Nice read, posible nman mangyari with companies putting a reasonable amount towards paying their accountants and with the laws that we have na karamihan eh hindi na na amend to reflect our current time marami talagang avenue for this. Is it right most of the time hindi is it legal most of the time oo
I came across this post in Facebook:
Any comments from those who are following this issue?
Yesterday 9 May 2020 at 12:50 AM · Public
" Why Duterte Allowed ABS-CBN To Be Shut Down"
"...Let’s all be honest here.
Of course, the President knows that the NTC will issue a Cease and Desist Order to shut down ABS-CBN. Every major decision by any government agency in this country, especially those of national importance, is just one text message or phone call away to the President (thru Bong Go).
Yes, there have been a number of instances even in the recent past wherein companies with expired licenses were allowed to operate even beyond the expiry of the congressional franchise. CBCP was one.
So why did the President allow ABS-CBN to be shut down?
When Deputy Speaker Johnny Pimentel of the House of Represenatives was asked about the timeframe in processing ABS-CBN’s franchise application, he said it will take weeks.
Yes, weeks, because according to him, Congress will need to look into all issues and hear out all the parties who are against the issuance of a new franchise to ABS-CBN.
With this statement, all the more I got more curious. NTC must have serious concerns on the validity of the existing franchise which convinced them to just wait for a new legislative franchise instead of issuing a provisional authority on their own.
I have been hearing about ABS-CBN’s tax issues and this company Big Dipper has appeared in social media newsfeeds a number of times so I thought of digging deeper on the matter.
I was able to secure ABS-CBN and Big Dipper company financial statements filed with the Securities and Exchange Commission and, honestly, I was shocked with what I discovered.
Consolidated financial reports of ABS-CBN as parent company showed their effective income tax rate in 2017 was only 11%. In 2018, their effective tax rate was -5%! In other words they didn’t pay tax in 2018.
I am attaching raw screenshots of the actual audited reports filed with the SEC for calendar years 2017-2018 so everyone can verify the information yourselves.
From the Income Statement, their 2018 revenues was Php22.7Billion. Their net income was Php1.9 Billion. However, their effective income tax rate was -5% equivalent to Php84Million benefit from income tax.
In order to do this, you will see in the other attachments that they used deferred tax assets (DTAs) specifically MCIT (minimum corporate income tax) amounting to Php165Million as well as NOLCO (net operating loss carryover) in the amount of Php244Million (which is 30% of the declared NOLCO tax base of Php814Million) in order to arrive at a tax provision of (Php84Million).
In layman’s terms, ABS-CBN was able to use tax credits in order to reduce (or avoid) tax payments by declaring in their financial reports that they are operating at a loss.
Wait. Loss? I thought they earned Php1.9Billion in 2018?
If you look again at their Income Statement, ABS-CBN, believe it or not, reported an operating loss in 2018. Revenue of Php22.7B less Php13.6B Production Cost, less Php2.4B Cost of Sales, less Php29M Cost of Services, and less Php7.1Billion General and Administraive Expenses will give you a net operating loss of Php432Million.
So how is it that they have net income when they are operating at a loss?
The answer is that ABS-CBN declared “Other Income” coming from dividends mainly from one subsidiary company called Big Dipper. Big Dipper contributed Php2.2Billion in dividend income to ABS-CBN’s total dividend income of Php2.9Billion and this is all tax-free.
Yes, based on our National Internal Revenue Code, inter-corporate dividends, or dividends received by a domestic corporation from another domestic corporation shall not be subject to tax.
When I checked on Big Dipper, I found out these following facts:
- it is a fully owned ABS-CBN subsidiary.
- It is registered with the Philippine Economic Zone Authority (PEZA)
- As PEZA-registered company, it availed of tax holiday until October 2013 and thereafter is only paying 5% income tax.
- Based on its financial statements, its main customer is ABS-CBN Hungary
Before this write up gets longer and longer, I believe, at this stage, it is becoming clearer what this whole set-up is all about. Big Dipper “exports” its services to a foreign Hungary-registered company, which is also a fully-owned subsidiary of ABS-CBN.
As my final note, we can talk all day about freedom of the press and about saving thousands of jobs, and rant about the ill-timing of NTC’s cease and desist order. But with this discovery, I think there’s a lot of “fixing and cleaning up” to do in order to get that new franchise. If ABS-CBN thinks they have found a legal way to avoid paying the right taxes, then I guess finally the government also found a legal way to shut down this immoral, unfair practice.