Court affirms Pacquiaos’ win in P2.2-B tax case
Former Sen. and boxer icon Manny Pacquiao and his wife Jinkee had their victory affirmed by the court in connection with a P2.26-billion tax case.
The Court of Tax Appeals (CTA) has affirmed its decision dismissing the case arising from the couple’s alleged deficiencies in 2008 and 2009.
A 68-page en banc decision, which was promulgated on Jan. 23, denied for lack of merit the petition for review filed by the Bureau of Internal Revenue (BIR) to seek a reversal of the 2022 decision and the 2023 resolution that both went in favor of the Pacquiaos.
The case stemmed from the BIR’s income tax assessment that found the couple having P2.26 billion in allegedly “underdeclared” income, as well as value-added tax (VAT) on local income that they allegedly left unpaid for the years 2008 and 2009.
The assessment, which was part of the BIR’s Run after Tax Evaders (RATE) program, broke down the deficiency income tax totaling P2,229,020,905 and the undeclared VAT worth P32,197,134 during the period.
No due process
At the time, Pacquiao was at the height of his boxing career, having defeated other ring legends, namely Miguel Cotto of Puerto Rico and former world champion Oscar De La Hoya.
But according to the CTA en banc, citing the BIR’s Revenue Regulations, the income tax assessment was void due to a violation of the respondents’ right to due process and the bureau’s failure to inform the Pacquiaos about the basis for a tax assessment.
“The taxpayer must be informed in writing of any discrepancies and be given the opportunity to explain and present evidence in an informal conference. This requirement ensures that taxpayers can clarify or contest the assessments before a formal demand is issued,” the court said, adding:
“There is no evidence to show that [the Pacquiaos] were given an opportunity to participate in an informal conference as required under the cited regulation.”
The tax court also noted that the BIR’s formal letter of demand did not provide sufficient explanation on how it came up with the couple’s supposed gross income.
The BIR notice also failed to furnish the respondents with copies of documents, such as newspaper clippings and articles, as basis for the assessment, it added.
“It is well-established that tax assessments must clearly inform taxpayers of both the factual and legal bases of the assessment to satisfy due process requirements,” it said. “The Supreme Court has consistently held that the absence of such clarity and specificity in the assessment notice constitutes a violation of the taxpayer’s right to due process.”
Lack of legal basis
The tax court also disagreed with the BIR’s argument that the tax assessment it initiated was grounded in fact and in law. It took note of court records showing that the agency relied on newspaper clippings “without independent verification of the reported figures.”
“There being no reversible error, the court en banc finds no cogent reason or justification to disturb the conclusions reached by the Special Third Division.”
It was referring to the September 2022 ruling of the CTA Special Third Division that nullified the income tax assessment for “lack of sufficient basis.”
The en banc decision was written by Associate Justice Jean Marie Bacorro-Villena.
Except for Associate Justice Catherine Manahan who dissented, and Associate Justice Henry Angeles who was on leave, the decision had the concurrence of Presiding Justice Roman del Rosario and the rest of the CTA justices.
