On Manny Pacquiao's Taxable Income

Recently the issue of PDAF, DAP, Janet Lim Napoles and anything related thereto, has been clouded by the order of garnishment issued by the Court of Tax Appeals on our very own boxing hero Manny Pacquiao's bank account.

What is this all hullabaloo about?  I hope this simple insight would give us any idea and information so as not to be misled by what are fed to us.  After all, the issue of Manny Pacquiao is also the issue of a common Filipino.

Manny Pacquiao.  A photo grabbed from AFP File Photo.

First we need to have a definition of a gross income.  Our tax laws define this gross income as a compensation for services, in whatever form paid, including but not limited to fees, salaries, wages, commissions and similar item.  Thus, based on this definition, Manny's winnings are considered part of his gross income.

The same tax laws of the land have defined the limits or provided what are those income not considered part of the gross income subject to tax.  They are:

• Life insurance
• Amount received by insured as return of premium
• Gifts, bequests and devises
• Compensation for injuries or sickness
• Income exempt under treaty
• Retirement benefits, pensions, gratuities, etc.
• Miscellaneous items
• income derived by foreign government
• income derived by the government or its political subdivision
• prizes and awards in sport competition
• prizes and awards which met the conditions set in the Tax Code
• 13th month pay and other benefits
• GSIS, SSS, Medicare and other contributions
• gain from the sale of bonds, debentures or other certificate of indebtedness
• gain from redemption of shares in mutual fund

 A lot of us would think that Manny's winnings are not taxable because they are considered as prizes and awards in sport competition.  While it is correct that Manny got those money from his boxing bouts and boxing is considered a sport, but it is not applicable in this case.  What the law contemplates are those prizes and awards in sport competitions that are sanctioned by the Philippine Olympic Committee.  Manny's boxing bouts are not sanctioned by our Olympic Committee, thus his income or winnings or prizes and awards remain taxable.

Allegedly Manny was not able to properly pay his taxes way back his winnings in the year 2008 and 2009.  However, the camp of Manny Pacquiao cries for a double taxation which is not basically allowed in our tax laws.  Accordingly, Manny's winnings were already taxed in the United States of America.  As a matter of fact, 30% of his winnings went to US government in the form of tax, that is according to Manny's camp.

The Philippines and the United States have actually tax bilateral agreement, thus, no resident of these two states shall be taxed twice.  However, the taxpayer should present any concrete document that his income was already taxed.  In this particular, Manny claimed that his income was already taxed.  But when he was asked to present a solid proof of such tax payment, he was only able to show and present the one that was issued by bank showing payment thereof.  What the BIR needs is actually the document issued by the Internal Revenue Service or IRS of the United States to show such payment.  Thus, this issue arises.

Inorder to determine whether or not Manny owes to the government, we have to determine why his winnings are taxable.

1.  Manny Pacquiao is a resident Filipino citizen.  According to our tax laws, all incomes of a Filipino resident derived within and without the Philippines are taxable.  Thus, no matter where Manny earned his winnings, regardless of the country he fought, that will not matter.  His income shall be subjected to tax.

The question would be on how much that Manny's income be taxed.  Considering that our tax system employs the progressive system, meaning as one income increases, the tax rate increases.  In our tax system, if one's taxable income is more than P 500, 000.00, the tax rate is 32% + P 125, 000.00.  Thus, Manny's winnings of millions of pesos shall be taxed at 32% + P 125, 000.00.

Granting that Manny did really pay to the US, still his incomes shall be subjected to 2% considering that the US only applied 30% and not 32%.

2.  Taxes are the lifeblood of the State.  The state needs this taxes to continue existing.  Thus, whatever it may cost, the State shall have all the right to exact taxes from her people.

While Manny is correct that his incomes are legally obtained and not earned through corruption, how much more those working class people earning just 15 thousand a month.  If these people were paying their taxes religiously, because the same were withheld already, how much the likes of Manny Pacquiao who still has billions remaining.

If the lowly teachers did not cry for enforced tax, how could MILLIONAIRE like Manny Pacquiao appeal to the masses as if being harassed by the government.

Give to Ceasar what is due to Ceasar as the old adage goes.