MANILA, Philippines – The Court of Tax Appeals (CTA) has affirmed the victory of former senator Manny Pacquiao and his wife Jinkee in a P2.2-billion tax case.
In a decision promulgated on January 23, the CTA rejected the petition for review filed by the Bureau of Internal Revenue (BIR), upholding the 2022 ruling and a 2023 resolution favoring the Pacquiaos.
The case stems from the couple’s supposed underdeclared income and unpaid value added tax (VAT) on their local income from 2008 to 2009.
The CTA found that Manny and Jinkee were not given due process, as there is no evidence that the BIR gave the couple the opportunity to explain their side of the story in an informal conference.
It also found that the BIR’s assessment of the couple’s alleged unpaid taxes was based on newspaper articles and clippings that were not counterchecked. The BIR did not furnish these articles to the Pacquiaos.
Here’s a rundown of the events surrounding the Pacquiao couple’s tax case through the years:
April 15, 2009
Manny Pacquiao files his 2008 income tax return (ITR), and an amended version of his ITR on February 19, 2010.
March 19, 2010
Manny receives a letter of authority from the BIR’s East Pasig office to examine his books of accounts and other accounting records.
April 15, 2010
Manny files his 2009 annual ITR.
July 27, 2010
Manny and Jinkee receive a letter of authority from the BIR which authorizes its national investigation division officers to examine their accounting records from 1995 to 2009.
September 21-22, 2010
The BIR separately informs the Pacquiao spouses that their accounting records are being examined as part of the bureau’s Run After Tax Evaders (RATE) program.
January 31, 2012
The Pacquiaos are notified of the BIR examiner’s initial findings.
February 20, 2012
The BIR issues a Preliminary Assessment Notice (PAN) stating that the Pacquiaos had alleged income tax and VAT deficiencies in 2008 and 2009. The Pacquiaos then file a protest on the PAN.
May 14, 2013
The BIR issues a Final Decision on Disputed Assessment (FDDA), which breaks down the Pacquiaos’ tax deficiencies as follows:
July 1, 2013
The BIR issues a warrant of distraint and/or levy and warrants of garnishment against the Pacquiao couple.
Distraint involves the seizure of one’s personal property to satisfy unpaid taxes, while levy involves the seizure and forfeiture of real property such as land. On the other hand, garnishment is a legal process that instructs a third party to deduct payments from a taxpayer’s bank account to settle liabilities he or she may have.
July 19, 2013
The BIR issues a Preliminary Collection Letter (PCL) which provides a further breakdown of the Pacquiaos’ alleged unpaid taxes:
August 1, 2013
The Pacquiaos file a petition for review before the CTA. This is then raffled to the court’s first division.
August 7, 2013
The BIR issues a final notice before seizure and gives Manny and Jinkee 10 days to pay their supposed deficient taxes.
August 12, 2013
The CTA first division issues summons ordering the BIR to respond within 15 days. The tax bureau is granted three extensions for this.
September 13, 2013 to December 20, 2013
Manny and Jinkee settle their deficient VAT assessments worth P32.1 million in two installments.
October 13, 2013
The Pacquiaos file an urgent motion to lift the warrants of distraint and/or levy and garnishment issued to them in July. They also request to suspend collection of the disputed tax irregularities.
October 21, 2013
The BIR files its response to the Pacquiaos’ petition, where it argues the following:
- The Pacquiaos filed the petition beyond the 30-day period from their receipt of the FDDA.
- The bureau complied with the due process requirements for the issuance of a deficiency tax assessment. This includes a notice of an informal conference (NIC), which invites the taxpayer to a conference with revenue officers to explain his side of the case.
- Jinkee was given sufficient notice and accorded due process during the audit and the couple’s right to protection against double taxation was recognized.
- The assessment of the Pacquiao couple’s supposed unpaid taxes was based on the best evidence obtainable.
January 15, 2014
The Pacquiaos file a manifestation reporting that they had fully settled the remaining balances of their unpaid VAT amounting to P32.2 million. They also say they no longer contest these deficiencies.
January 21, 2014
The BIR files a counter-manifestation stating that the interest computed in the FDDA only covered the period until April 15, 2012. The BIR argues that deficiency penalties continue to accrue since the Pacquiaos opted to settle their deficiency VAT in installments.
April 22, 2014
The CTA first division grants the Pacquiaos’ urgent motion for suspension, since the amount the BIR sought to collect from them was way beyond their net worth. In exchange for the suspension of collecting these taxes, the court orders the couple to post either a cash bond of nearly P3.3 billion or a P4.9 billion surety bond.
The Pacquiaos move for partial reconsideration of the bond requirement, but the CTA denies this.
August 4, 2014
Manny and Jinkee file before the Supreme Court a petition for certiorari with urgent application for the issuance of a status quo/temporary restraining order (TRO) and/or writ of preliminary injunction related to the suspension of the collection of taxes.
August 18, 2014
The Supreme Court issues a TRO against the CTA first division’s resolutions pertaining to the tax collection.
The High Court orders the CTA to refrain from requiring the respondents to post the cash or surety bond pending its decision. It also prohibits any attempt to collect taxes from the Pacquiaos based on the disputed IT and VAT assessments while the case is ongoing.
April 6, 2016
The Supreme Court’s second division partially grants the Pacquiaos’ request for a writ of preliminary injunction, blocking the required posting of a bond in exchange for the suspension of tax collection.
The High Court also tasks the CTA to conduct a preliminary hearing to determine whether:
- the 15-year period that the BIR was investigating was arbitrary and excessive;
- fraud has been duly established in the BIR’s investigation;
- the final demand letter issued against the Pacquiaos was irregular, and;
- the demand letters sent by the BIR were valid.
July 27, 2018
The CTA dispenses with the bond requirement after learning that the BIR failed to comply with pertinent laws regarding the assessment and collection of the Pacquiaos’ supposed deficient taxes.
It orders the BIR to desist from implementing its final decision on the disputed assessment, and to lift the warrants of distraint/levy and warrants of garnishment until the disposition of the case.
The tax appeals court also grants the Pacquiaos’ request to lift a notice of lien dated January 8, 2015 over their real properties in General Santos City.
August 24, 2018
Manny and Jinkee file a motion for summary judgment, requesting that the CTA render a summary judgment by declaring all the demand letters from the BIR null and void, as well as canceling assessments of their supposed P2.2 billion in deficient taxes
December 21, 2018
The CTA junks the Pacquiaos’ motion for summary judgment, saying that the couple failed to establish the absence of a genuine issue.
November 26, 2019
Richard Querido, the Pacquiaos’ accountant, takes the stand. He has helped the Pacquiaos prepare their ITRs since 2006, and he has also helped Manny file his Statement of Assets, Liabilities and Net Worth (SALN) when he was elected congressman in 2010.
He tells the CTA that the BIR failed to issue and properly serve a Notice of Informal Conference against Manny and Jinkee. He also claims that the BIR did not comply with the requirements needed to conduct a fraud audit investigation and the issuance of letters of authority covering 1995 to 2009.
He also testifies that the tax bureau failed to inform the Pacquiaos of the factual and legal basis of their supposed unpaid taxes tied to their US-sourced income in 2008 and 2009. At this time, Pacquiao is at the height of his boxing career, defeating Puerto Rican Miguel Cotto and former world champion Oscar De La Hoya.
Querido further says that the BIR disregarded documents provided by boxing promotional company Top Rank Incorporated, HBO, and HBO pay-per-view. Instead, the tax bureau relied on unverified newspaper accounts to come up with the Pacquiaos’ supposed unpaid taxes.
December 2, 2020
BIR assistant commissioner James Roldan, who heads the BIR’s enforcement and advocacy service, takes the stand. He says that Manny only declared around P39.02 million in gross income in 2009, despite creditable withholding tax certificates amounting to P109.49 million.
This translates to about P70 million in supposed undeclared income.
January 27, 2021
Manila Standard‘s managing editor, Ramonchito Tomeldan, is called to the stand. He confirms a certified true copy of an article titled, “Pacquiao set to pay more income tax, blames change of accountants” from the newspaper published on December 20, 2010.
Other articles in question include a November 7, 2010 Philippine Daily Inquirer article and a November 19, 2009 Philippine Star article.
September 29, 2022
The CTA Special Third Division promulgates a decision canceling the deficiency assessments against the Pacquiaos, as well as the warrants of distraint and/or levy and garnishment and final notice before seizure issued against the couple.
According to the CTA, the BIR failed to give the Pacquiaos due process. It finds that Manny and Jinkee were not given the opportunity to examine the supporting evidence behind the deficient tax assessments.
The BIR failed to provide proof that the Pacquiaos were given an opportunity to participate in an informal conference to explain their side and submit documentation.
The CTA also finds that the BIR’s assessment lacked sufficient basis since they were based on newspaper clippings and articles. “While petitioner claims that the assessment was not solely based on newspaper clippings, the records reveal that the said clippings were relied upon without independent verification of the reported figures,” the court writes.
October 26, 2022
The BIR files a motion for reconsideration of the CTA special third division’s decision.
February 17, 2023
In a resolution, the CTA special third division denies the BIR’s motion for reconsideration for lack of merit.
March 30, 2023
The BIR files the instant petition for review seeking the reversal of the Special Third Division’s ruling that favored the Pacquiaos.
January 23, 2025
The CTA en banc upholds the 2022 ruling of the special third division and the 2023 resolution. – Rappler.com