Why the taxman cometh

Our latest report inquires into the steadily rising fortunes yet also steadily shrinking taxes paid by Ang Galing Pinoy Rep. Juan Miguel ‘Mikey’ Arroyo and wife Ma. Angela Montenegro Arroyo, now the subject of a P73.85-million tax evasion complaint filed by the Bureau of Internal Revenue (BIR).

What seems like an intractable story actually builds on some equations that are simple enough for anyone to follow, to wit:

• Anyone who acquires more properties and assets s- net of liabilities – should have earned much more to be able to cover these investments.
• Anyone who incurs huge loans should have been creditworthy to be trusted as capable of paying up.
  Anyone who sells any properties should have earned from the deal, and paid the taxes due on such sale.
• Anyone who receives a donation or inheritance has grown more in wealth, and both the donor and the donee, as well as the source of bequest, should have paid donor’s or estate taxes.

In brief, anyone who has earned more, acquired more, sold more, and inherited more should have paid the lawful and correct amounts of taxes that the government, by its sovereign right and duty, levies on any number of so-called “tax incidents” or taxable transactions on all citizens.

And anyone – not least of them lawmakers who had sworn to uphold and enforce the laws – who fails to file tax returns, with the correct amounts and within deadline, is certain to send the BIR on an investigation into exactly what that individual has reported, or not reported.

The taxman cometh with a frown for spouses Mikey and Angela Arroyo on account of the yawning gap between their constantly growing estate and their constantly falling tax payments, as well as their alleged failure to file income tax returns for several years.

This report by PCIJ Research Director Karol Anne M. Ilagan reviews the Statement of Assets, Liabilities, and Net Worth of the Arroyos from 1992 to 2009, records of their corporate and business holdings at the Securities and Exchange Commission, data enrolled in the income tax returns they filed for certain years, and the tax deficiency assessment reports that the BIR attached to its complaint against the couple.

To validate these data, the PCIJ interviewed Atty. Ruy Rondain, counsel of the Arroyos, and tax lawyers and certified public accountants who are not identified with either the Arroyos or the BIR.

A sidebar, meanwhile, looks at the wealth of Mikey and Angela through the years, based on his SALNs.