Lawmakers critical of ABS-CBN’s bid to return on the air chided on Tuesday the network for using a subsidiary and a foundation it formed to avoid paying the correct amount in taxes to the government.

At the resumption of the joint congressional hearing on ABS-CBN’s legislative franchise application Wednesday, Kabayan Partylist Rep. Ron Salo accused the broadcast giant of using the Big Dipper Company, a company it formed, as a tax shield.

“It is a very creative, unusual tax scheme in order for ABS-CBN Corporation to evade paying the proper amount of taxes to the government,” Salo said after grilling officials of the network at the hearing conducted by the House Committees on Legislative Franchises and on Good Government.

Ricardo Tan, ABS-CBN Corporation group chief finance officer and lawyer Othello Carag quickly denied the accusation, saying that the network committed no wrongdoing in creating Bid Dipper and registering it with the Philippine Economic Zone Authority chaired by Charito Plaza.

Big Dipper Digital Content and Design Inc., which is 95 percent owned by ABS-CBN, avails itself of tax incentives granted under the PEZA Law as an IT Enterprise that is in the business of “repurposing ABS-CBN content for export.”

However, Salo pointed out that while it gave ABS-CBN Corporation billions upon billions of pesos in profit, Bid Dipper declared “a measly sum of P638M out of P24.5B income in 2016, P884M out of P22.8B in 2017, P793M out of P22.18B in 2018, and P474M out of P25.4B in 2019.”

“To top it all, its dividend declarations to ABS-CBN Corporation which amounted to P1B in 2016, P2.5B in 2017, P2.2 B in 2018, and P2.3B in 2019 are all tax-exempt because they are both domestic companies,” explained Salo as he pointed out that Big Dipper employs just 162 workers.

In the same hearing, Cavite Rep. Crispin Remulla noted that the ABS-CBN Foundation, the charitable arm of the network, received a total P129 million donation from the company which amounts given on various occasions were deducted from the computation of its income tax.
“Sa madaling salita, hindi totoo na puso-puso iyan po ay may business sense na nakakatulong sa inyong kumpanya,” he said. (In other words it is not given sincerely because it involves business sense that would help the company.)

For his part, Anakalusugan Partylist Rep. Michael Defensor compared to a “budol-budol” stunt ABS-CBN’s claim of paying government over P14 billion in taxes when bulk of the amount actually comprised of withheld taxes coming from various tax payments.

A “budol-budol” is a scam wherein the victim is tricked into accepting bundles of counterfeit money in exchange of valuables or real money.

Defensor aired the accusation after Tan and ABS-CBN lawyer Othello Carag confirmed that ABS-CBN was only able to pay government P757 million income tax in 2016; P195.8 million and P294 million in creditable withholding tax in 2017 and P163.9 million with P312.08 million in creditable income tax in 2018.

He pointed out that the taxes paid by the network is a far cry from the income tax payments of its rival, GMA-7 of P1.4 billion and P928 million in 2017 and 2018, respectively, alone.

It was Cavite Rep. Elpidio Barzaga who noted the seeming misrepresented tax payments declared by ABS-CBN during a Senate hearing. He noted that the over P14 billion that the network boasted as taxes paid, only P1.4 billion actually comprised its real contribution to the government, the remainder are withholding taxes of personnel and other suppliers.

Notwithstanding the accusations aired by lawmakers, Bureau of Internal Revenue represented by Asst. Commissioner Manuel Mapot and PEZA’s Plaza said they see nothing unlawful with the way ABS-CBN carried out its business.

“I’m shocked that both PEZA and the BIR do not see anything wrong in this unusual tax scheme that allows tax leakages of hundreds of millions, if not billions, of revenues,” said Salo.

As a PEZA-registered company, Big Dipper is entitled to a preferential tax rate of 5% from its gross income, tax holidays in the first 5 years of its operation, and free from taxes and duties on its importation.

Meanwhile, Tan stressed that ABS-CBN Corporation and its subsidiaries contributed P71.5 billion in taxes to the national economy within a period of 17 years.

“From 2003 to 2019, ABS-CBN as a group paid P71.5 billion in taxes,” Tan said.