Rappler indicted for tax evasion

The Department of Justice (DOJ) has found probable cause to charge Rappler Holdings Corporation in court for tax evasion in connection with a complaint filed by the Bureau of Internal Revenue (BIR) earlier in the year.

The DOJ, through Assistant State Prosecutor Zenamar Machacon-Caparros, upheld the BIR's complaint against RHC, its president Maria Ressa, and its independent certified public accountant Noel Baladiang for "willful attempt to evade or defeat tax and willful failure to supply correct and accurate information under Sections 254 and 255, respectively, of the Tax Code," said a Friday press statement, citing an October 2 resolution.

The complaint against treasurer James Bitanga was dismissed upon Ressa’s certification that he was an “inactive and nominal treasurer who did not participate in the management and operations of RHC,” the DOJ said.

In March, the BIR accused Rappler of failing to pay taxes out of the income it gained from the sale of Philippine Depositary Receipts (PDR) in 2015.

The bureau alleged that Rappler's tax deficiency reached P133.84 million, but the statement did not indicate the amount of the company's alleged tax liability as charged by the state prosecutor.

Justice Secretary Menardo Guevarra said the amount could appear in the formal charges that would be filed in court early next week.

The statement, however, mentioned a BIR allegation that a total gain of P162.5 million out of the issuance of PDRs supposedly went undeclared in the company's tax return.

Caparros, the prosecutor, ruled that in buying Rappler Inc. shares for the supposed purpose of underwriting PDRs for resale to interested buyers, RHC acted as a "middleman" whose profits were taxable under the Tax Code, according to the statement.

"By not declaring such profits in its returns, the RHC has violated the Tax Code," it said.

The prosecutor also decided that Ressa should be held accountable as Section 253 of the Tax Code makes a corporate president and other officers "personally liable" for such an offense by the corporation, the DOJ said.

"Brushing aside" Ressa's defense that the non-declaration was unintentional, Caparros held that a "defense of lack of criminal intent is better ventilated during the trial proper."

In its complaint, the BIR accused Rappler of misrepresenting the firm's tax returns in 2015 by acting as “dealer in security” in conjunction with its issuance and sale of PDRs to two foreign judicial entities that same year.

By dealing in securities, RHC should have paid income and value-added taxes, but its returns in 2015 reflected no taxes have been paid out of the income it gained from the PDR transactions, the BIR alleged.

However, Rappler said it “never hid” the transactions. Its officers also denied RHC is a merchant of securities and that the holdings firm profited from PDR issuances.

“The complainants’ treatment of us is selective justice, and will have a chilling effect on PDR issuers. Clearly, at most, the taxability of PDRs is a novel and difficult question of law, which cannot give rise to a criminal prosecution, as this negates willfulness,” it said in a required filing before the DOJ in May.

The resolution to indict comes several months after Rappler saw its certificate of incorporation revoked by the Securities and Exchange Commission (SEC) for allegedly violating the foreign ownership restrictions on mass media companies.

The news organization, which has published pieces critical of the Duterte administration, is challenging the SEC before the Court of Appeals, which remanded the case back to corporate regulator for a study of the effect of a foreign investor's donation of its PDRs to Rappler's staff.

Rappler still faces a cyber-libel complaint by businessman Wilfredo Keng before the DOJ. —NB, GMA News