The Bureau of Internal Revenue (BIR) on June 19 filed a criminal complaint with the Department of Justice against PHD Media Network 2006, Inc. (PMNI), together with its responsible corporate officers—President/Chief Executive Officer Herminia de Leon, and Chief Financial Officer/Treasurer Rowena M. Nardo.
For its part, PHD said payments for media suppliers are not part of the taxable base.
“In our ongoing discussions with BIR on this issue, BIR alleged that payments for media suppliers that passed through PHD are part of the taxable base. PHD’s contention is that this is not PHD’s income and therefore not part of the taxable base,” the network said in its official statement.
BIR filed the case for willful attempt to evade or defeat tax, and for deliberate failure to supply correct and accurate information in its income tax returns (ITRs) and value added tax (VAT) Returns for taxable years 2009 to 2011, according to a news release from the Department of Finance.
According to the BIR, records of investigation showed that PMNI was issued Letter of Authority (LOA) No. 211-2014-00000059 for the examination of its books of accounts and other accounting records for all internal revenue taxes from January 1, 2009 to December 31, 2011.
PMNI, together with its responsible corporate officers, was sued for an aggregate tax liability amounting to P532.6 million, inclusive of surcharges and interests, broken down into: 2009 – P222.95 million (Income Tax – P156.07 million & VAT – P66.88 million); 2010 – P194.45 million (Income Tax – P130.21 million & VAT – P64.24 million); and 2011 – P115.20 million (Income Tax – P71.9 million & VAT – P43.3 million).
PHD is under the Omnicom Media Group, which is headed by CEO Nicanor Gabunada Jr., who was appointed in 2012 following De Leon’s move to Havas Media Ortega.
BIR said that access letters sent to business entities that engaged PMNI’s services revealed the agency received payments amounting to P294.82 million in 2009, P282.73 million in 2010, and P226.3 million in 2011.
However, PMNI in its ITRs declared gross sales of only P71.09 million in 2009, P78.51 million in 2010, and P101.40 million in 2011.
Based on the replies to BIR’s access letters, PMNI received the following payments:
P294.82 million DMCI – P12.73 million, & Foodsphere – P282.09 million in 2009
P282.73 million (DMCI – P10.82 million, Foodsphere – P269.41 million, & Pharm Asia-Cuvest, Inc. – P2.50 million) in 2010
P226.3 million (DMCI – P11.3 million, Foodsphere – P207.6 million, & Pharm Asia-Cuvest, Inc. – P7.4 million) in 2011.
“A comparison of the gross income declared by PMNI in 2009 to 2011 as against the income it received in the same years as certified by its aforementioned clients disclosed that PMNI deliberately failed to declare its correct taxable base by substantially underdeclaring its taxable income by P223.73 million or 314.69% in 2009, by P204.23 million or 260.15% in 2010, and by P124.88 million or 123.16% in 2011,” the BIR said, citing Sec. 248 (B) of the Tax Code. According to the Tax Code, an under-declaration of taxable income by more than 30% is considered substantial and constitutes a prima facie case of fraud tantamount to tax evasion.
The case against PMNI, and its responsible corporate officers is the 257th filed under the RATE (Run After Tax Evaders) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.
Prior to the complaint against PMNI, the BIR also filed complaints against outdoor advertising company JS Dream Ad and marketing communications agency Adformatix.
