Had it not for Othello Dalanon's Expose of the Dunkin' Donuts Tax Anomaly, President Duterte would not have Learned about it

Dunkin' Donuts Billion-Peso Tax Evasion Issue.

Had it not for Othello Dalanon's expose of the Dunkin' Donuts tax anomaly, President Duterte wouldn't have learned about it. 🇵🇭

🔆Background

Othello Dalanon, a certified public accountant, served the government for more than a quarter of a century with a humble beginning as a Janitor-Messenger who became an anti-corruption crusader in the Bureau of Internal Revenue (BIR) where he spent the great years of his life as a lowly revenue officer.

He is the former BIR revenue officer who conducted the tax audit of the 2007 financial records of Golden Donuts, Inc. (GDI), the exclusive Philippine Franchisee of the global brand "DUNKIN' DONUTS" owned by the Rufino-Prieto clan of the Philippine Daily Inquirer (PDI), that culminated in the doughnut company's P1.56 billion deficiency tax liabilities which the then Commissioner of Internal Revenue Kim S. Jacinto-Henares intentionally failed to either collect or pursue tax evasion case against the said company for deliberately understating its sales in the tax return.

In 2013, disgusted and disenchanted over Henares’s willful neglect of the doughnut company's tax case, Dalanon resigned from the BIR, sacrificed his career including the benefits he is supposed to receive for his long years of service in the government upon reaching the mandatory retirement age, risked his life and the safety of his family, to fight against Henares in order to protect the interest of the Filipino people in the aforementioned tax liabilities of Dunkin' Donuts.

After his resignation from BIR in 2013, aside from the publication of the issue in print and broadcast media, he incessantly posted it on social media or facebook for more than two (2) years until it reached President Duterte’s attention sometime in April 2017 and has since been mentioning the issue in all his speeches - "ang donut ni Prieto ng Inquirer may utang na taxes inayos ni Henares. From a billion taxes pagdating kay Henares naging 8 million na lang", the President said.

The BIR, upon learning of President Duterte’s constant bangs against the Prieto of Philippine Daily Inquirer (PDI) in connection with the Dunkin' Donuts tax issue, conducted a review of Dalanon’s audit findings and found it to be meritorious. Thus, a new investigation ensued via a new Letter of Authority that culminated in the filing of the tax evasion complaint against the doughnut company on 23 February 2018 before the Department of Justice in Manila.🇵🇭
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P1-B tax evasion complaint filed vs Dunkin’ Donuts franchisee

February 24, 2018 | 12:33 am
Business World

THE Bureau of Internal Revenue (BIR) filed on Friday a P1-billion tax evasion complaint against Prieto-owned Golden Donuts, Inc. (GDI), which holds the local franchise for Dunkin’ Donuts chain.

In a statement, the BIR said the criminal complaint was filed with the Department of Justice against Golden Donuts and four of its officials for willful attempt to evade tax, and failure to supply correct and accurate information on the company’s income tax return (ITR) and quarterly value added tax (VAT) return in 2007.

Named in the complaint were Golden Donuts President Walter C. Spakowski, Treasurer Miguel H. Prieto, Chief Financial Officer Pedro E. Paraiso and Vice-President for Finance and Administration Jocelyn V. Santos.

The BIR said GDI and its corporate executives are also being held civilly liable for income tax, VAT and expanded withholding tax (EWT) deficiencies for taxable year 2007, reaching P1.12 billion, including surcharge and interest. Broken down, GDI’s income tax deficiency stood at P840.82 million; VAT — P270.42 million; and EWT — P7 million.

Golden Donuts is the exclusive franchisor of Dunkin’ Donuts of America, Inc. (DDAI), which gave it the license to develop and operate doughnut shops in the Philippines.

“The case arose when a confidential information was received by the BIR that GDI made substantial under-declaration on its sales. To check the veracity of said information, a Letter of Authority was issued by the Commissioner of Internal Revenue for the examination of its books of accounts and other accounting records pursuant to the Run After Tax Evaders (RATE) Program of the BIR,” the tax agency said.

In its investigation, the BIR said sales invoices issued by some suppliers were “intentionally altered” and did not include GDI’s taxpayer identification number.

“Through this scheme, GDI was able to claim the altered invoices as deductions from its income and as input VAT credits in the amount of PhP99,297,036.47 and PhP11,915,644.38, respectively. Consequently, no deduction or input tax credits shall be allowed if supported by non-compliant receipts/invoices as they are not valid proof of substantiation,” the BIR said.

The tax authority also noted Golden Donuts was found to have “substantially” under-declared its sales by 39%, and its royalty income by P38.96 million.

“The under-declaration of sales was noted by comparing the donut sales declared by GDI vis-à-vis sales derived from the grossed-up value of franchise fee paid to Dunkin Donuts of America, Inc. (US),” the BIR said.

GDI DENIES ACCUSATIONS

In response, Golden Donuts said it “categorically denies” the BIR’s accusations.

“As a matter of fact, the tax liabilities of GDI for the said year had been settled with the BIR as of 2012. Further, it has always been compliant with all tax laws and regulations, as evidenced by tax clearances issued by the BIR over the years,” the company said in a statement.

“It appears from the news reports that the complaint was filed based on an alleged 39% underdeclaration of sales which arose from the attribution of sales of franchises to GDI. All GDI franchisees are business entities separate from GDI that are responsible for paying their own taxes… GDI is prepared to answer the tax evasion case in the proper forum,” it added.

In April 2017, President Rodrigo R. Duterte accused the Prieto family, which then owned The Philippine Daily Inquirer, of not paying correct taxes on its Dunkin’ Donuts business.

“Inquirer ang may-ari ng Dunkin’ Donuts. Alam mo ba ‘yan? At may utang ‘yan sila na taxes. Inayos ni Kim Henares. Walang ibinayad o nabayad nang kaunti lang (Inquirer is the owner of Dunkin’ Donuts. Did you know that? And they owe us taxes. It was fixed by Kim Henares. They did not pay or just paid a little amount),” Mr. Duterte said then, referring to the former BIR commissioner.

Last year, the Prietos sold its 85% stake in the Inquirer Group of Companies to business tycoon Ramon S. Ang, calling the move “a strategic business decision.”

Mr. Duterte also criticized the Prieto and Rufino families, owners of the Mile Long property in Makati City, for evading taxes and rentals.

The Mile Long property located along Amorsolo Street in Makati has been the subject of a legal dispute between the government and Sunvar Realty Development Corp.

In August 2017, the property firm owned by the Rufino and Prieto families agreed to vacate Mile Long following an order issued by the Makati Regional Trial Court’s branch 141. — Karl Angelo N. Vidal🇵🇭
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✒ Othello Dalanon
Former BIR Director

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