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[P359.75M tax evasion charges vs multi-level marketing club]

Lendio, Mariciela A.

SYNTHESIS/ COMMENTARY

Tax evasion or tax fraud is defined as the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of a tax. BIR can file a tax evasion case against any
individual or corporation as long as there is a presumption of substantial under declaration or at
least 30 percent under declaration of income or over declaration of expenses.
Undoubtedly, Royale Business Club International, Incorporated (Royale) has violated the
National Internal Revenue Code of 1997 when it willfully attempted to evade or defeat tax and
deliberately failed to supply correct and accurate information in its annual income tax returns and
quarterly value added tax returns for 2011, 2012 and 2013. Stated in the news column, Royale
Business Club International, Incorporated under declared its correct taxable sales by 387 percent
or P151.64 million in 2011, by 122 percent or P129.69 million in 2012 and by 80 percent or
P157.38 million in 2013. The figures presented clearly indicated an intentional evasion of taxes.
387 percent is really a big amount of understatement from that of the correct taxable sales. I
highly agree with the BIR in filing a tax evasion case for the Royale Business Club International,
Incorporated.

The news article pointed that the Royale tax evasion case is the 340 th filed under the Run
After Tax Evaders (RATE) program of the BIR under Commissioner Kim S. Jacinto-Henares. As
defined, Run After Tax Evader is a program to investigate and prosecute individuals and/or
entities engaged in tax evasion and other criminal violations of the National Internal Revenue
Code (NIRC) of 1997. The Run After Tax Evader (RATE) program of the BIR for me is a very
effective move in envisioning the goal to collect the proper taxes due to the government. This
program for me is an enforcing tool for the business establishments to honestly declare their
taxable income and thus pay their rightful amount of taxes.
In conclusion, the remedy for cases like this is to settle the complaint by paying the taxes
payable including penalties charge. But a business establishment can avoid this hassle by being
truthful and honest to the BIR from the very beginning of their business. If only Royale Business
Club International, Incorporation declared and paid the correct amount of tax due, there would
not be filed a case of tax evasion and subsequently pay a higher amount for the tax payable
evaded. Business establishments and individuals should honestly pay their taxes for the taxes
serve as the lifeblood of our country. Taxes are the fund used by our government in making our
lives, the citizens, more comfortable and sustainable. Business establishments and individual
taxpayers must have that automatic treatment to pay correct taxes for the benefits of such will

only go back to them, more tax funds - more accessible services. Honestly paying your taxes will
not only benefit you, but also benefit the growth of our country.

P359.75M tax evasion


charges vs multi-level
marketing club
Rappler.com
Published 6:39 PM, Mar 12, 2015
Updated 6:39 PM, Mar 12, 2015

The Royale Business Club is found to have willfully underdeclared its income tax returns
from 2011 to 2013, the Bureau of Internal Revenue says
MANILA, Philippines Royale Business Club International Incorporated, a Quezon Citybased multi-level marketing (MLM) organization, has been slapped with tax evasion
charges by the Bureau of Internal Revenue (BIR) worth P359.75 million ($8.13 million).
Royale is a domestic corporation that markets and distributes food supplements,
cosmetics, pharmaceutical products, and beverages.
The BIR said the company underdeclared its annual income tax returns (ITR) and
quarterly value added tax (VAT) from 2011 to 2013, as defined under sections 254 and
255 of the National Internal Revenue Code of 1997 as amended (tax code).
Also charged for the same violations were its officers: Royale president Julius Allan
Nolasco; vice president for finance/treasurer Isa Angela C. Bautista; assistant treasurer

Jeanette Maghirang; assistant treasurer Imelda Pedron; and assistant accounting


manager Marjorie Molina.
Based on access letters released by the Bank of the Philippine Islands (BPI),
Metrobank, and Banco de Oro (BDO), BPI certified that it paid Royal P141.60 million
($3.20 million); Metrobank, P468.55 million ($10.60 million); and BDO P171.07 million
($3.87 million).
In sum, Royale received income payments from the said banks amounting to P190.79
million ($4.31 million) in 2011; P236.38 million ($5.35 million) in 2012; and P354.06
million (8.01 million) in 2013.
But Royale declared in its ITR gross sales amounting to only P39.14 million
($884,374.12) in 2011; P106.69 million ($2.41 million) in 2012; and P196.68 million
($4.44 million) in 2013.
In effect, Royal substantially underdeclared its correct taxable sales by 387% or
P151.64 million ($3.43 million) in 2011; 122% or P129.69 million ($2.93 million) in 2012;
and by 80% or P157.38 million ($3.56 million) in 2013.
Thus the aggregate deficiency tax liability, inclusive of surcharges and interests of
P359.75 million ($8.13 million) for 2011, 2012, and 2013.
The case against Royale, together with its responsible corporate officers and
employees, is the 340th filed under the Run After Tax Evaders (RATE) program of the
BIR under Commissioner Kim S. Jacinto-Henares. It is likewise a RATE case of the
National Investigation Division.
Royale practices direct-selling strategy in which the sales force is compensated for the
sales people they recruit on top of generating sales.
While exactly not illegal as most MLM firms are registered with the Securities and
Exchange Commission and the Direct Selling Association of the Philippines, some of
them though have been found to be engaged in pyramiding scheme. Pyramiding

scheme does not involve an actual product to sell, but rather subsisting on a business
model that requires enrolling people in the scheme. Rappler.com
US$1 = P44.20