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Rotary Club foundation, prominent businessmen face tax evasion case

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MANILA, Philippines – A 40-year-old foundation formed by the Rotary Club of Makati, as well as prominent businessmen comprising its officers, are facing tax evasion charges after allegedly passing off as a donation part of the revenues earned from the lease of a 20,063 square meter property in Paranaque City.

The Bureau of Internal Revenue (BIR) on Thursday filed a P47 million complaint before the Department of Justice against the Makati Rotary Club Foundation Inc. (MRCFI) and its officers, namely Felix Amparo, Jose Bengzon III, Federico Borromeo, Jr., Larry Boyer, Juan Carlos, Jr., Ramon Diokno, Tomas De Leon, Robert Kuan, Ricardo Librea, Conrado Marty, Alfredo Parungao, Antonio Quila, Wellington Soong and Jesus Tambunting.

BIR Commissioner Kim Jacinto-Henares said the foundation evaded tax payments by splitting these into rentals and donations.

The foundation’s lease contract with Fedders Koppel for the 2000-2004 period provides for a lease of P4 million for 2000 that increased to P4.9 million by 2004 and an annual donation of P2 million.

The contract covering the 2005-2009 period provided for an annual lease of P4.2 million plus value-added tax and annual donations. The contract provided for a donation of P3 million in 2005, P3.2 million in 2006, P3.3 million in 2007, P3.6 million in 2008 and P3.9 million in 2009.

Classifying part of the payment as donation is a tax saving scheme since the donor is liable to pay the tax, according to the BIR.

Given this scheme of splitting the payment, MRCFI’s P27 million donation didn’t form part of the computation of the foundation’s corporate income tax and value added tax (VAT) liabilities for the period 2000 -2009.

The Rotary Club of Makati said it won the first of two Rotary International Significant Achievement Awards for having organized the foundation. The club credits its success through the years to its foundation, which used to earn rental income from a three-storey arcade at the Makati Commercial Center.

In recent years, the foundation reported that it earns an annual P20 million in rentals from two properties, one of which is in Paranaque. A third property in Guadalupe Viejo, Makati is home to the foundation’s headquarters.

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