Dominguez rages against Megaworld’s “pabaon” thread and keeps a close eye on the BIR

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Dominguez: bond offerings

Secretary of Finance Carlos G. Dominguez III. (Photo by Ministry of Finance)

MANILA, Philippines — The Department of Finance (DOF) is keeping the Bureau of Internal Revenue (BIR) under close watch over recent issues, such as outgoing Finance Secretary Carlos Dominguez III’s alleged “pabaon,” and the BIR’s contentious dispute with property giant Megaworld Corp. who lost millions of pesos from the equity investments of public pension funds.

Around the same time the BIR-Megaworld brouhaha broke out, “someone called me last week and said there were some BIR people harassing people because they allegedly collected funds for my ‘pabaon,'” Dominguez said in an interview on the sidelines of an event of the Climate Change Commission (CCC), of which he is the chair-elect.

Pabaon is the colloquial term for money that is supposed to be given as a gift to outgoing officials when they retire or complete their term. Dominguez will end his roles as chief economic director of the current administration and head of the DOF at the same time as President Rodrigo Duterte steps down on June 30.

“I got really pissed off because that’s absolutely not true. Do you know what that means? [BIR personnel] walking around saying, ‘we’re going to give money to Dominguez because he’s leaving’. These sons of bitches,” the CFO said.

“It’s the first time I’ve heard of people raising money to give me a ‘pabaon’, which is really annoying,” he said.

Unfortunately, Dominguez said the whistleblowers who reported to him did not identify the unscrupulous BIR agents. “I don’t know the names, but people were calling me. I asked them the names [but they said] ‘we don’t want to say because they might turn against us.’ You know how it is. They want to be a whistleblower, but they only want to half-whistle,” the CFO said.

This is one of the reasons why Dominguez and BIR senior management last Friday (May 20) suspended all special audit task forces undertaken by other BIR offices through special orders on revenue and trading notes on real estate developers, direct selling and multi-level marketing companies, e-sabong, as well as Philippine Offshore Gaming Operators (POGOs), until further notice.

“I’ve stopped these investigations because I don’t want something like this – a legitimate thing to do – to be used to harass people under false pretences, for nothing,” Dominguez said.

BIR Revenue Officers are empowered by Section 5 of the Revenue Code to initiate special audits, upon approval by the BIR Commissioner.

But these special audit task forces, like the one formed by BIR’s (Southern National Capital Region) Revenue Region 8B to investigate Megaworld’s tax debts arising from its joint venture real estate developments with the authority Conversion and Development of Bases (BCDA) in Bonifacio Global City, had been deemed by the DOF as redundant in the jurisdiction. Under tax authority orders issued jointly by the heads of DOF and BIR, Megaworld was covered by BIR’s Large Taxpayer Service (LTS), which collects from large corporations.

“Fix the jurisdictional issue first before you go out. Do not be dumb. It was the left hand that didn’t know what the right hand was doing. Come on, that’s not a professional thought,” Dominguez said, adding that he had ordered the BIR to review its processes so that no similar jurisdictional disputes recur.

Dominguez nevertheless said that the BIR-Megaworld problem was not among the cases in which the tax officials would have searched for a “pabaon” for him. “I didn’t hear it from them, [it was] others and from different parts of the country. ‘Son [his nickname], What is that? Is it true?’ Son of a bitch, of course not!

As for Megaworld, Dominguez said he found that BIR’s allegations of unpaid taxes “are unproven – there’s no assessment, there’s nothing.”

“I have not seen an evaluation and a charge sheet [from the BIR]. And by announcing it publicly like that on a publicly traded company, you’re not just affecting the company; you reach the shareholders. It’s not right,” Dominguez said. He was referring to BIR’s May 17 media advisory which announced that the country’s largest tax collection agency was expected to serve a shutdown order against Megaworld on May 18. Sources said the BIR also approved the shutdown order on May 17.

“There was a threat of closing a listed company without any basis. There is no indication that they did not pay the tax. There are not any. By doing this to a publicly traded company, it affected the stock price. The price of shares affects the public who owns shares in them. So why are you going to affect people when in fact there is no discovery yet? You affect shareholders,” Dominguez said.

Dominguez said he was concerned about the stock market investments of the Government Services Insurance System (GSIS) as well as the Social Security System (SSS) — two state-run pension funds under his leadership.

Dominguez later said via Viber message that “collectively, Megaworld’s public shareholders lost approximately 111 million pesos in value from May 17 to 23, of which GSIS and SSS lost 37 million pesos,” the listed company being involved in a tax problem.

“SSS and GSIS are funds for widows and orphans. I don’t know who else has stocks there – I don’t know the full list – but why would you affect the value of people’s wealth when there’s really nothing to blame them yet? said the CFO, again referring to the BIR’s lack of findings on Megaworld’s alleged unpaid taxes.

Dominguez said BIR’s LTS will continue to audit Megaworld and other real estate companies, but “obviously if you want to affect a company, you do it, but you do it with a full base.”

TSB

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