The molehill was not a mountain-A A +A
Monday, December 9, 2013
There’s no real, actual point of conflict between Fighting Congressman Emmanuel “Manny” Pacquiao and the equally strong-willed Tax Lady, BIR Commissioner Kim Henares. No one questions the Pacman’s intention to pay the proper income tax as truly as no one should question Madam Henares’ resolve that every taxpayer must give what is due the government.
Then why the controversy? Why the media frenzy that has had both players pitted against each other on radio, television and print?
It began innocently enough. The BIR noticed that Pacquiao’s tax payment in one tax year was substantially lower than the tax that he paid during the previous year. A cursory review of his payments indicated that on a year-to-year basis, his income tax payments to the Philippines became progressively lower as the years passed.
As with any other taxpayer with gradually diminishing tax payments, the Bureau wrote Manny a letter asking him to explain why his annual payments were going down. The BIR records revealed that he initially submitted insufficient documents, for which he was asked to give more proof of payment. Then, he stopped replying altogether, because of which the BIR elevated the issue from a mere query to an actual investigation.
Instead of adequately explaining his side in the investigation, Manny Pacquiao filed a complaint against the Bureau with the Court of Tax Appeals, questioning the former’s actuations. The BIR answered the complaint, but continued with its own investigation. Not satisfied with the congressman’s evidence, it went on to garnish his bank deposits and levied his properties in the Philippines. Manny cried foul and took his frustrations out in press conferences and media interviews.
Pacquiao insisted that he paid what was due the government in taxes and that the diminishing payments were because most of these were paid in the United States where his prize money were all earned. Commissioner Henares riposted that then, he must submit proof of his tax payments in the US.
Pacquiao disagreed, his lawyers insisting that the BIR can secure that evidence directly from the United States Government without bothering the congressman. The point of conflict is therefore not that Manny Pacquiao was evading his tax obligations, but only the exact amount of taxes paid in America that can be credited to his Philippine tax payments.
It is at this point that I think Manny’s lawyers and accountants did him a disservice. A Filipino citizen earning income is obliged to pay income taxes to the government and, for its own survival, the government through the BIR has the right to squeeze as much of it out of the taxpayer as it legally can. If he earned money abroad and paid taxes to a foreign government because of those earnings, the law allows the taxpayer to credit the amount paid as a deduction to his Philippine income tax payment. But the burden is on the taxpayer to prove that he paid taxes abroad and how much of it he can deduct from his Philippine tax obligation. While there may be treaty stipulations allowing it, a taxpayer like Manny Pacquiao cannot score the government if it insists that he prove his US tax payments instead of the BIR securing it via a government-to-government action. To repeat, the rule is that on the one claiming the deduction or the exemption lies the burden of proving he is entitled to it.
Instead of convincing their client that the BIR was behaving unfairly, or that politics was behind all of the pressures being exerted on him, Pacquiao’s lawyers should simply have complied with the documentary requirements demanded by the BIR and proved that he had religiously paid the proper taxes to the Philippines. Then this “controversy” would not have arisen. Then the Pacman and the Taxman would not have squared off, and Commissioner Henares and Congressman Pacquiao would have remained friends. The molehill would then not have appeared like a mountain.*
Published in the Sun.Star Bacolod newspaper on December 09, 2013.