Arum defends Pacquiao: Charges false

GENERAL SANTOS CITY, Philippines—It’s Round 2 of the Pacquiao-Taxman fight.

Hurting from a government freeze on his bank deposits, world boxing champion Manny Pacquiao threw again verbal jabs at the Bureau of Internal Revenue (BIR) on Wednesday, claiming he had proof that he had already paid his income taxes in the United States for his fights there in 2008 and 2009.

Pacquiao, 34, who is also Sarangani representative, showed to local reporters copies of the 2008 and 2009 income tax returns submitted to the US Internal Revenue Service and sent to the BIR to dispute a statement of its commissioner, Kim Henares, that he had given only a copy of a letter of his promoter, Bob Arum, to the Philippine tax agency.

The BIR said it took into account the taxes paid by the boxing icon to the US government, but insisted that he still had remaining tax liabilities of P2.2 billion stemming from his failure to remit the balance from his income tax obligations in 2008 and to pay the value-added tax.

Claro Ortiz, the BIR lawyer handling the tax deficiency case, explained in a phone interview with the Inquirer that based on the estimated amount of Pacquiao’s gross income for 2008 and on the 32-percent income tax rate, the boxer should pay P340 million in income tax to the BIR on top of the P120 million he remitted to the US government.

Moreover, Pacquiao also failed to contest the amount of the BIR assessment within the allowable time, prompting the BIR to issue a warrant of distraint against his bank accounts to get hold of his money.

Top Rank

In Las Vegas, Nevada, Pacquiao’s promoter, Bob Arum of Top Rank, said the allegations of P2.2 billion ($50.2 million) in unpaid taxes from US bouts in 2008 and 2009 were false and that his agency made certain the proper money was paid to US authorities just to avoid such problems.

“Filipino authorities confirmed that Manny is not required to pay double tax,” Arum said in a statement on Tuesday (Wednesday in Manila). “If Manny paid US taxes for fights and endorsements that occurred on US soil, he is not required to pay double taxes in the Philippines.”

Ortiz said the BIR sent letters to 22 banks to inquire about Pacquiao’s accounts with them, but only two—Banco de Oro (BDO) and Hong Kong Shanghai Banking Corp. (HSBC)—confirmed his deposits of P310,000 and P851,000, respectively. Thereafter, the agency issued the warrant of distraint and levy, he added.

However, Pacquiao filed a motion in the Court of Tax Appeals (CTA) in Quezon City, seeking to stop the BIR from implementing the warrant. The court then issued a “status quo ante” order to temporarily prohibit both parties from doing anything to the money in the two banks.

In particular, the CTA did not allow the BIR to take hold of the money and Pacquiao, to withdraw it.

According to Ortiz, the court shall lift its order once a decision on the case is arrived at. A hearing is scheduled for Dec. 5.

Frozen accounts

“All of my accounts were frozen,” Pacquiao told reporters here. He said he could not withdraw even from his six other bank accounts in HSBC, China Bank, BDO, Security Bank, Union Bank and Metro Bank.

“The money that was garnished by (the BIR) is not stolen,” he said. “This came from all of the punches, beatings, blood and sweat that I endured in the ring.”

He denied Henares’ statement to media that only two bank accounts were frozen. “That is not true. [She] … was just referring to my wife’s accounts.”

He appealed to the BIR to lift the freeze order, saying in Filipino, “We are actually talking to them.”

Arum said he expected certified US tax paperwork for the Philippines’ boxing hero to be received by authorities in his homeland “very soon.”

Fund transfer

“For each of Manny’s fights that occurred in the United States, including those in 2008 and 2009, Top Rank withheld 30 percent of Manny’s purses and paid those monies directly to the Internal Revenue Service via electronic funds transfer (EFT),” he said.

“Top Rank has deposit confirmations for each payment. Top Rank has done the same for all US endorsements it has facilitated on Manny’s behalf.”

But, Arum said, Philippine officials wanted certified paperwork of those transactions from the IRS rather than deposit confirmations.

“Top Rank submitted copies of the EFT deposit acknowledgements to the BIR as proof of payment. The BIR received the documents but directed Manny to obtain ‘certified’ documents directly from the IRS itself,” he said.

“Obtaining certified copies of documents from the IRS takes time Manny made the formal request to the IRS and we have every expectation that the necessary documents will be furnished to the BIR very soon.”

Tax liabilities

Ortiz, the BIR lawyer, explained Pacquiao’s tax liabilities:

For 2008, the BIR estimated Pacquiao’s gross income at P1.5 billion, taking 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.

On a 32-percent income tax rate, 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.

The fact that Pacquiao failed to pay the P340 million in income tax liability only made things worse for him, Ortiz said.

Under the Tax Code, he said, the BIR shall impose surcharge and interest on unpaid tax liabilities. In Pacquiao’s case, the BIR imposed a 50-percent surcharge, or P170 million, on basic income tax liability and a cumulative interest of P250 million for the four years that the boxer failed to pay the liability.

Ortiz said the BIR imposed the 50-percent surcharge as it believed that fraud was involved because of deliberate withholding of some of his earnings.

Moreover, Pacquiao has an unpaid VAT of P4.3 million, plus 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—amount to P760 million.

2009 record

For 2009, Pacquiao’s gross income was placed higher at about P2 billion, based on which the BIR is running after P688 million in basic income tax liability.

Ortiz said Pacquiao did not report any income tax payment to the US government. As such, the BIR had nothing to deduct from the income tax liability, he added.

Again, he said, the BIR imposed the surcharge of P344 million and the cumulative interest of P373 million for the three years that the liability had remained unpaid.

The lawyer said Pacquiao did not pay the VAT in 2009. The unpaid VAT liability, including surcharge and interest, amounts to P26.7 million.

Thus, Pacquiao’s total unpaid tax liabilities for 2009—including the basic income tax plus the surcharges and interest—stands at P1.4 billion, Ortiz said.

The combined unpaid tax liabilities for 2008 and 2009 amounted to nearly P2.2 billion.

Relief aid

“I am not a criminal or a thief. I am not hiding anything,” Pacquiao said. “I have already paid my taxes in America. Had I not paid the correct taxes, they (US authorities) would have come after me, and I would not have been able to travel there.”

Despite returning like a hero from beating Mexican-American Brandon Rios over the weekend, Pacquiao said he had no money to keep his promise to help typhoon victims in the Visayas.

Pacquiao, the wealthiest member of Congress and one of the world’s richest athletes, said he borrowed over P1 million to purchase relief supplies before his fight on Sunday with Rios in Macau and would borrow more to keep his word to the typhoon survivors.

He said he planned to provide aid to more than 10,000 families.—With reports from AFP and AP

 

RELATED STORIES:

Arum: We took part of Pacquiao’s winnings as payment to IRS

BIR explains why Pacquiao’s tax liability reached P2.2B
Dionisia Pacquiao snarls at BIR over son’s tax issue