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‘MOTHER OF TAX EVASION CASES’

Cebu whistle-blower sues tycoon on taxes

By: - Bureau Chief / @InquirerSLB
/ 11:24 PM December 27, 2011

CEBU CITY—A Cebuano whistle-blower has charged two firms owned by tycoon Lucio Tan of allegedly using dummy companies to evade paying taxes worth billions of pesos.

Danilo Pacaña, 56, filed tax evasion charges against Fortune Tobacco Corp.-Philip Morris Fortune Tobacco Corp. (FTC-PMFTC) and Asia Brewery Inc. (ABI) at the Bureau of Internal Revenue (BIR) on Dec. 6.

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He asked BIR Commissioner Kim Henares to conduct an “honest-to-goodness investigation” of these firms to collect the correct amount of taxes from them.

Pacaña said he believed that the case was the “mother of tax evasion cases in the country’s history.” The tax evasion had allegedly gone on for at least 20 years, he said, and had cost the government billions of pesos.

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The Inquirer contacted officials of Tan’s companies but they declined to comment.

Jethro Sabariaga, BIR chief of staff on legal matters, confirmed Pacaña’s complaint had been received by Henares on Dec. 6.

He said the complaint would be merged with other cases involving Tan’s companies that were being looked into by the BIR.

“Unlike him, we cannot go public and talk about these cases being evaluated because these are confidential,” he told the Inquirer in a phone interview.

Pacaña was a former regional auditor of the Tan-owned Allied Banking Corp. when he blew the whistle on the bank’s alleged practice of not paying its documentary stamps on certificates of time deposits from 1979 to 1987. He resigned from the bank in 1990.

P213M in taxes

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Pacaña said the bank’s tax deficiency was assessed P213 million, but Allied Bank didn’t pay a single centavo after then BIR chief Beethoven Rualo dismissed the case in September 1998.

He said he volunteered to testify on FTC’s alleged practice of using dummy firms but he later backed out when he noticed that the BIR would also dismiss excise tax cases against the firm. But 13 years after, he said the practice apparently continued.

In his affidavit, Pacaña claimed that FTC-PMFTC created at least seven dummy marketing firms to under declare taxable transactions to pay minimal excise taxes from 1986.

He said his information came from the firm’s former senior salesman assigned to the Visayas office who retired recently after 30 years in the company.

‘Paper trail’

The salesman, whose name was withheld, allegedly issued receipts and sales invoices and deposited the sales to the accounts of the alleged dummy firms in Allied Bank. Pacaña said the funds eventually ended up in the bank’s branch in Binondo.

Pacaña said ABI also used dummy firms as marketing arms to evade payment of correct taxes.

He said he was provided a confidential memo issued by an ABI official to managers of the alleged dummy companies on Feb. 29, 1996, instructing them to “conceal and remove any information that provide paper trail” on the firms’ ownership.

The memo was given to him by Elpidio Que, former ABI regional sales manager in Luzon who was terminated in 2007 after working in the firm for 30 years.

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TAGS: Lucio Tan, news, Regions, Tax evasion, whistle blower
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