‘ICIJ Leaks Database’ now online

BIR chief ready to investigate
Pinoys with offshore accounts

THE BUREAU OF INTERNAL REVENUE (BIR) says it will investigate leads from the interactive database that reveals names of people from more than 170 countries, including the Philippines, associated with secret offshore tax havens released today by the International Consortium of Investigative Journalists (ICIJ) based in Washington, DC.

The ICIJ Offshore Leaks Database allows users to search for owners, officers and other parties linked to some 120,000 secret companies, trusts and funds created in offshore locales such as the British Virgin Islands, Cayman Islands, Cook Islands and Singapore, the ICIJ announced in a statement. The database came from a hard disk containing 2.5 million files on secret offshore entities in more than a dozen tax havens leaked to the ICIJ last year.

BIR Commissioner Kim Jacinto-Henares told PCIJ in an interview that she welcomes the public release of the database, saying it can aid the agency’s efforts to gather more leads and information that could result in tax investigations and cases.

Since she was appointed tax chief in 2010, Henares has filed 170 cases against taxpayers for failing to pay the correct tax before the Department of Justice as part of a massive clampdown against tax evasion. Tax collections in the Philippines amounted to just 12.9 percent of economic output, one of the lowest in Southeast Asia.

“We will look into it and match (the information on Philippine residents in the database) with income tax returns,” she told PCIJ. “First, what we will do simultaneously is get confirmation and data from the various governments that have control of the banks so they can provide us the information. Secondly, at the same time, we will check with the income tax returns whether the taxes they have paid support those kinds of assets.”

Not wrong per se

She stressed that opening or owning an offshore account per se is not a violation of Philippine laws because such outward investments have been allowed following the deregulation of foreign exchange markets in the 1990s.

Still, Filipinos earning money abroad, except overseas Filipino workers, are generally required to report such income when they file their tax returns in the Philippines, Henares said. Taxes paid to governments of countries where such income is earned are generally credited against taxes payable in the Philippines, she added.

Henares said the tax investigations will focus on those who have sizeable offshore investments but report no or little income in their income tax returns filed with the BIR in the Philippines.

Aside from the ICIJ interactive database, BIR will also seek information from tax authorities in the United States, United Kingdom, and Australia, which announced a plan last month to share tax information with other countries “involving a multitude of trusts and companies holding assets on behalf of residents in jurisdictions throughout the world.”

More, more data

“The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands, and the Cook Islands,” said the U.S. Internal Revenue Service in a statement released last month. “The data contains both the identities of the individual owners of these entities, as well as the advisors who assisted in establishing the entity structure.”

The British tax office said the size of the data obtained by the three tax agencies was around 400 gigabytes, compared to 260 gigabytes of data obtained by the ICIJ. The data gathered by the ICIJ is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010, according to ICIJ.

The information in the ICIJ’s public database contains only the names and addresses of people associated with the offshore trusts, companies, funds, and other entities. It does not include emails, memos, corporate documents, tax filings and other files from the original leak.

PCIJ has examined some of the information in the ICIJ database and found about 500 entries with Philippine addresses. The list consisted mainly of businessmen and businesswomen, but also included well-known politicians and other public officials who failed to mention or disclose their interests in offshore entities in the annual asset disclosure statements.

Not by names alone

Henares clarified, however, that IR will not prosecute or charge people just because their names are on the list. “It does not mean that just because your name is there, you are already liable,” she said. “I cannot go to court with the information but it helps narrow down who should be investigated.”

To be sure, not all offshore accounts are used to evade or avoid taxes, and some are set up for perfectly legitimate business reasons such as legal and tax neutrality for international joint ventures. Setting up a joint venture in an offshore center does not give any undue advantage to any of the investors compared to organizing it in one of the investors’ home countries.

But offshore entities and tax havens are controversial worldwide because they are sometimes used to hide illicit wealth and income from corruption, tax evasion, and shadowy economic activities.

“Tax evasion is a central theme in the meetings British Prime Minister David Cameron will chair next week with the leaders of the G8 industrialized countries,” said the ICIJ. “In the U.S., anticorruption advocates are urging President Obama to support proposals that would require owners of shell companies in the U.S. and other countries to publicly register their holdings. “

‘Secrecy for sale’

On April 4, 2013, the Washington, DC-based ICIJ published its massive report, “Secret files expose offshores’ global impact,” which was triggered by a cache of 2.5 million files on more than 120,000 offshore companies and trusts of “politicians, con men and the mega — rich the world over.”

The secret records leaked to ICIJ exposed the names behind covert companies and private trusts in 10 offshore jurisdictions, including the British Virgin Islands and the Cook Islands.

The 260 gigabytes of data covered 2.5 million files, including more than 2 million e-mails, four large databases, half a million text, PDF, spreadsheet, image, and Web files.

Many times larger than the Wikileaks files, the ICIJ data covered 122,000 offshore companies or trusts, nearly 12,000 intermediaries (agents or “introducers”), and about 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies, according to ICIJ.

To analyze and verify the data, ICIJ organized a global network of 86 journalists and media partners from 46 countries, including PCIJ for the Philippine reports.

Too, ICIJ collaborated with reporters from The Guardian and the BBC in the United Kingdom, Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post in the United States, and the Canadian Broadcasting Corporation (CBC).

As part of the global release of the ICIJ reports, PCIJ published, on April 4-5, 2013, a two-part story on the offshore accounts of three elective officials who are required under Philippine laws to file truthful and complete Statements of Assets, Liabilities, and Net Worth (SALNs) every year, and upon entry into and exit from public office.

Imee, Manny, JV

The PCIJ story focused on then re-electionist Ilocos Norte Gov. Maria Imelda ‘Imee’ Marcos, then senator Manuel ‘Manny’ B. Villar Jr., and then senatorial candidate Jose Victor ‘JV’ Ejercito.

Villar’s Nacionalista Party was part of the administration Team PNoy coalition led by President Benigno Simeon C. Aquino III’s Liberal Party.

Ejercito, on the other hand, was a candidate of the opposition coalition United Nationalist Alliance (UNA) that is led by Vice President Jejomar C. Binay.

Marcos was listed as one of the beneficiaries of the Sintra Trust, formed in June 2002 in the British Virgin Islands. The other beneficiaries of the offshore account are her adult sons with estranged husband Tomas Manotoc: Ferdinand Richard Michael Marcos Manotoc, Matthew Joseph Marcos Manotoc, and Fernando Martin Marcos Manotoc.

She was also listed as a financial advisor for Sintra Trust, as well as a company in which the Sintra Trust was a beneficial shareholder called ComCentre Corporation (formed in January 2002 in the BVI and still in operation) and a “master client” for the M Trust (formed July 1997 in Labuan, Malaysia, and closed July 2009).

The Presidential Commission on Good Government (PCGG) has launched an investigation into Marcos’s offshore accounts, saying it is keen find out if these might contain some of the estimated $5 billion that her father, the late strongman Ferdinand E. Marcos, allegedly amassed through corruption. He, too, held offshore accounts, which the Philippine government has sought to freeze.

‘Awesome’ account

The ICIJ data showed that Villar is the beneficial owner of a BVI international business corporation called Awesome Dragon Holdings Limited. It was incorporated in the BVI on July 26, 2007 while he was president of the Senate.

Villar served as Senate president from July 2006 to November 2008. He ends his second term as senator on June 30, 2013.

The ICIJ data also showed that Ejercito is a director of a BVI company called Ice Bell Properties Limited formed on July 8, 1999, when his father, Joseph ‘Erap’ Ejercito Estrada, was still president. Ejercito was then a nominee to Congress of the Kabataan ng Masang Pilipino, a party-list group affiliated with Estrada’s Partido ng Masang Pilipino.

JV Ejercito eventually declined the nomination after a tweaking of the rules that helped KAMPI qualify for a House seat proved too controversial for him. Two years later, in 2001, he became mayor of San Juan City, Erap Estrada’s political bailiwick.

Although PCIJ sent letters to Marcos, Villar, and Ejercito, only Villar made an effort to explain his involvement with an offshore account.

In a written reply to PCIJ’s questions, Villar admitted to being the “ultimate shareholder” of Awesome Dragon Holdings Limited but said it was a dormant company with a capital of just one U.S. dollar. He said it was put in place in 2007 “as a ready corporate vehicle for any strategic multinational business opportunity that may become available.”

Inactive? Not quite

“I am indicated as owner of said company because we were informed that if a company wants to incorporate as a subsidiary-company in the British Virgin Islands, said company is required to identify the natural person or persons who is/are the ultimate shareholder/s of said company.”

He wrote in reply to PCIJ’s queries: “While having a BVI company may be abused by some, there is actually nothing sinister about owning one, especially this company that was never used and has a capital of only a single dollar. This is being done by big companies worldwide.”

Villar, who is one of the country’s richest lawmakers, said Awesome Dragon Holdings Limited was not activated because he decided to focus all his entrepreneurial efforts in the Philippines. “As a businessman and eventually as a public official, I am proud to say that I invested heavily in the country economic-wise and generated employment opportunities for Filipinos,” he said.

But that was also the wise course of action to take, given the onset of the global financial crisis just a year after Villar set up his offshore corporation. Whatever opportunities abroad were available in 2007 evaporated the following year with the collapse of Lehman Brothers and the stockmarket meltdown in rich Western countries.

Still, contrary to Villar’s statement, the offshore company remains “active,” based on a check made by the PCIJ on Tuesday, April 2, 2013, with the government Financial Services Commission’s Registry of Corporate Affairs in the British Virgin Islands.

To maintain its active status, annual payments of at least $2,200 are being made to the BVI government and Portcullis Trust Net Limited by or on behalf of Awesome Dragon Holdings Limited, according to documents acquired by the ICIJ. The offshore company has an authorized capital of $50,000, implying that the issued capital of only $1 can be quickly raised to as much as $50,000 if needed

JV: Sad memories

Ejercito, for his part, did not confirm or deny his directorship in Ice Bell Properties Limited. Instead, he raised questions about the timing of this story, which, he said, “is highly suspicious considering the on-going electoral campaign of which I am one of the leading contenders among the UNA senatorial candidates.”

He added that it brought back “the sad memories of 2001 when I was accused of owning a house inside the posh Forbes Park, which actually was owned by relatives of the Sultan of Brunei, and false accusations of other supposed business assets that did not belong to me.”

Ejercito wrote: “I have held high respect to (sic) the PCIJ as an institution. I hope that you will not allow yourself to fall in (sic) the manipulative efforts of desperate people in (sic) dirty politics.”

In the May 2013 elections, Ejercito ran and won as senator, landing No. 11 in the list of 12 winners. — PCIJ, June 2013