Raps vs. Rappler show underdeclaration in tax returns

By Benjamin Pulta

November 12, 2018, 6:20 pm

MANILA -- State prosecutors who evaluated the tax evasion charges against online news site Rappler and its president Maria Ressa in its resolution said the company underdeclared its tax returns more than eightfold in 2015.

In its 15-page resolution released on Monday, Department of Justice (DOJ) Assistant State Prosecutor Zenamar J. L. Machacon-Caparas said: "Rappler Holdings Corp. (RHC) committed substantial under declaration at 844 percent in its tax returns for 2015 after failing to declare a total of PHP162,412,783 representing the difference between the acquisition cost of the underlying shares (PHP19,245,967) and the total consideration for the Philippine Depositary Receipts (PHP181,658,757)".

From its investigation, revenue officials learned about the purchase by RHC of 1,300,000 common shares from Rappler Inc. (RI) at PHP1 per share in December 2014. On May 25, 2015, RHC also purchased 110,917,181 common shares from RI for a subscription price of PHP110,917,181.

On May 29 and July 29, 2015, RHC issued 264,601 and 11,764,117 Philippine Depositary Receipts (PDRs) respectively, to NBM Rappler LP representing a total of 12,028,718 RI shares as underlying shares for a total subscription price of PHP111,474,554.

On Aug. 28, 2015, RHC again purchased additional 7,217,257 common shares from RI. Subsequently, on Oct. 2, 2015, it issued 7,217,257 PDRs to Omidyar Network Fund LLC for a total subscription price of PHP70,184,204.

"All the PDRS were issued by RHC for a total consideration of PHP181,685,758 as against the total subscription price of the underlying RI shares at P19,245,975. The total gain amounted to PHP162,412,783 but which amount was not reflected as income in the tax returns for 2015," the DOJ said.

According to BIR, RHC devised a scheme to hide its transactions as a dealer in securities. RI started its negotiations regarding funding with Omidyar and NBM Rappler as early as Oct. 29, 2013 and Jan. 26, 2014.

A few months later, RHC was incorporated carrying the primary purpose of buying and selling real and personal properties, including shares of capital stocks, bonds, debentures, promissory notes or other securities and obligations.

Despite the prohibition from acting as a stockbroker or a dealer in its certificate of incorporation, RHC regularly engaged in the purchase and resale thereof. "All these demonstrate and deliberate intent to conceal the true nature of its securities transactions, and consequently evade the payment of the correct amount of taxes, making respondent RHC and its responsible corporate officers liable for "willful attempt to evade or defeat tax" under Sec. 254 of the Tax Code.

"RHC clearly made substantial, frequent and repeated trading of securities in stocks and equity derivatives if we consider them within the time frame in which they were exercised, one after the another," the DOJ said.

RHC made two large purchases of shares and engaged in the resale thereof in terms of 19,245,975 in three large batches, within a single tax year (2015). This was on top of the other round of purchase of shares in the latter part of the previous years.

"These instances conform to the regularity of transactions seen in securities dealing," the DOJ said. (PNA)