Next bout: Pacman vs Kim

MANILA, Philippines - After defeating American Timothy Bradley last Sunday and earning some $20 million in prize money, boxing legend Manny Pacquiao may be in for the toughest fight of his life – this time against revenue chief Kim Henares.

In a radio interview, Henares yesterday said the Bureau of Internal Revenue (BIR) is determined to get Pacquiao to settle his back taxes, which have now ballooned to about P2.65 billion due to interest charges.

Pacquiao was assessed a tax liability of more than P2.2 billion as of December 2012 for failure to pay taxes on earnings from his fights in 2008 and 2009.

Aside from his latest $20-million purse, Pacquiao has other earnings from his fight with Bradley, including from endorsements and pay-per-view television subscriptions in the United States.

“He should report all his US earnings and tax payments to the BIR so as not to complicate his tax problems with the bureau,” Henares said.

She said that win or lose, Pacquiao has to remit to the BIR 32 percent of his earnings from the latest bout.

The BIR chief also reminded the boxer to properly document his US tax settlements to avoid being levied twice.

The US Internal Revenue Service earlier demanded that Pacquiao settle around $18 million in alleged back taxes.

Henares said that if Pacquiao pays all his taxes in the US, he may not be no longer be required to pay any local tax under a tax treaty between the Philippines and the US.

She added that what the boxing champion should pay in the Philippines are income tax and value added tax (VAT) on his earnings, endorsements and services earned or rendered in the country.

Henares said Pacquiao had paid about P32 million in past-due VAT covering his P114-million earnings from 14 product endorsements, but not his income tax liabilities for previous years.

In June 2012, the BIR demanded that Pacquiao and his wife Jinkee pay a total of P2,200,310,745.23 for taxable years 2008 and 2009.

The BIR said that for 2008, Pacquiao had an income tax liability of P762,515,263.48. His VAT due was P4,374,267.14.

For 2009, the BIR wants to collect P1,406,715,144.03 in income tax and P26,706,070.58 in VAT from Pacquiao.

In 2008, Pacquiao had three fights in the US with Juan Manuel Marquez, David Diaz and Oscar dela Hoya. In 2009, he fought Ricky Hatton and Miguel Cotto.

His promoter, Top Tank, reportedly paid him a total of $12.9 million for 2008 and $14.9 million for 2009.

Pacquiao is contesting BIR’s tax assessments before the Court of Tax Appeals (CTA).

His mother Dionisia has also complained about the BIR’s looking into her houses, jewelry and other assets.

Two-year wait

Henares said had the boxing champion reported his earnings and tax payments for 2008 and 2009, he would not have been in trouble with the BIR.

“We waited for two years for him to submit the documents, but he failed to do so,” she said.

She said it would be now up to the CTA to resolve his appeal.

“As far as we are concerned, our assessments are final and we will continue to demand payment from him,” she added.

As for Pacquiao’s mother’s assets, Henares has said that if these were acquired from donated funds, donor’s taxes should be paid.

Henares said the BIR had attached a writ of garnishment against Pacquiao’s assets and properties to compel him to meet his tax obligations.

Under the Tax Code, the BIR shall impose an interest of 20 percent per annum on unpaid tax obligations. Under the Philippine Tax Code, a compromise payment of at least 40 percent of basic tax assessed may be allowed when reasonable doubt as to the validity of the assessment against the taxpayer exists.

In cases where the taxpayer is suffering from a net worth deficit or has been declared bankrupt, a minimum compromise rate equivalent to 10 percent of the basic assessed tax applies.

Where the basic tax involved exceeds P1 million or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to approval of the evaluation board, which shall be composed of the BIR commissioner and four deputy commissioners.

The Tax Code also states that no offer of compromise shall be entertained unless the taxpayer waives in writing his or her privilege of the secrecy of bank deposits. Such waiver shall constitute the authority of the BIR commissioner to inquire into the bank deposits of the taxpayer.

The CTA, meanwhile, is set to rule on the motion filed by Pacquiao and his wife Jinkee after submitting the case for resolution last March 28.

Pacquiao’s motion is for the lifting of the warrant of distraint and levy and garnishment and for the issuance of an order to suspend the collection of tax.

The BIR had promised in December that it would not execute the warrant “during the pendency of the discussion” on some related matters between Pacquiao’s camp and the BIR.

“There is an ongoing discussion between petitioners and respondent that would have a material effect in the outcome of the present incident,” court records said.

Defending Kim

Reacting to criticism of Henares’ allegedly spoiling Pacquiao’s triumph by reminding him of his tax obligations, Malacañang said she was only doing her job.

“We don’t quite think that Commissioner Henares intends to be any way disrespectful, or that her manner any way tends to lessen the honor that Manny Pacquiao has brought to the country,” deputy presidential spokesperson Abigail Valte said in a press briefing.

Pacquiao won a 12-round unanimous decision over Bradley, avenging his controversial 2012 loss to the previously unbeaten American.

“Commissioner Henares said… they were talking to the camp of Pacman as to what else could be done to the liabilities he was facing... We don’t mean to make it hard for Congressman Pacquiao,” Valte said.

She said the “Pacman versus Taxman” talks on social media should not be taken seriously.

“Perhaps in the spirit of fun. We know how we can find humor in every situation and perhaps, you know, this is an example of that,” Valte said.

She said the entire nation began the week on a celebratory note with Pacquiao’s regaining the World Boxing Organization welterweight title – and for that the nation was thankful.

Valte stressed Henares was not singling out Pacquiao, much less using him for political purposes.

“There is no such intention. But remember Commissioner Kim Henares’ focus is to really collect taxes – that is her job,” Valte said.

Told that some people were mad at Henares for her tough talk on the boxing icon’s tax problems, Valte said the BIR chief was simply very focused on her job and on her mandate.

“I don’t think that she intends to be offensive. She’s just doing her job,” Valte reiterated.

Henares, for her part, said Pacquiao’s problem with the BIR should be an eye-opener to him.

“Hopefully, he learned in 2008 and 2009 the principle that all Filipinos who are residents of the Philippines, all of their income globally, must be reported and the paying of taxes in other countries, if any, should be documented and the documents must be submitted to us,” Henares said.

“On the issue of whether he still has to pay something here, we don’t know that yet, because that depends on the tax rate in the foreign country. But until he reports the taxes that he paid there, then he cannot benefit from the tax credit,” Henares said.

“I just want to tell everyone, I’m only saying these things in answer to your questions. I don’t talk just out of nowhere – it’s because somebody asked a question, that’s why I talk about this issue,” she said. With Aurea Calica, Janvic Mateo