Realty company charged with tax evasion, together with its BIR tax examiners

The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against PHILMAY PROPERTY, INC. (PPI), together with its President ONG SEET-JOON, AVP/Treasurer ATTY. RAFAEL MORALES, Legal Department Head and Corporate Secretary JONATHAN ONG, Sales and Marketing Department Head BENJAMIN LIRA and Remedial Accounting Associate MICHELLE REYES, for willful attempt to evade or defeat Income Tax (IT), Valued Added Tax (VAT), Documentary Stamp Tax (DST) and Expanded Withholding Tax (EWT) in violation of Section 254 of the NationalInternal Revenue Code of 1997, as amended (Tax Code), and for deliberate failure to file DST Return and willful failure tosupply correct and accurate information in its IT Return (ITR) and VAT Return in violation of Section 255 of the Tax Code, all for the fiscal year ending 30 June 2009.

PPI is a domestic corporation primarily organized to own, use, improve, develop, subdivide, sell, exchange, lease and hold for investment or otherwise, real estate of all kinds with office address at Legazpi Towers, 300 Roxas Boulevard corner P. Ocampo Sr., Malate, Manila.

Charged with PPI were VICENTE VELARIO, JOSEPH MACUHA and NORADEL MENDOZA, the Revenue Officers of BIR who were originally tasked to examine the former’s books of accounts and other accounting records for all internal revenue taxes for the fiscal year ending 30 June 2009 for willfully aiding or abetting the responsible corporate officers of PPI in committing violations of Sections 254 and 255 of the Tax Code.

Records of investigation showed that PPI was investigated by Revenue Officers VELARIO, MACUHA and MENDOZA for the subject fiscal year and was made to pay total deficiency taxes amounting to P499,206.53, inclusive of increments. A confidential informant, however, alleged that the government incurred a revenue loss from the said examination considering that the original assessment presented to PPI was P51.9 million, prompting the Office of the Commissioner of Internal Revenue (OCIR) upon recommendation of the BIR’s Internal Audit Division to order the re-investigation of PPI to ascertain its correct deficiency tax liabilities.

The re-investigation disclosed that PPI indeed evaded the payment of the correct amount of taxes in the sum ofP169.83 million, inclusive of surcharges and interests, by willfully exploiting illegal schemes to perpetrate tax evasion.

PPI claimed a deductible interest expense amounting to P47.6 million for a loan it secured from Maybank Philippines, Inc. (MPI). Investigators, however, exposed the loan transaction as a “related transaction” since MPI is 99.999% owned by Malayan Banking Berhad (MBB) which also owns PPI by at least 59.999%. As such, the interest expense should not be claimed as deductible expense. PPI’s claim of P3.2 million representing salaries and wages without withholding any tax due thereon and of P50.2 million as operating expenses, including interest expense, without any supporting documents , were likewise uncovered and disallowed by the BIR. Said schemes led to an underdeclaration of PPI’s taxable income by as much as 69.56% and the non-payment of income tax in the aggregate amount of P37.81 million.

PPI also evaded the payment of VAT amounting to P73.13 million by deliberately failing to report consummated sales of real properties amounting to P95.07 million and a “transaction deemed sale” for VAT purposes with the re-acquisition by MPI of its properties with a book value of P223.82 million in exchange for a loan payable reduction of P72.7 million.

Further, PPI failed to report said consummated sales and reacquisition of properties transactions for the payment of DST and EWT thereon. In addition, a contract of loan granted by MPI to PPI amounting to P419.25 million was not subjected to DST. PPI was thus assessed deficiency DST and EWT amounting to P15.57 million and P43.32 million, respectively.

Revenue Officers VELARIO, MACUHA and MENDOZA were charged for deliberately failing to conduct a thorough audit of the books of accounts and other accounting records of PPI in accordance with standard auditing techniques. Without the cooperation of said revenue officers through the issuance of a deficiency tax assessment amounting to only P499,206.53, PPI could not have avoided the payment of its correct tax liabilities for the fiscal year ending 30 June 2009 which is P169.83 million.

The case against PHILMAY PROPERTY, INC. (PPI), its responsible corporate officers ONG SEET-JOON, ATTY. RAFAEL MORALES, JONATHAN ONG, BENJAMIN LIRA and MICHELLE REYES, and Revenue Officers VICENTE VELARIO, JOSEPH MACUHA and NORADEL MENDOZA is the 163rd filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares. It is likewise a RATE case of Revenue Region No. 6, Manila. (reytdlc)

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