Mikey, wife want P73-M tax evasion charges junked

MANILA, Philippines - Former presidential son and now Ang Galing Pinoy party-list Rep. Juan Miguel Arroyo and his wife Angela denied before the Department of Justice (DOJ) yesterday the P73.85-million tax evasion charges filed against them by the Bureau of Internal Revenue (BIR) last April.

The couple appeared before the DOJ panel and submitted a counter-affidavit denying BIR’s allegation of wrongful declaration of taxable income and non-filing of income tax returns (ITR).

The BIR had accused Rep. Arroyo, son of ex-President and now Pampanga Rep. Gloria Macapagal-Arroyo, and his wife of violating Sections 254 and 255 of the National Internal Revenue Code, saying they only paid P2.4 million, P1.7 million and P376,000 in taxes for the years 2004, 2006 and 2007, respectively, when he and his wife bought several properties worth millions from 2004 to 2009, including residential houses in the US, in Lubao, Pampanga and in La Vista Subdivision in Quezon City.

The Arroyo couple claimed that the BIR made a mistake in computing the taxes they have paid in those four years.

“Even based on the computations of the BIR, the computations drawn were wrong… we used the computation forwarded by the BIR and the results are wrong by almost 100 percent,” explained lawyer Ruy Rondain, counsel of the Arroyos.

Rondain said Arroyo’s ITRs on the years specified in the BIR complaint were covered by “substituted filing (of ITR) by Congress.”

In asking the DOJ to junk the complaint, the couple further alleged that the BIR “used a simplistic and general approach of comparing certain information derived from our SALN (Statement of Assets, Liabilities and Net Worth) and income tax returns to determine our alleged unreported income.”

“In this approach, the BIR did not determine any specific transaction or income that we may have earned but did not report for tax purposes.

“Likewise the BIR did not question the veracity of the items (assets and liabilities) listed in the SALN that we filed and they in fact used these in determining our alleged tax liabilities,” they argued.

Rondain said the BIR merely computed the net worth using the asset and liability information in the Arroyo’s SALN, calculated the increase in net worth for each year from 2004 to 2009, and determined the unreported income by comparing the increase in net worth with the taxable income reported in the tax return.

“Applying the same general approach that the BIR used in their Net Worth Method computation and taking into account the items mentioned above, we can show that there would not be any resulting unreported income,” he claimed.

Rondain said that if only the BIR used proper formula in computing the net worth, the respondents would not have any unreported income.

The couple cited for instance BIR’s error in taxable year 2004: “Instead of the estimated amount of P6,066,324 used by the BIR in its computation, the net worth of P72,727,511 as stated in the SALN that we filed should be the amount that should correctly be used in the Net Worth Method computation. Furthermore, our interest income, tax exempt income and gifts from relatives, all amounting to P1,378,472 should be included as part of our total income or adjustments for the year and the resulting amount should be compared with the increase in net worth.

“Accordingly our total income/adjustments in 2004 amount to P3,868,207 (consisting of the reported taxable income per income tax return of P2,489,375 and the amount of P1,378,472 of adjustments enumerated in the preceding sentence). Comparing this with the increase in net worth of P3,803,893, there is no unreported income that would result,” they explained.

He added that for taxable years 2005, 2007, 2008 and 2009, the Arroyo’s interest income, tax exempt income and gifts from relatives should also be considered as part of total income or adjustments for the year and the resulting amount should be compared with the increase in net worth for that particular year.

In 2005, their total income would amount to P556,374 consisting of the reported taxable income per return of P378,000 and the interest income and tax exempt income of P178,374. 

“Comparing this with the increase in net worth of P420,000, there is no unreported income that would result,” they said.