Revenue Regional Director Eduardo Pagulayan, who was behind the (now aborted) closure of Megaworld) has been demoted to researcher/technical assistant at the office of Commission Caesar Dulay, where he would serve until his retirement end of June, in which case he gets less retirement benefits.
Weeks before he was to retire, Revenue Regional Director (South NCR) Eduardo L. Pagulayan got demoted to researcher/technical assistant under the Commissioner’s office, after he threatened to shut down Megaworld for supposedly failing to register its joint venture in Bonfacio Global City.
Pagulayan ordered a tax audit of Megaworld because the Bases Conversion and Development Authority (BCDA) and Megaworld failed to register the JV in BGC. (Bilyonaryo.com reported that Ayala Land and Federal Land were also subjected to audit by Pagulayan but only Megaworld complained about the harassment).
This angered Finance Secretary Carlos Dominguez III who immediately suspended the authority of BIR task forces to conduct special audits that usurped the jurisdiction of other BIR divisions.
In an order dated June 1, BIR Commissioner Caesar Dulay assigned Pagulayan, who is retiring end of June, as technical assistant under his office. (This means that his retirement pay will be pegged at the lower position).
‘Surprise advisory’
Last May 18, the Inquirer reported receiving a BIR media advisory sent on Tuesday (May 17) afternoon that surprised long-time BIR beat journalists because it readily identified the taxpayer that BIR was supposed to close.
Deputy Commissioner Arnel Guballa, Regional Director Eduardo Pagulayan Jr. and other officials of the agency’s Revenue Region 8-B covering south-NCR, will issue a closure order against Megaworld Corp., the BIR announcement read.
Before issuing the closure order, the BIR was to host reporters for breakfast at Denny’s in Megaworld’s own upscale Uptown development in BGC. It was then that the BIR was supposed to issue the closure order in the presence of media.
At first confused if it was really the real estate giant which the BIR would close due to unpaid taxes, Biz Buzz quickly texted Guballa to clarify if it’s Megaworld or perhaps just a Pogo nearby just like its previous “Oplan Kandado” operations. Guballa’s short reply to Biz Buzz was: “Secret.”
In response, Megaworld also issued a statement saying that “we have already reached out to the concerned BIR regional office, and the matter has been clarified and resolved.”
After a reporter tweeted the advisory, the listed firm’s stocks fell 9 percent, although it recovered in minutes. Buyers came in hot; MEG closed at 2.94 percent from Monday by the end of Tuesday’s session.
Nearly three hours after the first media advisory, the BIR sent an updated one, signed by Pagulayan, which read:
“The [May 18] activity is being held in abeyance until further notice.”
Full cooperation
“Representatives from Megaworld manifested their full cooperation with all the requirements of the BIR,” the country’s biggest tax-collection agency said. Reporters surmised that BIR was using media to also quickly collect whatever Megaworld owed BIR.
Whatever it was, company sources tell us that the issue was about an audit of sales revenues—an audit that hadn’t been conducted yet. No formal notice was also served on Megaworld, insiders said. There’s also a lingering question of whether the company is, in fact, under the jurisdiction of the BIR office in question, we hear.
On May 20, Rep. Joey Sarte Salceda of the House Ways and Means Committee, maintained a cautious stance on the controversy surrounding the aborted closure of real estate giant Megaworld, saying that the BIR must further justify its actions in a hearing to be conducted on Monday, May 23.
“Releases such as the closure order should not have been made public without a unified BIR position. I still haven’t seen one,” Salceda said in reaction to the press release issued Friday by the BIR-NCR South Regional Office.
Salceda said the Large Taxpayer Service, which is one of the two BIR units that announced the closure order of Megaworld, has yet to explain the mystery behind the unenforced directive.
“The markets are already uncertain. It’s a sin to the financial markets and to make economic and fiscal stability to create the impression that tax enforcement is arbitrary and tax authorities can simply inflict ‘reputational’ damage at will,” Salceda pointed out.
Salceda wanted BIR to fully explain why it aborted the service of the Megaworld closure order a few hours after it invited media to cover the news event.
Megaworld is apparently perplexed at the supposed issuance of the BIR directive although media reports indicated that officials of the LTS and NCR-South Regional Office have explained that the closure was put on hold after the firm’s officials agreed to cooperate with the tax agency.
Because of Salceda’s demand for explanation, Director Eduardo L. Pagulayan Jr. issued a press statement revealing that his office has been investigating and verifying the “taxes on One Time Transactions (ONETT) on the sale/transfer of properties by Megaworld.
“Although Megaworld is considered a large taxpayer under the jurisdiction of the Large Taxpayers Service, BIR National Office, ONETT falls under the jurisdiction of the BIR Regional Offices since the situs of taxation of sale, transfer and other disposition of real properties is where the property is located,”said Pagulayan in the press release.
Pagulayan claimed that Megaworld initially resisted the BIR audit.
“The BIR Regional Office, however, found that the said corporation failed in its compliance and reportorial requirements under the Tax Code. Failure to comply with the said requirements is a ground for closure,” he disclosed.
Pagulayan then said that the issue was resolved as
“Megaworld will now comply with the audit. Hence, closure was set aside,” Pagulayan said.
Pagulayan’s case in Cebu
In May 2021, Pagulayan who was then BIR-Regional Director of Region 13 was slapped an administrative and criminal complaint by the Cebu CFI Community cooperative before the Office of the Ombudsman-Visayas after he cancelle3 the coop’s tax exemption, the Freeman reported.
Gemaila Alvarado, CFI Legal Division chief, filed the complaint on behalf of the cooperative on May 7, 2021 and sought for Pagulayan’s immediate dismissal from the government service because of alleged oppression and grave misconduct.
Alvarado also prayed that a criminal complaint be filed against Pagulayan for violating Section 3(e) under Republic Act 3019 as amended otherwise known as the Anti-Graft and Corrupt Practices Act.
Pagulayan was also accused of violating Section 22 of RA 1102 otherwise known as Ease of Doing Business and Efficient Delivery Act.
Sought for comments, Pagulayan said he has not received yet a copy of the complaint adding he was “not aware that there is a complaint against me by CFI whose Certificate of Tax Exemption I previously revoked because of non-compliance of the conditions of its tax exemption. I will answer once I will receive a copy of the complaint.”
He said that effective today, he will be transferred to the National Capital Region-Revenue Region South. He will be replaced by Director Glen Geraldino who was also the director of the said region.
Pagulayan, however, clarified that his transfer has nothing to do with the filing of the complaint against him as it is just a normal reshuffling.
CFI as a duly accredited cooperative enjoys tax exemption privileges from all taxes and in recognition, BIR granted their first CTE on October 4, 2010 valid for five years.
Due to the revocation, an act that was dubbed by the cooperative as “highhanded and arbitrary,” the revenue chief denied their application for another five-year CTE.
Alvarado said that one of the conditions for the CTE issuance is that the cooperative must submit to the BIR a Certificate of Good Standing issued by the Cooperative Development Authority every year which was overlooked by the latter.
Such failure to submit the CTE was in good faith as
“there was no proper mechanism as to when and what particular department or office of the BIR is the said certificate of good standing to be filed.”
On October 11, 2018, Pagulayan issued a Letter of Authority authorizing the BIR to examine the books of accounts of the cooperative for the taxable year 2017.
“Apparently, the action taken by respondent Pagulayan against CFI Coop is manifestly illegal, arbitrary, null and void and done in bad faith with the malevolent intention of causing and due harm and prejudice to the latter,” a portion of the complaint reads.
The complainant said the revocation of their second CTE and the subsequent denial of their supposed third CTE application on the ground of the previous revocation “was a gross violation of the non-retroactive provision under Section 246 of the National Internal Revenue Code.”
The CFI Coop’s tax exemption privilege is granted by law and not subject to the BIR’s discretion, the complainant said adding that their failure to submit the CGS was not done in bad faith nor done to mislead the BIR.
Alvarado said that the cooperative’s request for reconsideration of the revocation was denied by Pagulayan on October 2, 2019 which prompted the latter to file an appeal to the BIR Commissioner on November 7, 2019 but this has remained unanswered.
On February 11, 2021, the cooperative again requested for the issuance of CTE but this was still denied by Pagulayan on the basis of his previous order dated August 13, 2019.
Lawyer Estrella V. Martinez argued the closure of her client’s business was illegal as it was signed only by Pagulayan, Jr. holding the post as officer-in-charge (OIC).
Martinez added that as an OIC Pagulayan’s duty was limited to signing daily time records of personnel as ruled by the Supreme Court in the Aytona Vs. Castillo case.
Tags: #BIR, #fromregionaldirectortoassistant, #Megaworld, #taxaudit/investigation, #governance