The Court of Tax Appeals (CTA) has affirmed its 2023 decision that acquitted Rappler Holdings Corporation (RHC) and its president and Chief Executive Officer (CEO) Maria A. Ressa of their tax charges and absolved them of civil liability for alleged unpaid tax obligations in 2015.

In a full court decision promulgated last Feb. 21, the CTA affirmed the rulings handed down by its first division on the dismissal of the four criminal charges against RHC and Ressa.

The dispositive portion of the CTA’s full court decision stated:

“Wherefore, premises considered, the instant Verified Petition for Review (of the Resolution dated May 18, 2023, on the Civil Aspect) and Verified Petition for Certiorari are denied for lack of merit. 

“The assailed Decision dated Jan. 18, 2023 and the assailed Resolution dated May 18, 2023 rendered by the First Division of this Court in CTA Crim. Case Nos. 0-679, 0-680, 0-681 and 0-682 are affirmed. So ordered.”

The 37-page decision was written by Associate Justice Corazon G. Ferrer-Flores with the concurrence of Presiding Justice Roman G. Del Rosario and Associate Justices Ma. Belen M. Ringpis-Liban, Catherine T. Manahan, Jean Marie A. Bacorro-Villena, Marian Ivy F. Reyes-Fajardo, and Lanee S. Cui-David.

Media outlet Rappler and its founder Ressa were initially slapped with violations of Sections 254 and 255 of the National Internal Revenue Code (NIRC) of 1997. They were accused of failing to supply correct and accurate information in their quarterly value added tax (VAT) return for the 3rd quarter of 2015.

In a decision dated Jan. 18, 2023 and a resolution dated May 18, 2023, the CTA cleared both Rappler and Ressa for failure of the prosecution to prove their guilt beyond reasonable doubt.

In the first charge for violation of Section 255, Rappler and Ressa reportedly attempted to evade tax by not declaring in the income tax returns filed by RHC for 2015 the trading income derived from its issue and sale of Philippine Depositary Receipts (PDRs) as a dealer in securities to NBM Rappler L.P. and Omidyar Network Fund LLC in the total amount of P109,022,399.23, resulting in deficiency VAT in the amount of P13,082,687.91.

The second charge for Section 254 involved the same sale amounting to P162,412,783.67, representing the difference between the aggregate book value of the underlying stocks of the said PDRs (P14,245,975) and the total consideration of the said PDRs (P181,658,758.67). Because they "fraudulently conceal[ed]" their true income earnings for that year, they defeated payment of P48,723,835.10.

The third charge for violation of Section 255 involved the sale of PDRs to Omidyar Network Fund LLC in the total amount of P70,184,204.57, which allegedly resulted in deficiency income tax worth P8,422,104.55.

The fourth charge for violation of Section 255 was for the sale of PDRs to both NBM Rappler L.P. and ON in the amount of P162,412,783.67, representing the difference between the aggregate book value of the underlying stocks of the said PDRs (P14,245,975) and the total consideration of the said PDRs (181,658,758.67).

The CTA’s first division ruled in favor of RHC and Ressa. It said it did not find any legal basis in the gain of RHC in the amount of P162,412,783.67 allegedly treated as trading income by respondents (RHC and Ressa) as the acquisition cost of different security is being used to attribute an alleged gain in the sale or issuance of another security.

It also said that the elements of the crime charged were not present. Since the alleged unpaid tax obligations have not been factually and legally established, it did not impose any civil liability, it added.

The petitioner Bureau of Internal Revenue (BIR) argued that the Court ignored "overwhelming evidence" which established the guilt of the respondents. 

The BIR said that RHC acted as a dealer in securities when it sold PDRs to NBM Rappler L.P. and Omidyar Network Fund LLC (ON), which have Rappler Inc. (RI) shares as underlying shares.

It also argued that the CTA refused to recognize the transfer of economic rights or beneficial ownership of RI shares, which constitutes as a taxable event. It accused RHC for willfully failing to supply the correct and accurate information in its tax return and to pay such tax.

Debunking the arguments, the CTA as a full court found there was no grave abuse committed by the Court in division, adding that there was no transfer of economic rights or beneficial ownership of RI shares which may constitute a taxable event.

The CTA also said that RHC is not required to report the amount received pursuant to the PDR issuance to NBM and ON.

"Since there is no gain or profit and the transaction is not a sale of shares of RI, the Court En Banc joins the Court in Division in ruling that RHC is not required to pay the income tax and VAT on the PDR transactions. Since the findings of the Court in Division that the act from which the alleged civil liability arose did not exist, the civil liability in the instant case is extinguished," it added. 

"Accordingly, the Court En Banc finds no reason to modify or reverse the disposition in the assailed Decision and assailed Resolution," it ruled.