MANILA, Philippines—No one is untouchable any longer.

As the Bureau of Internal Revenue (BIR) itself put it, it is using the Al Capone method to nail a son of former President Gloria Macapagal-Arroyo for tax fraud.

In a move unthinkable for the agency during the nine-year Arroyo administration, the BIR Thursday charged Ang Galing Pinoy party-list Rep. Juan Miguel “Mikey” Arroyo and his wife, Angela, with evading taxes.

Under the net worth method, tax investigators add up all assets of a subject and subtract all his or her liabilities to calculate the net worth.

BIR Commissioner Kim Jacinto-Henares said the Arroyo couple were found to have a tax liability of at least P73.85 million, including surcharges and interest.

From 2003 to 2009, Arroyo, who, incredibly, represents the party-list group of security guards and tricycle drivers, and his wife either failed to file their income tax returns or underdeclared their income, Henares said at a press conference at the Department of Justice where the BIR filed a case against the couple.

A BIR comparison of the couple’s net worth and reported taxable income “using the net worth method first employed in the US against gangster Al Capone” showed a substantial underdeclaration of income of more than 30 percent in 2004, 2006 and 2007, a BIR statement said.

Under the Tax Code, an underdeclaration of taxable income of more than 30 percent is considered a prima facie evidence of fraudulent return.

Capone was imprisoned for good not because of criminal activities in the 1920s like bootlegging, bribery of Chicago officials and killings of rivals, but because of tax evasion.

Tips from informants

Henares said tips from informants prompted the BIR to investigate the Arroyo couple using the net worth method.

The BIR used the statements of assets, liabilities and networth (SALNs) of Arroyo when he was Pampanga vice governor in 2002 and when he was Pampanga congressman from 2004 to 2009.

His net worth rose from P50,000 in 1993 to P5.72 million in 2001, the year he was elected vice governor. His net worth soared to P76.5 million in 2004 and to P99.2 million in 2009.

“Based on the information and documents gathered during (the BIR) investigation, it was disclosed that Mr. and Mrs. Arroyo were able to acquire real, personal and other properties for the years 2004 to 2009, which are worth several millions,” the BIR complaint said.

Among these assets were residential houses (in Lubao, Pampanga province, and in La Vista subdivision in Quezon City), vehicles, shares of stock, jewelry, clothes and other personal effects that Arroyo enumerated in his SALNs.

Wedding gifts

Henares said the gifts the couple received when they got married were also subject to taxes. Arroyo wed Angela Arroyo Montenegro, his second cousin, in 2002.

Embroiled in a controversy in 2009 about his and his wife’s real estate purchases in the United States, Arroyo claimed that campaign contributions and wedding gifts were partly the reason for the substantial increase in his net worth.

It was reported in 2009 that Arroyo did not declare in his SALN in 2007 and 2008 a $1.32-million beachfront property in the San Francisco Bay Area in California that he bought and transferred to his wife’s name in 2006.

Henares said that while Angela did not list any occupation, she was able to buy and sell stocks.

Director in firms

The BIR also determined that Angela was a director in various domestic and international firms from 1991 to 1999.

“Remember, if you report that you have an asset, you have a net worth, you should be able to say where it comes from. And where it comes from normally, always there’s a tax consequence,” Henares said.

“If somebody donated it to you, there should be a donor’s tax. If you inherited it, you should have an estate tax. If you bought it, you should have income from which to buy this property,” she added.

The BIR chief said wedding gifts were considered donations and donations worth at least P10,000 were taxable.

The complaint noted that Arroyo registered as a One Time Transaction (ONETT) taxpayer in June 2002 in Pampanga, and again in Quezon City in July the same year.

This led to the cancellation of his ONETT TIN (taxpayer’s identification number) in July 2009.

Angela registered as a ONETT taxpayer in Makati City in September 2002 but failed to file any income tax returns (ITRs).

Arroyo did not file ITRs in 2005, 2008 and 2009. His wife did not file any return from 2003 to 2009, the BIR said.

Deliberate failure

Henares said Arroyo filed a net income of P2.4 million in 2004, P1.7 million in 2006 and P376,000 in 2007.

“Clearly, such continuous and deliberate failure of Mr. & Mrs. Arroyo to file the mandated ITRs for several years and their substantial underdeclaration of income demonstrate their propensity and willful intent to evade the taxes due the government,” the BIR complaint said.

Henares said the complaint filed against the Arroyos was without any political slant.

She said that if the Aquino administration was only after its predecessor, the BIR should have filed the complaint immediately after President Benigno Aquino III assumed office last year.

Mini trial

Henares said the BIR itself had done “a lot of filtering... (conducting) a mini trial (within the agency), to see how strong the case is before we file it.”

“There is due process... The respondents can present their evidence in the preliminary investigation. My advice (to the Arroyos) is there is a proper venue. We should use that venue,” she said.

Asked if Arroyo, as a lawmaker, would be liable for violation of the anti-graft and corrupt practices law, Justice Secretary Leila de Lima said at the media briefing that the justice department would do “the necessary evaluation.”

The case against the Arroyo couple was the 37th filed by the BIR under its Run After Tax Evaders (RATE) program, a government initiative implemented during the previous administration to shore up government coffers.

Nikko Dizon, Inquirer.net