The Bureau of Internal Revenue (BIR) charged the CAP companies with "deliberately failing to remit" the taxes, an act that revenue officials said was tantamount to misappropriation of government funds.
According to BIR commissioner Guillermo Parayno, the officials of the CAP companies face tax evasion charges and charges of swindling or estafa for "misappropriating money they received in trust."
Parayno led the filing of tax evasion raps against CAP Phils. and CAP Pension president Enrique Sobrepeña Jr.; CAP Phils. Inc., treasurer Alfredo Collado; CAP Pension treasurer James Marsh Thompson; CAP Pension assistant treasurer Romulo Espaldon; and CAP assistant treasurer Conrado Munasque.
The BIR also filed tax evasion charges against Chinese businessman Eliseo Co, owner of the Divisoria Dried Fish Center and General Merchandising that supplies dried fish and other fish products to the New Bilibid Prisons (NBP) in Muntinlupa City.
Co was charged with tax evasion for failing to declare his true sales figure in his dealings with the Bureau of Corrections (BuCor) for the taxable year 1998.
Parayno said Co supplied fish and fish products to the NBP but declared sales of only P9.2 million.
Based on the BuCor warrant register, Co collected over P14 million from the NBP.
"This represented undeclared revenues of P4.8 million which is 52 percent of what Co declared," Parayno said. "Under the revenue code, under-declaration of more than 30 percent of income is prima facie evidence of false or fraudulent return."
Co was a former caterer and supplier of the NBP who has since been replaced by other suppliers. The BIR said it only needed to counter-check Co’s contracts with the BuCor to validate his tax declarations against the actual sales contract.
"For his (Co’s) unlawful under-declaration, estimated tax liabilities including incremental penalties would amount to around P4.4 million," Parayno said.
"You might not have heard of Eliseo Co in the same manner as you know CAP Pension and CAP itself but based on our investigation, all are equally guilty of tax evasion," Parayno said.
According to Parayno, CAP Pension and CAP deliberately failed to remit withholding and value-added taxes from May 2004 to February 2005, totaling more than P85.52 million.
"The companies continuously filed their tax returns without making the corresponding payment," Parayno said. "This is misappropriation of government funds. CAP did not remit taxes it already withheld."
In a statement sent by fax to The STAR, the CAP firms said "CAP filed a request for VAT refund on Sept. 21, 2001 for tax year 1999. The BIR instead wrote CAP saying that it should pay more because it differs with the company’s computation."
According to the CAP statement, "the BIR believed that the basis should be the total amount collected from the planholder by CAP.
"CAP argued that the total amount collected from the planholder consists of two portions: 40 percent (at that time) was mandated as going to the trust fund; 40 percent was for the corporation’s operating expenses, etc."
CAP contended that "what should be taxed should only be the portion that goes to the corporation," adding that "the Federation of Pre-Need Companies agrees with the position of CAP."
"Nevertheless, the BIR ruled that CAP pays taxes based on the gross amount," the statement said.
In response to the BIR lawsuit, "CAP filed a case before the Court of Tax Appeals on April 4" docketed as CTA Case No. 7190.
The statement also said "CAP prioritized the planholder payments," adding that "on its withholding taxes, CAP asked for an extension of up to two years (and) Deputy (Internal Revenue) Commissioner Kim Jacinto-Henares approved a six-month extension per BIR letter dated May 11."
"The extension is contingent upon: Receipt of proof of payment of P500,000," the statement added. "CAP paid this per E-payment Transaction No. 560108 with PNB (Philippine National Bank)."
"The CAP board of directors, in its meeting of May 5, identified the assets and approved the mechanics of payment," the statement said.
Parayno said that all the reportorial compliance and payment requirements of the CAP firms, classified as large taxpayers, are being monitored by the Large Taxpayers Service of the BIR.
He said that based on the monthly routine verification conducted by the BIR with its Integrated Tax System, it was discovered that, although CAP Phils. Inc. electronically filed its withholding taxes for compensation returns for the period of May 31, 2004 to Feb. 28, 2005, the expanded withholding tax returns for the period May 31, 2004 to Nov. 30, 2004 and the VAT returns for the period June 30, 2004 to Feb. 28, 2005, it "deliberately failed to make the payments corresponding to such returns and likewise deliberately failed to remit the withholding taxes."
"As of May 2, 2005, CAP Phils. Inc.’s total tax liabilities amounted to P53 million, exclusive of increments such as P28.5 million for withholding tax-compensation from May 31, 2004 to Feb. 28, 2005; P14 million withholding tax-expanded from May 31, 2004 to Nov. 30, 2004 and P10.5 million Value Added Tax from June 30, 2004 to Feb. 28, 2005, or a total of P53 million" Parayno said.
He said that as of May 2, 2005, the CAP Pension’s total tax liabilities amounted to P32.5 million, exclusive of increments; P5.6 million withholding tax-compensation from May 31, 2004 to Feb. 28, 2005; P12.58 million withholding tax-expanded from May 31, 2004 to Feb. 28, 2005; and P4.27 million in VAT from June 30, 2004 to Jan. 31, 2005.
"CAP Phils., Inc. and CAP Pension offered to settle their liabilities by installment. However, to date, no installment payment was received from CAP Phils. Inc., and CAP Pension," Parayno said.
He added that "full or partial settlement of civil liabilities will, however, not prevent the BIR from filing a criminal case for manifest violations of the Tax Code."
Parayno said the BIR would also file the same complaint against other insurance companies if they will fail to remit or under-declare their incomes.