TIMELINE: Tracing BIR's tax complaint against Rappler Holdings
MANILA, Philippines – It's been over a month since the Bureau of Internal Revenue (BIR) filed a tax evasion case against Rappler Holdings Corporation – the latest in a string of complaints from government agencies that have been going after the social news network since President Rodrigo Duterte accused it of being funded by the Central Intelligence Agency.
The BIR last month announced via a press release that Rappler Holdings has evaded taxes amounting to P133.84 million, for allegedly not supplying "correct and accurate information in its 2015 income tax return."
Until now, there is no clear picture of how the tax collector came up with the P133.84-million tax liability.
The BIR argued that Rappler Holdings, as a dealer in securities – a claim disputed by the social news network – is subject to income tax (IT) and value-added tax (VAT). Rappler has said it sold Philippine Depositary Receipts (PDRs) amounting to P188 million only.
As defined in the tax code, a dealer in securities is "a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and the resale thereof to customers; that is, one who, as a merchant, buys securities and re-sells them to customers with a view to the gains and profits that may be derived therefrom."
Here's a rundown of events surrounding the tax evasion complaint:
May 25, 2015 – Rappler Holdings issues and sells 12,028,718 PDRs to investment firm North Base Media Limited. (READ: TIMELINE: The case of Rappler's SEC registration)
A PDR is a financial instrument that allows foreigners to invest in a Filipino company, without owning any part of it. This is consistent with the 1987 Constitution, which states that mass media in the Philippines should be wholly owned by Filipinos. A PDR is not equivalent to a share in the company.
Rappler is the first media startup in the Philippines to join broadcasting network giants ABS-CBN and GMA in offering PDRs to international investors.
May 31, 2015 – Rappler Holdings publishes a report announcing its partnership with North Base Media.
June 8, 2015 – Rappler Holdings files Securities of Exchange Commission (SEC) Form 10-1 – a notice of confirmation exempt transactions – for the 264,601 PDRs sold to North Base.
August 8, 2015 – Rappler Holdings files a subsequent SEC Form 10-1 for the 11,764,117 PDRs sold to North Base.
October 2, 2015 – Rappler Holdings issues 7,217,257 PDRs to Omidyar Network Fund LLC.
November 5, 2015 – Rappler Holdings publishes a report announcing Omidyar Network’s investment.
December 1, 2015 – Rappler Holdings files SEC Form 10-1 for the 7,217,257 PDRs to Omidyar Network.
January 11, 2018 – The SEC revokes Rappler's license to operate because the PDRs of Omidyar supposedly violate the constitutional restrictions on ownership
February 28, 2018 – Omidyar Network announces it has donated its PDRs to 14 Filipino managers of Rappler, in an effort "to address the unwarranted ruling" made by the SEC.
March 5, 2018 – Five days after the PDR donation, BIR delivers to the Rappler office a notice dated March 2, requesting for various documents related to a tax examination of Rappler Holdings.
March 8, 2018 – In just 3 days, BIR publishes a press release on its website announcing a file tax evasion case against Rappler Holdings, alleging that the firm, together with its president Maria Ressa and treasurer James Bitanga, wilfully attempted to evade tax payments, as well as failed to provide accurate information in its income tax and value-added tax (VAT) returns for 2015.
BIR Commissioner Caesar Dulay writes a referral letter to former Justice Secretary Vitaliano Aguirre II that "RHC, Ms. Ressa, and Mr. Bitanga are being charged for willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information for taxable year 2015."
Rappler Holdings finds out via Twitter that the BIR filed a tax evasion complaint against the firm, even if the firm has not submitted to the BIR any documents for assessment and investigation as of this period.
March 13, 2018 – Rappler Holdings questions the BIR's grounds for filing a criminal complaint against its two executives for allegedly evading P133.8 million in taxes.
Lim says Rappler Holdings cannot be considered a dealer in securities when it issued the PDRs to Omidyar Network and North Base Media. "Rappler was the issuer; it did not buy the PDRs." (READ: Rappler lawyer cites loopholes in BIR's tax complaint)
Lim also says Rappler Holdings did not resell the shares it bought from Rappler Incorporated. He points out that the PDRs of Rappler Holdings are different from the Rappler Incorporated shares. "Those two are distinct financial iinstruments."
Lim, senior partner at Angara Abello Concepcion Regala and Cruz Law Firm, also argues that the capital raised from issued PDRs are not yet booked by Rappler as income as of now.
April 16, 2018 – Rappler Holdings receives the tax evasion complaint from BIR. Ressa and Bitanga also receive a subpoena from the Department of Justice over the tax evasion complaint.
The subpoena is signed by Assistant State Prosecutor Zenamar J.L. Machacon-Caparros on Wednesday, April 11.
The assistant state prosecutor order Ressa and Bitanga to submit their "counter-affidavit and other supporting documents" or affidavits by witnesses, if any, at 11 am. Two dates are listed: April 24 and May 7.
The 7 government offices that have taken action against Rappler include the Office of the Solicitor General, the SEC, DOJ, the National Bureau of Investigation, Malacañang, the Department of Education, and now the BIR. – Rappler.com