Mike Arroyo lawyer charged with tax evasion

Former First Gentleman Mike Arroyo. INQUIRER FILE PHOTO

The Bureau of Internal Revenue (BIR) on Thursday filed in the Department of Justice a P12.32-million tax evasion case against Jesus Santos, one of the lawyers of former First Gentleman Jose Miguel “Mike” Arroyo.

Santos supposedly received excessive salaries and unwarranted bonuses and allowances during his term as member of the board of trustees of the Government Service Insurance System (GSIS). He is the third GSIS trustee to be charged with tax evasion.

Santos was charged with four counts of willful attempt to evade tax and four counts of willful failure to supply correct and accurate information in his income tax return, as well as failure to pay the correct taxes from 2006 to 2009, in violation of the internal revenue code.

Contacted by the Inquirer, Santos said he could not issue an immediate comment because he had not received any formal complaint.

GSIS documents

Allegations about excessive salaries and bonuses received by appointees to government-owned and -controlled corporations and state financial institutions came out during an inquiry by the Senate committee on finance.

The BIR looked into Santos’ financial transactions aided by documents from the Senate committee and the GSIS.

The BIR claimed Santos “substantially underdeclared” his income from 2006 to 2009. Santos allegedly declared only an income of P4.13 million for the four-year period but GSIS records supposedly showed his gross income totaled P24.66 million.

The BIR assessed Santos’ tax liability at P12.32 million for the four-year period, including surcharges and interests.

“A comparison made by BIR investigators of the income or revenues declared by Attorney Santos in his ITRs for taxable years 2006 to 2009 as against the income payments he received from GSIS in the same years revealed that he deliberately failed to declare his correct tax base by substantially underdeclaring his income for the said years,” BIR Commissioner Kin Henares said in a press briefing.

Santos served as Arroyo’s lawyer in the P12.5-million damage suit filed in 2006 against Arroyo by 36 journalists—most of whom Arroyo earlier charged with libel—and three media organizations.

Makati Rotary Club

The BIR also filed a P47-million tax evasion case against Makati Rotary Club Foundation Inc. (MRCFI) and its officers for purportedly passing off as a donation part of the revenues from the lease of its 20,063-square-meter property in Parañaque City from 2001 to 2010.

The bureau also recommended charges against the foundation’s chairpersons, presidents and treasurers during the period.

A staff at the MRCFI said the foundation would release a statement on the case shortly.

The case against MRCFI arose from confidential information that the BIR said it received from two complainants.

The BIR said it found out that MRCFI entered into a lease agreement with Fedders Koppel Inc. over the land and with Rohm & Haas Philippines Inc. (RHPI) over a manufacturing plant on the same property.

According to the bureau, MRCFI’s 2000 to 2004 lease contract with Fedders Koppel provided  a lease of P4 million for 2000 that increased to P4.9 million by 2004 and an annual donation of P2 million.

Interest-free

Investigators claimed that based on the lease agreements and court documents, MRCFI split rental payments from Fedders Koppel and RHPI into two parts—a lease portion and a substantial portion as “donation.”

MRCFI allegedly denominated portions of the rental payments as donations and compelled its lessees to give rental payments under the guise of a donation.

MRCFI, however, demanded interest from the date of the default of the rental and the purported donation, contrary to the nature of a donation, for which interest should not be charged, the BIR claimed.

Case vs paper wholesaler

The contract covering 2005 to 2009 provided an annual lease of P4.2 million plus value-added taxes (VAT) for the five-year period plus annual donations. The contract provided “donations” of P3 million, P3.2 million, P3.3 million, P3.6 million and P3.9 million.

As a result of the scheme of splitting rental payments, the government was deprived of taxes amounting to P47.05 million from 2001 to 2010, the BIR claimed.

It said the MRCFI also did not declare the P23.1 million “donation” as part of its rental income and was not included in the computation of its corporate and value-added taxes from 2000 to 2009.

The BIR also filed a P162.82-million case against a wholesaler of paper and paper products, Eagle’s Fortune Inc., for willfully failing to pay taxes.

The BIR accused the company of faking purchases to claim input value-added tax and faking some sales to claim output VAT.

It said Eagle’s Fortune also did not declare P181.6 million worth of sales to United Pulp and Paper Co. Inc. and Steel World Manufacturing Corp. The BIR included Eagle’s Fortune’s general managers in the complaint.—With reports from Northern Luzon Bureau and Tetch Torres of INQUIRER.net

Originally posted at 01:49 pm | Thursday, February 16,  2012