Rappler Holdings Corp. cannot be held liable for tax evasion as the company is not in the business of buying and selling securities as the Bureau of Internal Revenue alleged in relation to the Philippine Depositary Receipts (PDRs) issued to two foreign investors.
“Definitely no,” Rappler’s legal counsel Francis Lim said in a television interview on Tuesday when asked if the company is accountable in terms of tax evasion.
“Basically, the theory of the BIR is that when you buy securities or stocks either through the stock market or privately and you sell the securities, you are in effect a dealer in securities and you will be taxed at such. Mali ‘yun,” Lim said.
“Very clear ‘yung definition ng dealer in securities in the Tax Code and regulation and it basically says a dealer in securities is a merchant that is primarily engaged in the purchase of shares for resale to its customers,” the lawyer emphasized.
On March 8, the BIR filed a tax evasion complaint against Rappler Holdings for tax deficiencies amounting to P133.84 in relation to the PDRs it issued to foreign entities.
The taxman alleged that Rappler Holdings purchased common shares from subsidiary Rappler Inc. and subsequently issued and sold PDRs to Omidyar Network and North Base Media in 2015, claiming the transactions were “proof that Rappler Holdings is engaged in purchase of securities and resale thereof.”
Lim, however, said it is wrong for the BIR to claim that Rappler is a dealer in securities just because it sold PDRs.
“For example, individual ako, bibili ako ng stocks through the stock exchange for my investment, then when the price of those shares increased and I sell … that does not mean to say that I’m a dealer in securities,” the lawyer noted.
“Effectively, ganun ang sinasabi ng gobyerno. Nag-subscribe raw ‘yung Rappler Holdings ng shares of stocks sa Rappler Inc. … and issued PDRs where the shares of stocks are underlying. Because the purpose of the company is to hold shares, then it is a dealer in securities,” he said.
Rappler did not earn income from the PDRs it issued, so it is not taxable, he said.
“It is raising more capital when you issue PDRs … When you raise capital that is not income. They should know that,” he said.
On January 15, the Securities and Exchange Commission (SEC) revoked the certificates of incorporation of Rappler Inc. and Rappler Holdings for supposedly violating the foreign ownership restrictions on mass media companies.
According to the SEC, Rappler violated the Constitution and laws when it allowed Omidyar Network, one of the Philippine Depositary Receipt (PDR) holders of Rappler, to exercise control over its corporate affairs as provided for in their internal agreement, in exchange for a fund infusion of $1 million.
On the other hand, the BIR said the case against Rappler Holdings is the 133rd filed under the Run After Tax Evaders program.