Supreme Court upholds Mikey Arroyo's tax evasion acquittal

ABS-CBN News

Posted at Dec 05 2018 01:55 PM

MANILA - The Supreme Court has affirmed the Court of Tax Appeals’ (CTA) acquittal of former lawmaker Juan Miguel “Mikey” Arroyo from cases filed against him covering some P27 million in alleged tax liabilities.

In a 13-page ruling dated September 12, 2018 but released to the media only on Wednesday, the high court’s First Division junked the Solicitor General’s appeal on procedural and substantive grounds.

The court faulted the Office of the Solicitor General (OSG) for filing the petition questioning the March 21, 2018 CTA decision without first filing a motion for reconsideration with the CTA, a procedural requirement under Rule 65 of the Rules of Court.

The Court also upheld the CTA’s finding that the Bureau of Internal Revenue failed to “identify the likely sources of unreported and undeclared income” of Arroyo and that the “net worth” audit method it used failed to sufficiently prove guilt beyond reasonable doubt.

The BIR had accused Arroyo, son of former President and now House Speaker Gloria Macapagal-Arroyo, of attempting to evade or defeat tax liabilities by underdeclaring his income for 2004 and 2006 and for failing to file income tax returns (ITR) and pay taxes for 2007. 

The BIR said that based on his statement of assets, liabilities and net worth (SALN), Arroyo and his wife acquired several properties from 2004 to 2009 such as houses in Lubao, Pampanga and La Vista Subdivision in Quezon City, but he either failed to file his ITR and pay the taxes or understated his income.

Three cases against Arroyo were filed before the CTA in October 2011 for violation of the Tax Code.

The CTA, however, acquitted Arroyo in March this year saying that the increase in Arroyo’s net worth alone did not establish his guilt beyond reasonable doubt and that it failed to prove the possible sources of income that could account for the increase.

It noted that Arroyo has no obligation to declare increases in net worth from passive income in his ITRs. He also had no duty to file separate ITRs for his income taxes withheld by the House of Representatives during his stint of House representative.

It also held that the prosecution did not establish that the net worth method used accurately reflected his income for 2004, 2006 and 2007.

The BIR sought reconsideration before the CTA only of the dismissal of civil actions for collection of tax deficiencies and not of the acquittal.

SC ruling

In affirming the CTA’s acquittal of Arroyo, the SC said the filing of the petition before the Court was premature since the prosecution should have exhausted all remedies first, including the filing of a motion for reconsideration before the CTA.

It also sided with the CTA’s findings.

“[T]he CTA in Division assiduously sifted the evidence and analysed the records; it explained the merits of the charges upon reviewing the elements of the offenses charged and determining whether or not the evidence adduced by the prosecution established such elements,” it said.

“Also, the CTA in Division, noting that the BIR did not discover the sources of Arroyo’s vaunted income, fully disclosed the various reasons why the State’s theory of the charges could not prosper, and how the chosen audit procedure known as the net worth method did not suffice to prove his criminal liability under the informations. In criminal cases, the quantum of evidence required is proof beyond reasonable doubt; hence, the Prosecution’s inability to identify the likely sources of the unreported or undeclared income of the taxpayer was a sure index of its failure to discharge the quantum,” it added.