By Lian Buan in Manila
The Philippines’ Court of Tax Appeals has acquitted Nobel laureate Maria Ressa and Rappler Holdings Corporation (RHC) of four charges of tax evasion that were filed in 2018 by the previous Duterte government.
The CTA 1st Division decided yesterday to acquit Ressa and RHC, Rappler’s holding company, in the Duterte government’s charge that it evaded tax payments when it raised capital through its partnership with foreign investors North Base Media (NBM) and Omidyar Network (ON).
This involved the issuance to the two entities of Philippine Depositary Receipts or PDRs, financial instruments commonly used even among media companies like ABS-CBN and GMA Network.
In an 80-page decision, the court ordered the acquittal of Ressa and RHC for “failure of the prosecution to prove their guilt beyond reasonable doubt’.
The decision was signed by Associate Justices Catherine Manahan, Jean Marie Bacorro-Villena, and Marian Ivy Reyes-Fajardo. Presiding Justice Roman del Rosario inhibited from the proceedings but certified the decision.
The victory ends more than four years of trial of a case filed in March 2018, two months after the Philippines’ Securities and Exchange Commission issued a closure order against Rappler on the basis of the Duterte government’s charge that it broke the law by being foreign-owned.
Rappler is a 100 percent Filipino company, a point asserted by the company in its appeal of the SEC order at the Court of Appeals (CA).
An emotional Ressa said after the verdict: “Today, facts win, truth wins, justice wins,” calling for freedom of detained former senator Leila de Lima and jailed journalists like Frenchie Mae Cumpio.
De Lima will begin her seventh year in prison in February, while Cumpio will begin her fourth year also in February.
Rappler CEO Maria Ressa talks to the media. Video: Rappler
The CTA voted 3-0 to decide the “non-taxability of the issuance of PDRs to North Base Media and Omidyar Network.” The court added, “No gain or income was realised by accused in the subject transactions.
“Since accused is not required to pay the income tax and VAT on the PDR transactions for the taxable year 2015, the elements of Sections 254 and 255 of the 1977 NIRC as amended, are rendered nugatory and without legal support. The plaintiff therefore failed to prove the guilt of accused beyond reasonable doubt,” said the CTA decision.
The CTA also said, “There is nothing in the wordings of the PDR instruments and the PDR subscription agreements that would show the foreign entities NBM and ON will become owners of the shares of stock of Rappler.”
Ressa’s lawyer Francis Lim, the former president of the Philippine Stock Exchange, said that if PDRs were declared to be taxable income just to convict Ressa and Rappler, every business seeking to raise capital would be affected.
“At the end of the day, it’s our economy, it’s our people through job generation that will benefit. Imagine if Maria was convicted, the repercussions,” said Lim.
‘Keep the faith’
Lim also said: “We had no doubt this day would come. I told them keep the faith, because in our hearts we knew an acquittal would come. We trust our judiciary, everybody knew where this case came from.”
It was former Bureau of Internal Revenue (BIR) commissioner Caesar Dulay, a Duterte appointee, who initiated the lightning tax probe into Rappler on January 24, 2018; he filed the criminal complaints two months later, in March, before the justice department then headed by Menardo Guevarra, another Duterte appointee.
Guevarra charged Ressa and RHC at the CTA in November 2018.
The CTA’s acquittal of RHC and Ressa is expected to affect a related case that was filed by the Duterte government against the two before the Pasig City Regional Trial Court, which handles tax cases involving less than P1 million (about NZ$28,500).
Rappler is about to wrap up its presentation of evidence for that case; the facts are identical to the four charges that the CTA junked yesterday.
In general, an acquittal cannot be appealed against because of the right against double jeopardy.
Three cases left
With the junking of the four CTA cases, there remain only three active court cases against Rappler and Ressa: the appeal of Ressa and former researcher Reynaldo Santos Jr. in their conviction for cyber libel pending at the Supreme Court, the lone tax case at the Pasig City RTC, and the appeal on the closure of Rappler pending at the CA.
The mother case, the SEC’s closure order that is pending at the appeals court, accuses Rappler of violating the constitutional requirement that Filipino media companies must be 100 percent Filipino-owned. The alleged violation was supposedly committed when it issued PDRs to foreign investor ON.
The court previously said that Rappler was entitled to a curing period, and that ON’s donation of the PDRs to Filipino managers had removed the problem. But the SEC in the last two days of the Duterte term in June 2022, stood firm on its order to close down Rappler — triggering another round of litigation at the appellate court which is still ongoing.
In the CTA cases, Rappler’s lawyers said that in the last 20 years, the BIR has treated PDRs as derivatives of stock for which only documentary stamp tax was due to be paid.
“This case exemplifies how the power of taxation can be used as a tool to cause a thousand cuts to our democracy. Rappler Inc., which has been at the forefront of providing independent journalism in the Philippines, caught the ire of the Duterte Government,” Rappler and Ressa said in a final memorandum submitted to the CTA before yesterday’s judgment.
“As a result, and for the first time in Philippine history, the BIR classified a holding company that issued PDRs as a dealer in securities and required the payment of income tax and VAT.
“The government’s targeted attack and investigations against Rappler Inc.’s parent company, accused Rappler Holdings Corporation and RHC’s president Maria Ressa, presents a clear example of how the law can be bent to the point that it is broken,” said Rappler’s memorandum.
Lian Buan is a senior Rappler journalist. Republished with permission.