The Court of Tax Appeals has found Nobel Laureate Maria Ressa and Rappler Holdings Corporation (RHC) not guilty on all four allegations of tax evasion. The CTA’s First Division ruled that the prosecution had failed to show guilt beyond a reasonable doubt. The Department of Justice (DOJ) initiated the lawsuit in 2018 in response to Ressa and Rappler’s refusal to disclose a profit of P162.41 million from the issue of Philippine Depositary Receipts (PDRs) in 2015.
PDRs are financial instruments used by some entities to receive foreign investment without violating the constitutional requirement of full Filipino ownership. However, the CTA said that the transactions of RHC mentioned in the case “cannot be considered as regularly or frequently engaged in the purchase of securities and resale thereof to customers.”
Citing the Securities and Exchange Commission (SEC) opinions, the Tax Court said “it is not repugnant to the nature of a holding company to engage in financial activities to raise capital for its subsidiaries. In fact, RHC is registered with the BIR as an entity engaged in the Line of Business-‘Financial Holding Company Activities’.”
On allegations that foreign ownership following the issuance of PDRs to foreign entities NBM Rappler L.P. and Omidyar Network (ON), the CTA said “PDRs are not statements nor are they certificates of ownership of a corporation.”
A Philippine Stock Exchange (PSE) Circular for Brokers No. 2375-99 stated that “for as long as PDR remains unexercised by its holder, the PDR holder has no right of ownership over the underlying shares and all such ownership rights pertain to and belong to the issuer.”
The court also stated that since the accused is not required to pay the income tax and VAT on the PDR transactions for the taxable year 2015, the elements of Sections 254 and 255 of the 1997 National Internal Revenue Code (NIRC) are rendered nugatory and without legal support. In conclusion, the court said that the plaintiff had failed to prove the guilt of the accused beyond reasonable doubt.
This decision by the CTA is a significant victory for Ressa and Rappler, which has been facing multiple legal challenges in recent years. With the dismissal of the tax case, there are now only three remaining cases against Rappler: an appeal on the Cyber Libel case, another tax case, and an appeal on Rappler’s shutdown before the Court of Appeals.
