Secretary Purisima denied allegation of Tax Evasion

A May 3, 2011 press release by the Department of Finance
Answering allegations of tax evasion from circulating “malicious” misinformation, Finance Secretary Cesar V. Purisima has stressed that he is paying his taxes religiously.
“There is a malicious SMS going around accusing me of tax evasion. This is the farthest from the truth. I have filed and paid my taxes religiously,” the Finance chief said.
Purisima issued the clarification as various quarters question the alleged discrepancies in his income tax returns and his statement of assets, liabilities, and net worth (SALN) filed from 2006 to 2009.
The Finance chief, in answering the unfounded allegations, said he was not employed since he left the previous administration in 2005 because of a ban that prohibits him from being employed by any banking or financial institution and other similar businesses two years after serving the government.
Section 9 of the New Central Bank Act provides that, “No person shall be a member of the Monetary Board if he has been connected directly with any multilateral banking or financial institution or has substantial interest in ay private bank in the Philippines, within one year prior to his appointment. Likewise, no member of the Monetary Board shall be employed in any such institution within two years after the expiration of his term except when he serves as an official representative of the Philippine government to such institution.”
The Finance chief said he derived his income from his “earnings in various investments,” which are all classified as “passive income” or those which are subject to final tax and need not declare in an individual’s ITR.
During the last five years, Purisima’s liquid investments reached an average of P100 million, causing the increase in his SALN.
“An income deriving from an investment is not the same income that is being declared in an ITR. They are simply not one and the same,” Purisima clarified.
“The reason that you cannot see the passive income in my ITR from 2006 to 2009 is that you don’t include passive income in ITR,” he added.
Under the National Internal Revenue Code, final withholding taxes imposed on passive income of an individual are “withheld at source by the payor-banks or corporations,” which are legally bound “to file the appropriate tax return with the Bureau of Internal Revenue (BIR),” Purisima noted.
The Finance chief said the Commission on Appointments (CA), in particular, has already asked and cleared him of the alleged discrepancies in his ITRs and SALN after the body was furnished of the same documents.
Purisima also took notice of the fact that the BIR made a step toward catching data on final taxes by issuing Revenue Regulations (RR) 2-2011, but was forced to suspend it this year after receiving numerous complaints.
RR 2-2011, issued last January, could have required taxpayers to file a separate Annual Information Return (AIR), together with their ITR, disclosing their other source of income aside from compensation income, during a one-year period.
“This is exactly the reason why the BIR issued that regulation. It is to avoid this confusion but unfortunately, many complained so we suspended its implementation,” Purisima said.
“The AIR, which could have improved transparency, was supposed to detail a taxpayer’s other source of income, including passive income. If the measure was allowed to be implemented smoothly without opposition of various sectors, there we can see this passive income,” Purisima explained.
Purisima’s ITR, meanwhile, indicates that he paid P4 million in taxes for this year alone.
The Finance Secretary was the chairman and managing partner of SGV & Co. until he was appointed Secretary of the Department of Trade and Industry in 2004 and the Department of Finance in 2005.
President Benigno S. Aquino III gave Purisima the Finance portfoilo on June 29, 2010.
Purisima has extensive work experience in public accounting both here and abroad. He was Area Managing Partner as head of the Asia Pacific Assurance Practice of Andersen Worldwide from 2001 to 2002 and was a member of the Global Executive Board of Ernst & Young from 2002 to 2004.