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Online Media Startup Rappler’s Parent Firm Charged With Tax Evasion

Case arose from allegedly unpaid taxes over purchase of shares from Rappler Inc.
By Entrepreneur Staff |

 

 

The Bureau of Internal Revenue (BIR) filed on March 8, Thursday, a criminal complaint against Rappler Holdings Corp. (RHC), the parent firm of beleaguered online media startup Rappler Inc., for allegedly evading income taxes and value added taxes (VAT) in 2015, the tax agency said in a statement.

 

Also accused were Rappler Holdings President Maria A. Ressa and Treasurer James C. Bitanga, a businessman who invests in diverse industries.

 

The case stemmed from Rappler Holdings’ purchase of Php19.2 million worth of Rappler Inc. shares in 2015 and subsequent issuance of Philippine Depositary Receipts (PDRs) to two foreign entities for Php181.6 million.

 

Because of those transactions, BIR alleged that Rappler Holdings is a dealer in securities and subject to income tax and value tax. However, the agency alleged that Rappler Holdings’ annual income tax and VAT returns for 2015 “showed that no IT and VAT have been paid by RHC for the income it gained in the PDR transactions.”

 

It then alleged that Rappler Holdings is liable for taxes and penalties of Php133.8 million broken down into income tax of Php91.3 million and VAT of Php42.5 million.

 

Rappler is already battling an order from the Securities and Exchange Commission (SEC) revoking its corporate registration for allegedly violating the country’s laws against foreign ownership of mass media enterprises. It is also under investigation by the Department of Justice (DOJ) for possible criminal violation of anti-dummy laws.

 

 

Related story: SEC Revokes Incorporation of PH's Pioneering Online Media Startup Rappler 

 

 

The SEC order was heavily criticized by local and international organizations as an attack on press freedom. It came after the Office of Solicitor General (OSG), the government’s chief lawyer, asked the corporate watchdog to open an investigation into allegations that Rappler has foreign ownership, which is prohibited by the country’s laws. Before this, Rappler has come under frequent criticism from no less than President Rodrigo Duterte who disliked the media organization’s critical reporting on his administration.

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Rappler is one of the country’s few media entities funded by venture capital firms rather than organized by wealthy local business or political families. It is also considered one of the country’s notable startup successes for scaling up its reach within a short period of time using savvy digital marketing techniques.

 

Entrepreneur Philippines has sought a comment from Rappler but the organization has yet to respond. However, a Rappler story about the BIR complaint quoted Ressa as saying the case was “ludicrous” as she urged the BIR to “check its own records.”

 

“Rappler has been paying its taxes accurately, promptly, and diligently, with no less than the BIR commending Rappler Inc. as one of Revenue Region 7's top 500 corporate taxpayers,” said the Rappler article. It also pointed that the complaint was filed only three days after BIR investigators went to the Rappler office. “Normal procedure, lawyers say, provides respondents with 30 days to reply,” the article added.

 

 

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