BIR sues local Dunkin’ Donuts franchisee for alleged P1.1-B tax evasion

The Bureau of Internal Revenue (BIR) on Friday sued the exclusive Philippine franchisee of Dunkin' Donuts for allegedly evading taxes worth over P1 billion in 2007.

Golden Donuts Incorporated (GDI) and four of its high-ranking officers are facing a complaint for "willful attempt to evade or defeat tax" and for "deliberate failure to supply correct and accurate information" in its income and value-added tax returns, according to a press statement from the BIR.

Named in the complaint filed with the Department of Justice are GDI 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 case was sparked by "confidential information" received by the BIR that GDI "made substantial under-declaration on its sales."

A probe later found that the sales figures were under-declared by 39 percent.

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

The BIR's investigation also found that GDI "under-declared" its royalty income by over P38.9 million, and that almost P133.2 million of its royalty income should be treated as active, instead of passive, income that is subject to regular corporate income tax.

‘Under-declaration’

A case of under-declaration of income, according to the BIR, is considered substantial when it exceeds 30 percent of the amount declared.

Investigation also showed that sales invoices issued by various suppliers had been "intentionally altered, in a desperate attempt to conform to substantiation requirements."

GDI allegedly claimed the altered invoices "as deductions from its income and as input VAT credits" worth almost P99.3 milion and P11.9 million, respectively.

Some invoices also allegedly did not contain the tax identification number of GDI, the BIR also said.

GDI denial

In a statement, GDI denied all allegations of tax evasion.

"Golden Donuts, Inc. (GDI) categorically denies the accusations of tax evasion for the year 2007," the company said.

"As a matter of fact, the tax liabilities of GDI for the said year had been settled with the Bureau of Internal Revenue (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," it added.

‘Inquirer ties’

In a rant against media outfits ABS-CBN and the Philippine Daily Inquirer in April 2017, President Rodrigo Duterte brought up Dunkin' Donuts alleged tax deficiency and its supposed ownership ties with the broadsheet.

“Inquirer ang may-ari ng Dunkin Donuts, alam mo ba iyan? At may utang iyan silang taxes. Inayos ni Kim Henares, walang binayad. Kung may binayad, kaunti lang,” Duterte said referring to the former Bureau of Internal Revenue commissioner.

“Ang Inquirer may utang iyan... Kaya Monday I will give—not only Inquirer—I will give them a deadline. I need money to run this country. I need money to build houses,” he added.

The Inquirer has said in its report on Duterte's pronouncements that it didn't own GDI.

Othello Delanon

In 2014,  a former Bureau of Internal Revenue examiner filed a complaint against BIR Commissioner Kim Jacinto-Henares for allegedly sitting on a P1.5-billion tax defficiency case involving GDI.

In a exclusive interview aired on GMA News' “24 Oras” on February 28, 2014, Othello Delanon said he informed Henares in 2010 of GDI's tax deficiency of more than P766 million, based on the assessment he conducted on the company's income for 2007.

“Itong stockholder secretary daw ng Golden Donuts, si Ms. Marixi Prieto, ay nakipag-usap daw kay Commissioner Kim Henares at saka kay (BIR regional) director Nestor Valeroso, at mukhang binigyan ng leniency ang tax payer,” Delanon said

“After my resignation, sabi ko aalis ako sa bureau para ilaban ito,” he added.

Marixi Prieto is board chair of the Inquirer.

Henares has denied sitting on the case.

She said representatives of GDI complained of inaccuracies in Delanon's assessment and she twice ordered a review.

“Pinaimbestigahan natin ng ilang beses, at sa mga imbestigasyon na yan, lumalabas na hindi naman tama yung assessment ni Mr. Othello [Delanon],”Henares said.

Henares did not disclose how much GDI owed the government in taxes, but denied meeting with GDI's officials to settle the case under the table.

“Si Marixi Prieto, hindi ko naman puwedeng sabihin na hindi ko nakakausap, in the sense na palagi ko nakikita yan sa vin d'honneur eh, sa mga state event sa Malacañang. Pero, in the first place, alam naman ng mga tao na hindi ako nangangausap pag tungkol sa assessment,” she said. —NB, GMA News