Far Eastern University

Institute of Accounts, Business and Finance

Business Administration Department



Group 3

TAX CASES


FRAUD FORA
AIA1003
(M/TH EB 404 3:00pm 4:30pm)


Prof. John John Jose Dorega






CASE OF MANNY PACQUIAO
MANGALINDAN, CELINE ABBEY
MOJICA, ERWIN

CASE OF LUCIO TAN (FORTUNE TOBACCO CORPORATION)
PASCUAL, JENNIE LLOVERAS

MALLARI, NATHANIEL RENZ GARCIA

PACHECO, ALYANA MARIE LAYA

CASE OF VILLARICA PAWNSHOP
PIODOS, THERESS JANE CANUA
PAYNOR, AMEXIS BIANCA

CASE OF FORMER CHIEF JUSTICE RENATO CORONA
MORTA, JOANA ROSE LOPEZ

PERTURBOS, GIOVANNI













CASE OF MANNY PACQUIAO
Date filed: August 1, 2013

Case: Tax Evasion against Manny Pacquiao filed by the Bureau of Internal
Revenue (BIR)

Tax case begun from Manny Pacquiaos failure to present original and
certified copy of his Internal Revenue Service (IRS) document which will
prove that he has paid his taxes from his prize winnings for the years 2008
to 2009.

The BIR sued Pacquiao for a P2.2 Billion tax deficiency including VAT.

When the BIR audited his 2008 and 2009 Income Tax Returns
(ITR),Pacquiao did not submit any documents which prompt the BIR to
subpoena him. But instead of presenting the documents required, he
submitted an affidavit declaring his US income and tax payment in his
2008 ITR. BIR did not ask for any more documents and allowed him to
claim tax deductions.

On his 2009 ITR, on the other hand, Henares said that Manny Pacquiao
underreported his income since he only declared only less than P50
Million earned in the Philippines and did not declare any US income.

Last May 2013, the BIR issued a notice of assessment on Pacquiaos tax
declaration. The assessment became final in June since there was no
respond from Pacquiao. On July 1, 2013, the BIR issued a warrant of levy
and distraint to 35 entities.

Henares also in an interview last Jan 17 that he gave Pacquiao options on
how to pay his taxes. Based on BIR rules, he can pay 40% but he needs
to submit documents that will prove that his other taxes, including US
taxes, are already settled. Second, he can pay 10% but he has to show
documents that he is financially incapable.

Manny Pacquiao

Last August, Pacquiao went to the Court of Tax Appeals to seek a review
of the BIR assessment and lifting of the warrant.

According the Pacquiaos promoter, Bob Arum of Top Rank Inc., said that
Pacquiao did pay his taxes in the form of withholding taxes via electronic
payments. It also asks certification from IRS but notes that such
documents takes time to be released.

Pacquiao had already paid P32 million of his liabilities which covers for tax
liabilities Value Added Tax and surcharges.

US IRS

It was reported in the US Media that a Federal Tax Lien dated November
22, 2013 was filed with the Official Recorders Office in Los Angeles,
California stating that they have made a demand for payment of his
liability amounting to $18.3 Million dollars of unpaid taxes for 2006 through
2010. This still remains unpaid.


Is there a tax fraud committed by the accused? If not, why? If yes, what are
the tax fraud schemes applied?

Yes, there is a tax fraud committed by the accused. First, Manny Pacquiao
understated his income for 2009 because according to the BIR, Pacquiao did not
include in his 2009 ITR his earnings from abroad. He did not comply with the tax
law that a resident citizen should declare his income from both within and outside
the Philippines.
Second is tax evasion. Pacquiao did not fully pay all of his taxes hence, he
underpaid his taxes. Here in the Philippines, according to the BIR, Pacquiao still
has unpaid tax liabilities of P760 Million for 2008 and P1.4 Billion for 2009 which
has a total of P2.2 Billion. Even though he recently paid P32 Million for his VAT
liability, there are still billions of pesos to pay to the BIR. Also, Pacquiao did not
also pay his taxes in the US. Even though Pacquiaos promoter, Top Rank Inc.
said that it had remitted tax payments to IRS for Pacquiaos income, it seems
that they did not fully paid them. According to the IRS, Pacquiao still has to pay
$18 Million dollars of taxes in the US. These are the total taxes for 2006 through
2010.
Third, claiming tax deductions and exemptions without basis. It has been
obvious that he cannot present an original and certified copy of his US IRS tax
document to prove that he has paid his taxes for his US income. Since he cannot
prove his payment, he should not be allowed any deductions in his 2008 and
2009 income tax unpaid liabilities.






CASE OF LUCIO TAN (FORTUNE TOBACCO CORPORATION)

On September 7, 1993, BIR Commissioner Liwayway Vinzons-Chato filed
with the Department of Justice a P25-billion tax evasion case against Tan
and Fortune Tobacco Corporation.

The Bureau of Internal Revenue claimed that Fortune Tobacco
Corporation defrauded the government of P25 billion in taxes by not
paying the correct amount of the cigarettes it sold from 1990 to 1993.

Fortune Tobacco Corporation avoided paying value added tax and ad
valorem tax when the nine dummy corporations the company put up acted
as buyer and the cigarettes were sold to them lower than the actual price.

The nine corporations, which were also charged in the tax evasion case,
include Townsman Commercial, Landmark Sales and Marketing, Crimson
Croker Distributors, Dagupan Combined Commodities, First Union Trading
Corp., Carl & Sons, Omar Distributors, Oriel & Co., and Mt. Matutum
Marketing Corp.

The BIR alleged that Fortune Tobacco and its nine dummy corporations
used willful intent in evading tax payments and filed with the bureau false
ad valorem tax returns for three consecutive years.

The BIR also alleged that the corporations also employed individual ghost
buyers that will effect into fictitious sales of Fortune Tobacco cigarette
products at a higher price than that of the wholesale price registered with
the bureau.

On March 22, 1999, the Marikina Metropolitan Trial Court dismissed the
tax evasion case against the Fortune Tobacco Corporation.

In a decision penned by Presiding Judge Alex E. Ruiz, the court said the
prosecution failed to prove that Fortune Tobacco Corporation owned even
a single share of stock in what the BIR alleged were its dummy
corporations.

The DOJ filed a motion for reconsideration on April 17, 1999, a day before
the 15-day prescribed period lapsed, but Ruiz junked the petitions on May
17, 1999.

The Supreme Court ordered a retrial of the case against the Fortune
Tobacco Corporation but it was dismissed again in 2006 by the Marikina
Metropolitan Trial Court due to insufficiency of evidence.

Is there a tax fraud committed by the accused? If none, why? If yes, what
are the tax fraud schemes applied?

Yes, there is tax fraud committed by the accused. One of the symptoms
that may arise in this case is the documentary evidence. Based on the articles of
incorporation, which the government submitted this as an evidence, showed that
the Fortune Tobacco Corporation (FTC) employees owned and ran these nine
dummy corporations. However, the FTC made a defense to this evidences
because according to them these employees are once part of FTC but they
resigned and formed their own companies. The defense made by FTC seems to
be questionable and can lead to be a possible red flag because there is still an
influence that may occur in these persons involved and FTC may possibly use
their former employees to ran and own their dummy corporations.

FTC and its nine dummy corporations, conspiring with, and mutually
helping each other, with willful intent to evade and defeat payment of the tax due
to the government. There are false and fraudulent ad valorem tax returns for the
taxable year 1992.

FTC is employing individual ghost buyers to effect or perpetrate fictitious
and simulated sales of FTCs cigarette products at a price higher than that of the
wholesale price registered with the BIR.























CASE OF VILLARICA PAWNSHOP
Date filed: July 15, 2010

Case: Tax Evasion against WilliamVillarica, owner of five W. Villaricachain
of pawnshops, filed by the Bureau of Internal Revenue (BIR)with the
Department of Justice (DOJ).

The BIR filed a criminal complaint with the Department of Justice (DOJ)
against Villaricafor attempting to evade and willful failure to file an income
tax returns.

William R. Villarica, sole proprietor of W Villarica Pawnshop in Caloocan,
Malabon, Marikina, Metro Manila and Bulacan, possibly owed the
government P22.5 million in taxes.

As per records of the BIR from 1998 to 2009, the only tax payment he
made was for approximately P25,607.25.

W. Villarica has stopped filing income tax returns since 2002 to 2009
claiming that his pawnshop business has already stopped operating.

In the verification of tax records, it showed that Villarica had failed to file
income tax returns for the year 2002 to 2009, except for 2007 where he
filed a return with zero tax payments.

BIR verified through a deed of sale provided by the Land Transportation
Office (LTO) that Villarica had bought aP26 million worth Lamborghini in
2007.

Based on the purchase price of the Lamborghini sports car alone, the BIR
computed the possible income tax deficiency of Villarica to be P16.2
million, while the possible deficiency in Value Added Tax (VAT) could
amount to P6.3 million.

BIR clearly stated that the case was against a person named William
Villarica, who owns W Villarica Pawnshop chains and not Henry Villarica
andLinabelleVillarica, spouses and owners of VP Villarica Pawnshop.



Is there a tax fraud committed by the accused? If not, why? If yes, what are
the tax fraud schemes applied?

Yes, there is a tax fraud committed by the accused. The first tax fraud
scheme is the failure to file an income tax return (ITR). Investigations showed
that W. Villarica stopped filing ITRs for taxable years 2002 up to 2009, except for
2007.
The second tax fraud scheme is the deliberately under reporting or
omitting of income. From 1998 to 2009, Villarica paid only a total of P25,607.25.
He declared that the pawnshop stopped operating since 2002 to 2009. In 2007,
Villarica filed an ITR with zero tax payments. During the same year, he bought a
Lamborghini sports car worth P26,000,000. The purchase was verified through a
deed of sale provided by LTO. Despite the declaration of zero income, Villarica
was able to buy a luxury car.Aside from a Lamborghini, Villarica also owned
several other cars such as a Ferrari, a Beetle, and a Toyota. With the evidences
gathered, Villarica attemptedto evade and willful failure to file income tax returns.
Another factor is the lifestyle symptom. The fact that Villarica has a P26-
million vehicle and other luxury cars yet there is a non-payment of income tax, it
is no doubt a red flag.















Case of Former Chief Justice Renato Corona
In a 65-page Resolution dated 26 April 2013, the Panel of Prosecutors
from the National Prosecution Service (NPS) found probable cause to
charge former Supreme Court Chief Justice RENATO C. CORONA for
violation of Sections 254 and 255 of the National Internal Revenue Code
(NIRC).

The case arose from a complaint filed by the Bureau of Internal Revenue
(BIR), charging the former Chief Magistrate of committing the crime of tax
evasion and willful failure to file his income tax returns for six (6) taxable
years, namely, 2003, 2004, 2005, 2007, 2008 and 2010, which criminal
acts, according to the BIR, also make him civilly liable to the State in the
total amount of P120,498,219.52, inclusive of surcharges and interest.

Former Chief Justice's Statements of Assets, Liabilities and Networth
("SALNs") for various years were brought into evidence and closely
scrutinized in connection with one of the Articles of impeachment signed
by members of the House of Representatives.

An examination of said SALNs led the BIR to note that there appeared to
be substantial increases in his networth from taxable years 2002 to 2010
that did not appear consistent with his earnings as a public servant.

This led the BIR to further investigate his financial holdings, the otherwise
confidential information relating to the same were obtained by the BIR by
virtue of the unconditional waiver respondent Corona himself signed,
executed and submitted to the Philippine Senate, acting as an
Impeachment Court.

The information thus obtained showed respondent Corona had cash
assets deposited in various banks and undeclared real properties. These
all point to the respondent's underdeclaration of his taxable income by
more than thirty (30%), which is sufficient to constitute prima facie
evidence of a fraudulent return.

Using the Net Worth Method of tax investigation, the BIR concluded that
respondent Corona earned income from other sources aside from his
compensation as a public official, which is contrary to his registration with
the a BIR as a "pure compensation income earner," who, instead of filing
the otherwise mandatory annual Income Tax Return, are allowed to avail
of the "substitute filing system" since taxes due from them were
supposedly withheld at source by their employers.




It, therefore, claims Corona: (1) failed to file his annual ITRs for the -
subject taxable years; and (2) failed to pay-the corresponding taxes due
thereon, despite the receipt of substantial amounts in income, as shown
by the significant increase in his net worth, his acquisition of numerous
properties, and possession of bank accounts containing large sums of
money.

Is there a tax fraud committed by the accused? If none, why? If yes, what
are the tax fraud schemes applied?

Yes, there is tax fraud committed by the accused. Former Chief Justice
Renato Corona failed to file his income tax returns for six (6) taxable years,
namely, 2003, 2004, 2005, 2007, 2008 and 2010, which criminal acts, according
to the BIR, also make him civilly liable to the State in the total amount of
P120,498,219.52, inclusive of surcharges and interest. He failed to pay-the
corresponding taxes due thereon, despite the receipt of substantial amounts in
income, as shown by the significant increase in his networth, his acquisition of
numerous properties, and possession of bank accounts containing large sums of
money.
He did tax minimization, BIR obtained an information showing respondent
Corona had cash assets deposited in various banks and undeclared real
properties. These all point to the respondent's underdeclaration of his taxable
income by more than thirty (30%). As to his claim that the money in his bank
accounts belonged to other persons, the Panel of Prosecutors found that he
failed to produce evidence to support such -claim, as--he did not-even adduce
the affidavits of the family members he is referring to. As a member of the
Supreme Court at the time, he is prohibited from obtaining compensation from
other sources, yet his bank accounts alone are grossly disproportionate to his
earnings as a Justice of the High Court.
He also cook the books by not recording all his assets and income in his
books such as in the instant case, is indicative of his willfulness to violate
Sections 254 and 255 of the NJRC. As to respondent's claim that the BIR failed
to take into account his familys and his personal wealth in computing his opening
networth, the Panel of Prosecutors pointed out that it was respondent himself
(who has full access and knowledge of his assets, liabilities and networth) that
armed the BIR with the opening networth it employed, when he filled up and
submitted his SALNs. The submission of the SALN being a mandatory
requirement under Republic Act No. 6713, respondent is expected to state all his
assets, liabilities and networth at the time of its execution. Hence, the BIR could
not be faulted for relying on the SALN that respondent had sworn under oath
contained true and correct statements of his assets, liabilities, networth and
business interests.