THREAD: House committees resume hearing on ABS-CBN franchise renewal | LIVE https://bit.ly/3eP9r0x 

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The House committee on legislative franchises will tackle the alleged tax law violations of ABS-CBN in the joint hearing today

Rep. Micaela Violago: It has caught my attention that there are more than 15 broadcasting companies that are continuously on air even though their franchises are already expired. Dapat maging patas ang proseso natin. May I ask the NTC to make proper action on this matter

Rep. Elpidio Barzaga Jr. reviews the history ABS-CBN Holdings Corporation and its stockholders

Rep. Barzaga: For every asset, there must be the corresponding entry on liability

ABS-CBN: May liability po ang ABS Holdings to Lopez Inc. of ₱6 billion. It was reflected in the books

ABS-CBN counsel: Ang binenta po ng ABS-CBN Holdings ay PDRs, not shares

Lanie Caimol of ABS-CBN Holdings: Yung transfer po ng ABS-CBN shares, pumasok po siya sa ABS-CBN Holdings. Tinransfer po siya ng Lopez Inc. Ang kabangga po niyang accounts sa financial statement is a liability (1/2)

Caimol: But when we issued the PDRs and when it was sold to the market, the proceeds were used to pay for that liability. At the end of 2009, zero na po ang liability (2/2)

Rep. Barzaga: Ang total PDRs niyong inissue ay 298,827,100. Ang value ay ₱46 per PDR.

Caimol: Ang initial issuance lang ang at ₱46

Rep. Barzaga: Nag-request ako last night yung corresponding tax payment ng ABS-CBN Corporation in the past three years at ihihiwalay natin yung withholding and value added tax. Unfortunately, up to now, hindi pa rin natatanggap ng ating ComSec

Rep. Barzaga: Yung ating VAT, ang sinasabi ng iba kong nakakausap, yung mga artista ng ABS-CBN pati na ng ibang channel, kapag binabayaran sila ay tanggal na ang VAT?

ABS-CBN: That's correct your honor

Rep. Barzaga: Aside from VAT, sa mga artista, ano pa yung tinatanggal niyo?

ABS-CBN Counsel: Mayroon pong expanded withholding tax

Rep. Barzaga: And how much is that?

ABS-CBN Counsel: That is either 10% or 15%, depende po sa income

ABS-CBN Counsel: To correct lang po, in most cases, it's 12% VAT and 10% expanded withholdings

ABS-CBN Counsel: Yung VAT po ay input tax naman po ng ABS-CBN. Yung expanded withhold tax ay yung sinabi niyo kahapon

Rep. Barzaga: Ano ba ibig sabihin ng input tax?

ABS-CBN Counsel: Ang ABS-CBN po kapag nagbabayad po ng services at ng goods, yung binabayad po nila, may binabayad po siyang value added tax (1/2)

ABS-CBN Counsel: Kapag palabas po, input tax po yun, na pwede naming i-offset against our value added tax na output tax naman po (2/2)

ABS-CBN Counsel: Yung output tax naman po ay yung pagbenta namin ng mga produkto namin at services

ABS-CBN Counsel: Ang VAT po ay hindi nagwi-withhold

Rep. Barzaga: Kayo ba ay nagbabayad ng local franchise tax based on the City Ordinance and also based on the decision of the Supreme Court?

ABS-CBN Counsel: Nagbabayad po kami

ABS-CBN Counsel: The equipment of Big Dipper is used solely for services offered by Big Dipper to its clients. It so happened that ABS-CBN is a client of Big Dipper. But none of the Big Dipper assets are actually used by ABS-CBN on any of its production of content

ABS-CBN Counsel: Si Big Dipper would render service to ABS-CBN and thus use those equipment to render service to ABS-CBN

Rep. Rolando Valeriano: Meron po bang nagbabantay na PEZA authority? Kasi ang Big Dipper is exempted from duties and taxes

PEZA: If I may answer that, our export companies registered with PEZA, like Big Dipper, enjoys different incentives. One of these are tax and duty free importation (1/2)

PEZA: Before they'll do the importation, they have to apply to PEZA and advise the PEZA board of the different equipment they will import... Once these imported equipment arrive in the country, PEZA will inspect if these were the ones listed in the permitted importations (2/2)

PEZA: In fact, we have a record for every IT enterprise and export company registered with PEZA... We require them to submit an annual report of their transactions of their availment of the different incentives

Rep. Valeriano: Noong tinayo po ba ang Big Dipper bilang a PEZA-accredited company, naka-tipid po ba ang ABS-CBN Corporation in terms of taxes or expenses?

ABS-CBN CFO Aldrin Cerrado: ABS-CBN became a client in late 2014 when a new product of ABS-CBN was launched — iWant

Cerrado: Noon lang po naging kliyente ng Big Dipper ang ABS-CBN

PEZA: If it is a foreign investor or foreign-registered company, we allow 70% for export and 30% for domestic sales. But if it is Filipino-owned, we allow 50% export and 50% domestic sale

ABS-CBN CFO Ricardo Tan: ABS-CBN Corp. does provide financial assistance to ABS-CBN Foundation. When there are calamities, such as the recent Taal Volcano or other typhoons, ABS-CBN Corp. is there to provide financial support

Rep. Mike Defensor: Hindi po kayo humihingi ng tax credit o kahit anong tax break sa inyong tulong sa foundation?

Tan: We receive certificate of donation

Cerrado says that ABS-CBN Holdings is not a subsidiary of ABS-CBN Corporation, but a subsidiary of Lopez Inc.

Can you estimate in terms of taxes ang naitulong ng ABS sa ating national economy?

Tan: From 2003 to 2019, ABS-CBN as a group gave ₱71.5 billion in taxes

BIR: Unfortunately, we only have here 2016, 2017, 2018, and 2019. There is a total income tax due in 2016 amounting to P757.6 million. For 2017, the total income tax due is P195.8 million. In 2018, P163.95 million. For 2019, P203.26 million.

BIR: The total income tax due is based on the minimum corporate income tax of tax payer on that particular year. However, there are several creditable withholding tax which they use in a specific year.

BIR: Like for instance, in 2016, there was an excess tax credit of P63.35 million; P357.65 million for 2017; and P669 million for 2018.

ABS-CBN President and CEO Carlo Katigbak says they are willing to waive confidentiality in submitting ABS-CBN documents to BIR.

Abante: Sa kabuuang natatanggap niyo na revenues sa operations ng ABS, ilan ang isinasantabi sa tax?

ABS-CBN: We paid the proper taxes. Wala pong kumulang.

Abante: Magkano na po ba ang nabayad na buwis ng ABS-CBN, sa kaban ng bayan mula 2016 hanggang 2019? ABS-CBN: 2015 to 2018, ang binayad naming kabuuang taxes ay P24.6 billion.

Tan: ABS-CBN is quite a different company from GMA. We have significant international operations where we are able to reach millions of Filipinos and we pay taxes in respective jurisdiction in which we are present.

Abante: In the last committee hearing it was said and I quote, ABS-CBN used its subsidiary Big Dipper, a PEZA-registered company as tax shield. ABS-CBN's effective tax rate in 2018 was at -5%. This means that ABS-CBN managed to avoid paying taxes in 2018. Is true or not? (1/2)

ABS-CBN: It is not true. Big Dipper is not a tax avoidance scheme. We applied for and qualified for the PEZA incentives during 2009. Over the years, we've met that requirement. (2/2)

Abante: Therefore, for all the undertakings of ABS-CBN and for the benefit of the people listening, that you can honestly say that you have paid an honest tax on the government? Tan: Yes, your honor, we can.

Tan: The -5% that was being referred to does not represent the taxes that we paid for that year. The -5% or -84 million is actually an accounting recognition of potential future tax benefits, taxes that may be recovered in the coming years. We actually paid that year P164 million

Rep. Marcoleta: Ang kinikita ng Big Dipper are derived from selling to itself. Kasi po, ang ABS-CBN Global ay hundred percent owned by ABS. Ganoon ang nangyayari dito. (1/2)

Rep. Marcoleta: Wala po siyang na pproduce. Dini-digitize niya lang ang content dito sa Pilipinas. That is not a product exported to a foreign country. (2/2)

ABS-CBN: Ang bawat subsidiary ng ABS-CBN may kanya kanya silang financial statements na fina-file sa BIR at nagbabayad po ng sari-sarili nilang taxes.

ABS-CBN: Each of the company in the consolidate financial statements, prepare their own financial statement, prepare their standalone income tax return, and pay their respective taxes.

Rep. Marcoleta: How many employees in ABS-CBN global branch in Luxembourg?

Tan: Wala po.

Rep. Marcoleta: ABS-CBN, ABS-CBN Film Productions, Sarimanok Creative Programs, isa lamang ang kanyang kliyente, ito nga ang ABS-CBN Global Hungary.

Tan: We are not selling to ourselves and that is misleading to say that. Because the ultimate customers are the Filipino and non-Filipino audiences around the world. Yung Hungary po licenses the content to other companies around the world.

Tan: That's how Hungary is able to generate foreign exchange which it then pays to the Big Dipper.

Atty. Othello Carag: I think there is an impression that only physical goods can be exported, but under our laws even services can be exported that is provided under the PEZA law.

Atty. Carag: Also, under the Resolution No. 00411 that was passed by PEZA law. It allowed the registration of information technology enterprises. So it can provide IT services abroad. These are not physical products, but in the form of services. (1/2)

Atty. Carag: Same with BPOs, they provide services and they are considered exports, and entitled to incentives under PEZA law. (2/2)

BIR notes that ABS-CBN is domestic corporation.

BIR: Tama po yung sinabi nila na ABS-CBN is regular paying their taxes in the past years.

BIR: Every year, we are issuing letters of authority not only to ABS-CBN but to almost tax payers.

Katigbak: The relationship between ABS-CBN and AMCARA is a blocktime relationship. It (ownership) has always been 49% but we sold it January 2019.

Rep. Defensor: Ang prangkisa natin kay AMCARA is only analog, wala silang digital. They (AMCARA) do not have an approved digital programming.

Katigbak clarifies that they are only buying air time from AMCARA.

Rep. Defensor: Signal po ng ABS-CBN ang lumalabas sa TV Plus. Hindi totoo na channel ng AMCARA yun. Frequency yun ng ABS-CBN.

Rep. Defensor: Kung wala kayong mga opisina sa labas ng bansa, kung hindi kayo na register sa PEZA, ang binabayaran niyo po ay 30% of income tax. (1/2)

Tan: You've described the hypothetical situation. Big Dipper is able to provide a unique service. It's also possible that without Big Dipper, we have to engage foreign firms. (2/2)

Rep. Defensor: Wala po akong sinabing ilegal. I support the statment of BIR. Of course the PEZA, I don't necessarily agree but andiyan na 'yan.

Hearing suspended until tomorrow, July 2, 1pm.