DOJ indicts Rappler for tax evasion

Mike Navallo, ABS-CBN News

Posted at Nov 09 2018 05:17 PM | Updated as of Nov 09 2018 07:15 PM

MANILA- (UPDATE) The Department of Justice National Prosecution Service has found probable cause to indict the holding company of news website Rappler for tax evasion over the sale of its Philippine Depositary Receipts to 2 foreign firms in 2015.

Also indicted are Rappler President Maria Ressa and its independent accountant Noel Baladiang.

In a resolution dated Oct. 2, 2018, Assistant State Prosecutor Zenamar Macachon-Caparros said Rappler Holdings, Inc. (RHC) and Ressa violated sections 254 and 255 of the Tax Code in evading payment of taxes and failing to supply correct and accurate information in its 2015 tax returns.

The Bureau of Internal Revenue filed the complaint in March accusing RHC of not paying P133 million in income and value added taxes over the sale of P181.67 million worth of PDRs to Omidyar Network Find LLC and NBM Rappler LP.

RHC allegedly gained P162.5 million from the transaction which it failed to disclose in its tax return.

But instead of the P133-million tax liability as alleged in the complaint, the resolution found RHC to be liable for around P108 million.

Rappler, in a statement, said the case was "a clear form of continuing intimidation and harassment," and "an attempt to silence reporting that does not please the administration."

Rappler had maintained it was wrong for the BIR to treat it as a “dealer in security” and subject the transaction to taxes.

It said it never hid any transactions from the agency.

In the resolution, Caparros said RHC acted as a middleman in buying Rappler, Inc.’s shares for the purpose of underwriting PDRs for resale to interested buyers.

RHC purchased around 119 million common shares from Rappler, Inc. from 2014 to 2015 and against these shares, issued PDRs to NBM Rappler and Omidyar.

The resolution said RHC’s profits from such a transaction is taxable under the Tax Code.

Ressa is being held liable as president of RHC.

Section 254 of the Tax Code penalizes attempts to evade taxes with fines of up to P100,000 and between 2 to 4 years imprisonment.

Section 255, on the other hand, punishes acts such as the failure to file tax returns or the failure to pay, withhold or remit taxes to the government, with up to 10 years imprisonment and a fine of at least P10,000.00.

These penalties will be imposed on the responsible officers of the companies who were also impleaded in the complaints.

If found liable, the company could also be ordered to pay fines ranging from P50,000 to P100,000.

Baladiang meanwhile will be charged for having certified the financial statements of RHC despite the non-disclosure of its purchase of Rappler, Inc.’s shares.

The complaint against RHC treasurer James Bitanga was dismissed because he was an inactive and nominal treasurer.


SALE OF PHILIPPINE DEPOSITARY RECEIPTS

The sale of PDRs is the same transaction that has been the subject of the Securities and Exchange Commission’s decision to revoke Rappler’s license to operate in January.

The SEC said the language in the Omidyar PDR gave Omidyar some form of control, which is prohibited under the Constitution. 

On appeal, the Court of Appeals agreed that the sale of the PDRs was tantamount to giving foreigners control but gave Rappler reasonable time to correct the transaction.

It also asked the CA to determine the legal effect of Omidyar’s subsequent donation of its PDRs to Rappler’s staff.

The DOJ said it will file the case next week.