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Right after Manny Pacquiao, the Philippines' National Fighting Fist, won against Bambam Rios, the
Bureau of Internal Revenue slapped him with a 2.2-billion tax case which led to the garnishment
of an upscale property. (Garnishment: noun; a court order directing that money or property of a
third party be seized to satisfy a debt owed by a debtor to a plaintiff creditor.)

(For the timeline of events related to this Pacman-Taxman fiasco, read Solita Monsod's "More And
More Like A Trapo".)

Attorney Raymond Fortun wrote a legal article which he posted in his Facebook account, entitled
'To Tax the Pacman'. The comments, sound and unsound, and his responses to his followers
provided a free and instant lesson on taxation. For a common tao, it is a big help in understanding
the issue without getting one's emotion get on the way.

Reposted below is Atty. Fortun's discussion.

What DOES the law say?

The Bureau of Internal Revenue (BIR) levies income tax on taxable income from within and outside
of the country on all citizens of the Philippines, even those working abroad. Of course, another
country (e.g. the US) also has the right to tax people for incomes earned within its jurisdiction. In
order to avoid the unfair situation where a Filipino earns income abroad and taxed there and is
subsequently obligated to pay taxes for the SAME income as a Filipino citizen, the Philippines and
the US have an income tax convention as early as 1976, providing for "Relief from Double
Taxation". So without having to bore you all with details, it is possible for a Filipino working
abroad to be slapped with taxes by the US, but can use this fact as a "Tax Credit" in filing his
income tax return in the Philippines.

So what does the Pacman have to do to avoid being taxed twice?
1. He has to pay taxes in the US for income earned therein.

2. He has to secure the official IRS form that the taxes have been paid. A CERTIFICATION FROM

3. He has to file an income tax return in the Philippines for the year covered. NOTE that the
Pacman has other incomes aside from boxing, such as TV advertisements, product endorsements

4. He has to submit the IRS "tax-paid" form and other tax-withheld forms to support his claim that
he should only pay X amount of tax.

5. He should answer in a timely manner all letters sent by the BIR, including assessment notices.

6. If he does not agree with the assessment, he should then avail himself of legal remedies as
provided under the Internal Revenue Code.

If he did NOT do any of these, then the BIR has the right to impose the appropriate tax on him,
and to run after his properties in the process. Again, it must be stated: DURA LEX, SED LEX. The
law is harsh, but that is the law. If the Pacman violated the law, then he should be held

In response to some of his followers' queries, Atty. Fortun provided these additional

1. The obligation to file an income tax return belongs to the taxpayer; it is NOT the taxman's job
to make inquiries to another taxing authority. I am certain that several notices/letters were sent to Pacman to
explain his incomes and taxes due before the Writ of Garnishment was issued.

2. What Pacman should have done is demand from Top Rank the Certification of Tax Withheld
(W-2 in the Philippines) and, if this was not given, to secure from the IRS the needed form. I'm
certain that Pacman has good lawyers and accountants to make the proper filings before the
problem became too big.

3. Tax liabilities NEED NOT reach the point where the BIR has to issue a Writ of Garnishment.

Most taxpayers who are caught not paying the proper taxes just resort to SETTLING THEIR TAX
LIABILITY through compromise agreements. The reason why the BIR went hard at Pacman because
he appears to have ignored the various assessment notices issued, or even paid under protest man

4. "Why me, when everyone is doing the same thing?" If there is anyone who is converting this
into a political issue, it's Manny Pacquiao. The issue is simple: DID HE PAY PROPER TAXES OR
NOT? DID HE PROPERLY FILE HIS INCOME TAX RETURNS? If the answer to both questions is in the
negative, then the BIR is correctly running after his winnings. Enough of the "maraming kurakot
diyan na hindi dine-demanda". If he knows of such corrupt people, point them out to the BIR so
that they can also be subjected to tax notices.

5. People, just check the Pacquiao camp's "defense":

1. I just brought honour to the country, and this is what you repay me? How dare you!

2. There are other people who do not pay proper taxes, and yet i'm the one who is issued a Writ of

3. Why have you not garnished the accounts of the senators in the PDAF scam?

4. I will make a loan just to give relief goods and visit Tacloban

5. I am with the opposition, hence, i'm being singled out

See? All preying on the public's emotions.

FIGHTS. He has enough money to hire the best lawyers and accountants to fix his tax problems
BEFORE they became problems. That's the difference between him and Lucio Tan -- LT hires the
best people to make sure that he does not have any legal issues with the government.

Re: the PDAF scam, please be informed that the BIR has already filed a tax evasion case against
Janet Napoles, her daughter and brother. As to the senators/congressmen, their time will come.
However, it may be more difficult to file tax evasion cases because there is no paper trail (as
BenHur Luy and the other whistleblowers have testified). When there is no declared income, the
BIR cannot just tax. Manny Pacquiao's fight purses, on the other hand, are a matter of public

6. Question: "bakit nafreeze agad mga accounts nya? Bakit si Sexi and Pogi hindi nangyari yun
eh may mga under declared din sila na mga income and properties..."
Because Manny's case had been pending before the BIR for sometime. On the other hand, and to
this day, nobody has admitted being Sexy and Pogi, and Jinggoy/Bong have denied having received
any amounts. When the criminal cases have been filed with the Sandiganbayan, THEN and only
then can the government move to freeze their accounts.

7. Question: "Bakit kung kaso ni Lucio Tan, hindi agad sila nag-issue ng WG? hanggang sa
maapila yata ni Lucio Tan yung Tax Evasion at maging pabor sa kanya, walang WG n nilabas ang
BIR. sabi nun tax expert from Las Vegas, taon daw tlga inaabot if kukuha ka ng certified true
copy sa IRS?"

I do not know the complete details of Lucio Tan's case, but I have reason to believe that LT's
lawyers did the proper legal steps -- filed a case before the Court of Tax Appeals and secured a
TRO to prevent the issuance of a Writ of Garnishment. Simply put, smart ang mga abogado ni
Lucio Tan.

I'm not too sure that i can accept the possibility that the US IRS is soooo inefficient that it would
take years to issue a certified copy of a tax payment.

8. So now people question the timing. If the BIR enforced the WG before the fight, AND pacquiao
got distracted enough to lose the fight, you would all be up in arms and say, "sana hinintay nyo na
lang after the fight! Ayan tuloy, natalo!" The situation is called 'damned if you do, damned if you
dont'. Somehow, I accept the BIR's move to enforce the WG after the fight.

I go back to the basic premise. If he filed his returns properly, we wouldn't even be having this
thread now. He has nobody but himself to blame.

9. Question: "Are you also implying sir that Filipino OFWs working in countries that have no
income tax convention with the Philippine government are still mandated by law to pay
income taxes with emphasis to the Middle East (wherein tax rates nearing 0%)?"

As a general rule, all Filipinos are obliged to file tax returns and pay taxes for income inside and
outside the country. Thats the law.

10. TO ALL OFW's:

According to Revenue Regulations No. 1-2011, the wage or income of an OFW that is earned out of
the country is exempted from income tax. However, the earnings of an OFW from a business
venture or any other property in the Philippines is subject to tax obligations.

Remittances from OFWs are also exempted from the documentary stamp tax (DST). However,
according to BIR rule, in the case of OFW remittances sent through banks, the recipient is required
to show proof of entitlement to DST exemption such as OEC or Overseas Worker Welfare
Administration (OEC) certificate.

All OFWs also enjoy exemption from paying travel tax and airport fees, although they are required
to show proof that they are legal migrant workers.

11. Pacquiao is "targetted" because his income is a matter of public record. Fight purses are
announced even before the fight. The enormity of the amounts involved justifies the extra effort
to collect. Finally, I cannot discount the possibility that politics has a hand in government actions.
Whether this is a smokescreen to mask other existing (or future) issues is not for me to speculate

12. I saw Pacquiao's interviews during the first day. He kept harping on the certification given
by Top Rank. Posible na hindi lang sya marunong magpaliwanag siguro. But as a matter of legal
practice, a Certified Copy is usually acceptable, and NOBODY asks for originals.

Lastly, income tax is based on gross income less expenses. Salaries and commissions are
deductible expenses. Hindi ko po masasagot if Pacquiao, in his ITR, already deducted these
expenses from his net income subject to tax.

13. Anyway, this tax case has been pending for 2 years. If indeed the BIR was asking for a
DUPLICATE original, then it would not have been hard to: (1) inform BIR to give him time to
secure the requested form, and/or (2) pay the necessary fee -- US$50? -- for the IRS to
produce the needed form. Sa mga interviews ni Pacquiao or his lawyers, wala akong narinig that
they sent BIR letters to explain why they could not produce the needed docs. That the Writ of
Garnishment was issued shows that's Pacquiao was given AMPLE TIME to defend himself/present
documents but whatever he gave was not acceptable under the BIR rules.

14. Question: " kapag ba hindi ka nagfile ng ITR sa BIR, automatic kakasuhan ka nila ng Tax

Oh yes! Dapat talaga mag-file Ng ITR kahit Zero pa ang tax na babayaran. More so yung mga high-
profile na income earners. Madali po mahuli yung hindi nag-file Ng ITR kasi computerized po.

15. Question: "Well, Pacman is an easy target! why don't we hear about false declaration of
assets among celebrity politicians?

Because celebrity politicans are NOT the issue.

16. Early on I had said that Pacquiao's income is a matter of public record. When boxers sign up
for a match, the purses are made known to the public. This is beyond dispute and impervious to

Thus, when Pacquiao declared ONLY Php50 Million (less than $1,300,000) as income, it doesn't
take a rocket scientist to figure out that HE DID NOT FILE A CORRECT INCOME TAX RETURN. The
50M may probably only cover his income from product endorsements and TV commercials here in
the Philippines. It is so clear that he did NOT declare his revenues (fight purse and pay per view)
for fights abroad.

The BIR most certainly will send him a deficiency tax assessment. The legal remedy is to file a
revised ITR and pay additional taxes thereon. The Writ of Garnishment is the end result of
Pacquiao's failure to pay his taxes properly.

17. I dont blame people for saying that politics is involved. But the fact of the matter is pretty
simple: did he pay his taxes properly or not?

Does the government stay away from collecting taxes due, out of fear that people will point out
that he supported a different candidate during the elections?

When is the right timing? If the BIR froze the accounts BEFORE the fight and Pacquiao lost,
wouldnt people blame the BIR for the loss? It's a "damned if you do, damned if you don't" situation
because of the personality involved.

18. Question: "Bakit sabi ni Henares sa PressCon nya, hindi na daw pwede i-revise yun ITR ni

He can't revise it NOW because the process has run its course. He had a chance TWO YEARS AGO to
do it.

It's a tax case but a legal case as well. There are PERIODS for doing certain things. Once the
period lapses, then a judgment becomes final. Pretty elementary po.

19. Comment: "BIR is now asking Manny to pay AGAIN! Double taxation is ILLEGAL."

My main post is about the procedure to avoid double taxation. Tama po, it is unfair to be taxed
twice. I am sure the IRS got its share. So it was just a matter of Pacquiao doing what our BIR
requires -- submit official docs to prove that he has been taxed. Apparently he did not. When the
assessment came, his accountants/lawyers did not even protest; thus, the assessment became

Do note the government's argument: Pacquiao only declared 50M as income in 2009. It is blatantly
clear that he underdeclared. Sorry po, sana wag nyo paandarin ang conspiracy theories because
the issue is so so simple.

20. People keep saying that Lucio Tan's assets haven't been frozen.

Lucio Tan hires the best lawyers and accountants to defend him and file the right docs. THAT, my
friends, is the key difference. So please stop the Lucio Tan comparisons because, frankly, there is
NO comparison.

21. Question: "Well the question still persist: do we have the accurate information with
regards to this fiasco? What do we have: 50M as under declared income 2009 and supposed
unprotested BIR assessment by Pacman's lawyers and accountants..."

I believe that info is more than enough po. Do the math because you can easily verify it by
googling it. How much was the purse of Pacquiao for his fight in 2009? More than Php50M ($1.2M)?
He definitely did not declare properly. Don't blame the accountants either. Remember: WE ALL
SIGN OUR ITRs. Manny knew or ought to have known that what was filed was not accurate.

22. We are ALL commenting based on known facts. And yes, we should all concede that we
dont have all the facts. That is why my main post says " IF he did not do ANY of these...". As
you see, my opinion is a CLINICAL discussion of the law and the facts.

I wonder who is arguing on the basis of emotion and not on blind and simple logic...

23. The law is there, and laws are inherently for the good of all. HOW the law is applied
defines the goodness of leaders.

Kaya I can accept people asking for compassion or maybe questioning the timing. In such instance,
the law is not being questioned but HOW it was implemented here.

But "baket si Lucio, hindi nafi-freeze" or "kurakot ang gobyerno" or "pinupulitika si Manny" or
"baket si Corona/Napoles" are fallacies in argumentation because they do not address the issue;
instead, they point at 'facts' that do not in any way help in answering the real issue.

24. Kung nagkulang si Pacquiao kasi hindi nya binigay ang pruweba na nagbayad sya, then he
should just own up to his stupidity instead of raising non-issues and playing with the public's

25. Two things: (1) underdeclaration of income and (2) failure to present proof of payment. I
am 100% sure na nagbayad si Pacquiao ng tax sa US but if he failed to declare properly AND/OR
failed to give proper documentation, then he has nobody to blame but himself for his

26. The fact that he paid taxes in the US does not mean that he has NO tax liabilities in the

What he paid are for revenues in the US. He also has revenues in the Phils. One's tax liabilities in
the Phils = revenues in and OUTSIDE the Phils less expenses less tax credits. The higher your
revenues, the bigger your tax liability. By declaring only 50M, malaking kakulangan sa gobyerno.

27. A news article says "DOJ junks tax case vs Pacquiao".

That is a criminal complaint filed by the BIR in 2012 for Pacquiao's alleged refusal to present his
tax records. The case was dismissed on a technicality, i.e. the summons should be served on the
person himself and, upon his refusal to receive, the BIR may resort to substituted service.

That dismissal by the DOJ has absolutely no bearing on the tax case for under declaration of
earnings for 2009.

On a final note, Attorney Raymond Fortun says:
Pacquiao was one of the highest taxpayers in 2008. Then suddenly, he pays "just" Php7 Million in
2009. He instantly got "red-flagged" by the BIR. It wasn't that BIR simply and suddenly didn't want
to accept the TopRank documents. Yung documents kasi, madaling intindihin kung ayaw talaga
magbigay ang IRS. But it was the sudden drop in declared income that did Pacquiao in. When he
declared "only" Php50 Million for 2009 despite the indisputable evidence of his earnings for 2009,
then there was clearly an under-declaration of income. THAT is the super big problem that was
never resolved until the BIR issued the Writ of Garnishment.

I hope this blog helps in keeping a record of what the good attorney does to make the law more
understandable. I hope some points in this "clinical discussion of the law" finally answer Ira
Panganiban's open letter to Kim Henares. For Ira's letter, google it.

By the way, prior consent of Atty. Fortun was sought before I published this blog.

Be safe!