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ABS-CBN’s issue on taxation: Tax Avoidance vs. Tax Evasion

Is tax avoidance illegal?

During the 10th joint house committee hearing, various accusations concerning the ABS-CBN’s taxes were discussed.

Critics claimed tw1he network used its subsidiary Big Dipper Digital Content and Design Inc. and Lingkod Kapamilya Foundation Inc. to avoid paying taxes.

To give light to the issue at hand, tax avoidance is very much different from tax evasion. Although it minimizes the payment of taxes, it is not considered illegal but rather employs legal means as a tax-saving measure like using tax credits and incentives.

Tax evasion, on the other hand, uses fraudulent means in order not to pay the tax supposed to be paid, like understating income by not declaring it in its tax returns or overstating expenses which may be non-existent or not in accordance with the tax laws. Although both methods reduce the payment of tax, tax avoidance legally makes use of all available measures to help tax minimization.

“ABS-CBN has paid its proper taxes every year contrary to the allegations, there has not been a single year where ABS-CBN has paid zero taxes,” ABS-CBN Group chief financial officer (CFO) Ricardo Tan said.

In fact, the ABS-CBN has been considered as one of the large top taxpayers, where data shows that the network even paid the government a total of P71.5 billion in tax within a period of 17 years.

The tax agency itself, Bureau of Internal Revenue (BIR) attested during the hearing how the network and its subsidiaries have been consistent in their obligation to pay its taxes. The BIR assistant commissioner Manuel Mapoy even confirmed that the network has no outstanding delinquent account.

In one of the allegations, critics alleged that the network used its subsidiary Big Dipper. This company is entitled to tax incentives and is registered with the Philippine Economic Zone Authority (PEZA) under “IT Enterprise”. Being so, it has undergone and complied various procedures, requirements, and evaluations.

PEZA director-general Charito Plaza said, “There is no such thing as making PEZA as a tax shield because these incentives are being evaluated by these agencies [which includes the Department of Science and Technology, Department of Finance, and the National Economic Development Authority] of government.”

In short, the ABS-CBN subsidiary Big Dipper, being registered as PEZA and fully compliant with its regulations, is legally allowed to enjoy all the fiscal benefits granted to them as this is based and in accordance with the law.

On another note, the network was also criticized of its non-payment of donor’s tax. Lingkod Kapamilya handles its social development programs. It is accredited by the Philippine Council for NGOs Certification (PCNC). This certification enables the organization to be exempt from paying donor’s tax.

As Tan pointed out, “The ABS-CBN Lingkod Kapamilya Foundation has always been transparent in its efforts to uplift and improve the lives of Filipinos. It is accredited by the Philippine Council for NGOs certification and its tax exemption has been confirmed by the BIR. The donations it receives are not subject to donors’ tax.”

Aside from this allegation, Senior Deputy Majority Leader and Cavite Rep. Jesus Crispin Remulla also questioned the donations given to the foundation. According to him, despite how much the network donates, it does not wholeheartedly gives it to the people in need since it would also provide an advantage on their part by deducting the donations in their income.

“Pag kayo ho ay nagdo-donate, hindi ibig sabihin, buong puso niyong binibigay. Binabawas niyo rin yan para mabawas po sa buwis na binabayaran niyo,” he said.

ABS-CBN chief financial officer Aldrin Cerrado briefly explained that donations, under the revenue code, is a deductible expense. Meaning, it is an allowable deduction in its reported income. ABS-CBN chairman Mark Lopez also cleared the misconception of the network’s sincerity in giving donations by saying, “On our donation, the tax credit is not the motivation for making those donation… It is also allowed.”



Moreover, ABS-CBN was also guided by its independent auditor SGV &Co, which further examines its financial records and other relevant information. Above all, the BIR agency itself takes part in ensuring that all prior and current year’s financial records were faithfully reflected in the filing of its tax returns. In fact, Manuel Mapoy said that the ABS-CBN’s prior year’s investigation, except 2019 which is still on-going, were already complete. Hence, any tax deficiencies were already settled and thus considered closed.

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