in the proper forum," it added.

Golden Donuts’ tax returns had been under investigation since 2007. The intial findings were made by former BIR examiner Othello Delanon.

In 2014, Delanon accused then BIR chief Kim Henares of sitting on the investigation and filed a complaint against her before the Office of the Ombudsman.  The Ombudsman dismised Dalanon’s complaint against Henares in 2015.

Duterte had earlier hit Henares over the issue as he continuously accused the Prietos of cheating the government through Golden Donuts’ taxes and their Mile Long property in Makati. He rehashed these issues as he lashed out against the Inquirer for its alleged negative reporting of his administration. – Rappler.com

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

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