Lawyers and doctors be warned.
Well-known election lawyer George Erwin Garcia, who counts among his clients deposed President Joseph Estrada and son Sen. Jinggoy Estrada, was charged on Thursday with tax evasion by the Bureau of Internal Revenue (BIR) along with a bank lawyer and two prominent doctors.
Garcia purportedly earned only P1.38 million in 2010 but was able to buy a condominium unit in Makati City for P53.3 million, thus underdeclaring his income by 30 percent, Revenue Commissioner Kim Jacinto-Henares said in a press conference on Thursday at the justice department.
But Garcia said he was being punished for his “honesty.”
The BIR formally filed in the justice department the complaints against Garcia, Banco Filipino lawyer Abelardo Aportadera Jr., neurologist Willy Go Lopez and dermatologist Sylvia Huang.
Aportadera’s tax liability amounts to P26 million, according to the BIR.
Suits were brought against Lopez and Huang for their purported failure to issue official receipts to their patients. (Under Section 264 of the National Internal Revenue Code, a fine of not less than P1,000 but not more than P50,000 and imprisonment of two to four years are imposed on those who do not issue official receipts.)
Henares said the complaints against the two doctors were the first in many years.
She said the filing took its cue from what President Aquino indicated in his State of the Nation Address—that many doctors and lawyers had been violating the law by not issuing receipts.
“This is a fair warning to everyone. When you sell goods or services, you are required under the law to issue a receipt and report it as income,” Henares said.
“This is just the beginning and there will be a lot more to follow. We have given instructions to our directors and district officers that they should have this kind of operation,” she said, referring to the surveillance conducted on Huang and Lopez.
Contacted by phone, Lopez told the Inquirer that he was being harassed by the parents of a teenager whom he operated on in 2009 but later died of complications.
Huang could not be reached despite repeated attempts.
Henares aired the reminder that vendors in bazaars (or “tiangges”) should be issuing receipts the way professionals like Huang and Lopez were required to.
“That’s why I don’t go to bazaars. They might be forced to close down,” the BIR chief said.
Intention to pay
Banco Filipino’s Aportadera told the Inquirer by phone that he had yet to see a copy of the BIR complaint.
“All I can say is I never had the slightest intent to evade my tax obligations to the government and will pay upon assessment. In fact, I have made a voluntary disclosure coupled with an intent to comply,” Aportadera said.
He said that he, along with his bookkeeper and accountant, had discovered discrepancies in his income tax returns, and that he submitted last week to the BIR’s regional district officer in Pasig City a letter indicating his intention to rectify his tax deficiencies.
Aportadera was sued by the BIR for allegedly failing to provide accurate information in his income tax returns for 2008 and 2009, and to file value-added tax (VAT) returns for 2008 to 2010.
On the BIR’s request, a Banco Filipino official said the bank paid Aportadera P29.4 million in 2008, P37.1 million in 2009, and P37.8 million in 2010.
The BIR said Aportadera underdeclared his income by P1.6 million in 2008 and P8.1 million in 2009.
His tax deficiency amounted to P5.5 million, inclusive of surcharges and interests, and his VAT deficiency, to P20.5 million, inclusive of increments, for taxable years 2008, 2009, and 2010.
Garcia was sued by the BIR for failing to pay P37.9 million worth of taxes, inclusive of increments.
Reached by phone, the election lawyer wondered why he would be charged with tax evasion when he had included his purchase of a condominium unit in his 2010 income tax return.
He said he had indicated the purchase was still under litigation, and thus the property had yet to be transferred to his name.
“Why are they punishing a taxpayer for being honest?” he said.
Garcia was also the election lawyer of Sen. Loren Legarda, Sen. Alan Peter Cayetano and his wife, Taguig Mayor Lani Cayetano, boxing champion and Sarangani Rep. Manny Pacquiao, former Sen. Juan Miguel Zubiri, Pampanga Gov. Lilia Pineda and a number of governors and congressmen.
The BIR said its investigation was prompted by confidential information that Garcia had purchased a unit worth P53 million, with three parking spaces, in the Shang Grand Tower Condominium at Podium III, on Perea corner De la Rosa Streets in Legazpi Village, Makati City.
Despite this pricey purchase, Garcia’s declared income from 2004 to 2010 based on his income tax returns amounted to P4.45 million.
The BIR said it used the “expenditures method” of tax investigation to determine that Garcia had underdeclared his income in 2010.
“This involves deducting all nontaxable sources of funds and the reported taxable income from total expenditures. Thus, a comparison of Garcia’s reported income of P1.38 million for the year 2010 and his total expenditures in 2010 of P53.3 million yielded a difference of P51.9 million or an underdeclaration of more than 30 percent,” the BIR said in a statement.
Under the tax code, an underdeclaration of taxable income of more than 30 percent constitutes prima facie evidence of fraud tantamount to tax evasion.
But Garcia said he was surprised that a complaint had already been filed against him when he was told by the BIR just last week that an audit of his books would be conducted.
The BIR said the complaint against Lopez stemmed from a June 18 complaint-affidavit submitted by spouses Arestophanes and Josephine Salvador claiming that they had paid the neurologist P164,000 for treating their 17-year-old son, Aries Joseph (AJ).
Carrying a mission order, BIR investigators had posed as patients to check the Salvadors’ complaints, and talked with a patient who said Lopez did not issue an official receipt.
Reached in his clinic at Cardinal Santos Medical Center, Lopez told the Inquirer that the person interviewed by BIR investigators Alex Manguba and Grace Cruz was a companion of his friend, a lawyer with brain cancer, whom he was treating for free.
“Of course, since I treat him for free, I didn’t issue an official receipt,” the doctor said.
Lopez said he was not surprised when told that the Salvadors had filed a complaint against him in the BIR.
“Masama pa rin ang loob nila sa akin (They still hold a grudge against me). They are harassing me,” he said.
Lopez said he had operated on AJ Salvador in May 2009 but that the teenager died of complications two weeks later.
He said the Salvadors had earlier filed charges of reckless imprudence resulting in homicide against him in the justice department, and of gross negligence at the Philippine Regulatory Commission.
Lopez also said the BIR investigators confronted his secretary, who surrendered the booklet of official receipts that he used prior to the current one.
He said his secretary’s appointment notebook, where his patients’ names are listed, was also confiscated.
Only on demand
As for Huang, Henares said two BIR investigators with a mission order also posed as patients in her clinic at LPL Condominium on Eisenhower Street in San Juan City last Aug. 22.
She said the investigators had observed that one patient was not issued a receipt.
“Ms Huang’s act of not issuing a receipt violates the provisions of the tax code. Based on the results of the investigation, it was clear that Ms Huang has been issuing receipts to her patients only upon demand despite the mandatory requirement of the law requiring persons subject to an internal revenue tax to issue receipts or sales or commercial invoices,” the BIR said in a statement.