TIMELINE: Tracing BIR's tax complaint against Rappler Holdings

MANILA, Philippines (UPDATED) – It's been over a month since the Bureau of Internal Revenue (BIR) filed a tax evasion case against Rappler Holdings Corporation – the latest in a string of complaints from government agencies that have been going after the social news network since President Rodrigo Duterte accused it of being funded by the Central Intelligence Agency.

The BIR last month announced via a press release that Rappler Holdings has evaded taxes amounting to P133.84 million, for allegedly not supplying "correct and accurate information in its 2015 income tax return."

Until now, there is no clear picture of how the tax collector came up with the P133.84-million tax liability.

The BIR argued that Rappler Holdings, as a dealer in securities – a claim disputed by the social news network – is subject to income tax (IT) and value-added tax (VAT). Rappler has said it sold Philippine Depositary Receipts (PDRs) amounting to P188 million only.

As defined in the tax code, a dealer in securities is "a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and the resale thereof to customers; that is, one who, as a merchant, buys securities and re-sells them to customers with a view to the gains and profits that may be derived therefrom." 

Here's a rundown of events surrounding the tax evasion complaint:

May 25, 2015 – Rappler Holdings issues and sells 12,028,718 PDRs to investment firm North Base Media Limited. (READ: TIMELINE: The case of Rappler's SEC registration)

A PDR is a financial instrument that allows foreigners to invest in a Filipino company, without owning any part of it. This is consistent with the 1987 Constitution, which states that mass media in the Philippines should be wholly owned by Filipinos. A PDR is not equivalent to a share in the company.

Rappler is the first media startup in the Philippines to join broadcasting network giants ABS-CBN and GMA in offering PDRs to international investors. 

May 31, 2015 – Rappler Holdings publishes a report announcing its partnership with North Base Media.

June 8, 2015 – Rappler Holdings files Securities of Exchange Commission (SEC) Form 10-1 – a notice of confirmation exempt transactions – for the 264,601 PDRs sold to North Base.

August 8, 2015 – Rappler Holdings files a subsequent SEC Form 10-1 for the 11,764,117 PDRs sold to North Base.

October 2, 2015 – Rappler Holdings issues 7,217,257 PDRs to Omidyar Network Fund LLC.

November 5, 2015 – Rappler Holdings publishes a report announcing Omidyar Network’s investment.

December 1, 2015 – Rappler Holdings files SEC Form 10-1 for the 7,217,257 PDRs to Omidyar Network.

January 11, 2018 – The SEC revokes Rappler's license to operate because the PDRs of Omidyar supposedly violate the constitutional restrictions on ownership

February 28, 2018 – Omidyar Network announces it has donated its PDRs to 14 Filipino managers of Rappler, in an effort "to address the unwarranted ruling" made by the SEC.  

March 5, 2018 – Five days after the PDR donation, BIR delivers to the Rappler office a notice dated March 2, requesting for various documents related to a tax examination of Rappler Holdings. 

March 8, 2018 – In just 3 days, BIR publishes a press release on its website announcing a file tax evasion case against Rappler Holdings, alleging that the firm, together with its president Maria Ressa and treasurer James Bitanga, wilfully attempted to evade tax payments, as well as failed to provide accurate information in its income tax and value-added tax (VAT) returns for 2015.

BIR Commissioner Caesar Dulay writes a referral letter to former Justice Secretary Vitaliano Aguirre II that "RHC, Ms. Ressa, and Mr. Bitanga are being charged for willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information for taxable year 2015."

Rappler Holdings finds out via Twitter that the BIR filed a tax evasion complaint against the firm, even if the firm has not submitted to the BIR any documents for assessment and investigation as of this period.

March 13, 2018 – Rappler Holdings questions the BIR's grounds for filing a criminal complaint against its two executives for allegedly evading P133.8 million in taxes.

Lim says Rappler Holdings cannot be considered a dealer in securities when it issued the PDRs to Omidyar Network and North Base Media. "Rappler was the issuer; it did not buy the PDRs." (READ: Rappler lawyer cites loopholes in BIR's tax complaint)

Lim also says Rappler Holdings did not resell the shares it bought from Rappler Incorporated. He points out that the PDRs of Rappler Holdings are different from the Rappler Incorporated shares. "Those two are distinct financial iinstruments." 

Lim, senior partner at Angara Abello Concepcion Regala and Cruz Law Firm, also argues that the capital raised from issued PDRs are not yet booked by Rappler as income as of now.

April 16, 2018 – Rappler Holdings receives the tax evasion complaint from BIR. Ressa and Bitanga also receive a subpoena from the Department of Justice over the tax evasion complaint.

The subpoena is signed by Assistant State Prosecutor Zenamar J.L. Machacon-Caparros on Wednesday, April 11.

The assistant state prosecutor order Ressa and Bitanga to submit their "counter-affidavit and other supporting documents" or affidavits by witnesses, if any, at 11 am. Two dates are listed: April 24 and May 7.

The 7 government offices that have taken action against Rappler include the Office of the Solicitor General, the SEC, DOJ, the National Bureau of InvestigationMalacañang, the Department of Education, and now the BIR.

October 2, 2018

DOJ indicts Rappler Holdings and Maria Ressa for tax evasion and failure to file tax returns, stating that through PDRs "it gained close to P162.5 million from the transaction, which it failed to declare in its tax return."

Assistant Prosecutor Zenamar Machacon Caparros signs the indictment.

November 9, 2018

The DOJ makes public the resolution indicting Rappler Holdings and Ressa.

"The National Prosecution Service (NPS) has found probable cause to indict Rappler Holdings Corporation (RHC), its President Maria Ressa and its independent Certified Public Accountant Noel Baladiang for violation of the National Internal Revenue Code or the tax code," the justice department says in a statement. 

November 26 and 28, 2018

DOJ files 3 counts of failure to file tax returns and one count of tax evasion against Rappler Holdings and Ressa before the Court of Tax Appeals. 

The justice department proceeds with the filing of cases despite respondents’ motion for reconsideration filed.

November 28, 2018

Judge Danilo Buemio signs an arrest warrant against Ressa who has been charged with violating Section 255 of the National Internal Revenue Code of 1997. The arrest warrant, however, is released to the public by the Pasig Regional Trial Court Branch 265 on December 3. 

December 3, 2018

Ressa posts a bail of P60,000 at the Pasig Regional Trial Court Branch 265 for alleged violation of the Tax Code. In posting her bail, Ressa does not waive her right to question the jurisdiction of the Pasig court over this case.

December 4, 2018

Rappler Holdings Corporation and Maria Ressa files a motion to quash before the Pasig Court, asking the court to void the charges, if not remand investigation to the DOJ – or at least suspend proceedings while they avail of appeal remedies. 

December 11, 2018

Ressa posts bail at the Court of Tax Appeals over 4 charges of alleged violation of the Tax Code. She posted P204,000 (about $4,000) worth of bail ahead of the issuance of warrants of arrest.

December 12, 2018

Citing lack of jurisdiction and absence of due process, Rappler and Ressa asks the Court of Tax Appeals  to nullify the tax evasion case filed against them and remand it to the DOJ.

February 7, 2019

The Court of Tax Appeals denies Rappler and Ressa's appeal and decides to proceed with the trial over 4 counts of alleged tax violations.

The CTA says the motion to quash filed is moot as the DOJ already denied the appeal in November 2018.  – Rappler.com

 

More information on Rappler's cases: