BIR explains why Pacquiao’s tax liability reached P2.2B
MANILA, Philippines – The Bureau of Internal Revenue said on Wednesday, it took into account the taxes paid by boxing icon Manny Pacquiao to the US government, but in the end, it still calculated a remaining tax liability of P2.2 billion.
The BIR said the P2.2 billion in tax liabilities covering 2008 and 2009 stemmed partly from Pacquiao’s failure to present proper documentation of his tax payments to the Internal Revenue Service (IRS) of the United States.
Pacquiao also failed to pay value added tax, the BIR said.
Claro Ortiz, the BIR lawyer handling Pacquiao’s tax-deficiency case, showed the breakdown of Pacquiao’s tax liabilities in a phone interview with the Philippine Daily Inquirer.
Ortiz said that for 2008, Pacquiao’s gross income was estimated at P1.5 billion. The amount took into account earnings from his fights abroad, his share in income from “pay-per-view” cable services that aired his fights, and his endorsements of various brands.
According to the Tax Code, the lawyer said, a Filipino earning an income ought to pay an income tax of 32 percent.
Based on the estimated amount of Pacquiao’s gross income for 2008 and on the 32-percent income tax rate, Ortiz said, the boxer was obligated to pay P340 million in income tax to the BIR on top of the P120 million he remitted to the US government.
“We took into account what he reported as his payment to the IRS. But still, he has unpaid obligations to the BIR,” Ortiz said.
The fact that Pacquiao failed to pay the P340 million in income tax liability only made things worse for him because of the surcharges and interests on unpaid tax liabilities, the lawyer said.
The lawyer said the BIR imposed a 50-percent surcharge, or P170 million, on Pacquiao’s basic income tax liability.
Also, the BIR imposed a cumulative interest of P250 million for the four years that the boxer failed to pay the income tax liability.
Under the Tax Code, the lawyer explained, the BIR might impose a 50-percent surcharge if a tax-deficiency case involved fraud. Ortiz said that in the tax deficiency case of Pacquiao, the BIR believed Pacquiao committed fraud when he deliberately withheld some of his earnings from the BIR.
But in cases where there is no fraud involved, a tax deficiency case is slapped a surcharge of only 20 percent.
The Tax Code likewise states that the BIR shall impose an interest of 20-percent per annum on unpaid tax obligations.
The lawyer said that on top of his income tax liabilities—the basic income tax due, plus surcharge and interest—Pacquiao also had an unpaid value added tax of P4.3 million.
The amount of VAT liability also includes surcharge and interest, the lawyer said.
Thus, for 2008, Pacquiao’s total unpaid tax liabilities—combining basic income tax due, basic VAT due, and the penalties—amounted to P760 million.
For 2009, the lawyer said, Pacquiao’s estimated gross income was higher at about P2 billion.
Based on this, the lawyer said, the BIR has been running after P688 million in basic income tax liability.
For 2009, Ortiz said, Pacquiao did not report any income tax payment to the US government. As such, the lawyer said, the BIR had nothing to deduct from the income tax liability.
Again, Ortiz said, the BIR imposed surcharge and interest to the unpaid income tax obligation. The surcharge amounted to P344 million, while the cumulative interest for the three years that the liability remained unpaid amounted to P373 million, he said.
The lawyer said Pacquiao again did not pay VAT in 2009. The unpaid VAT liability, including surcharge and interest, was P26.7 million.
Thus, Pacquiao’s total unpaid tax liabilities for 2009—including the basic income tax plus the surcharges and interest—stood at P1.4 billion.
The combined unpaid tax liabilities of Pacquiao for 2008 and 2009, therefore, is nearly P2.2 billion.