PH domain registry sued for tax evasion

The Bureau of Internal Revenue (BIR) on Thursday, July 11, filed a criminal complaint for tax evasion with the Department of Justice against dotPH, the country’s Internet domain name registry.

Aside from dotPH, whose official business name is Domain Merchandising Services Inc. (DMSI), also charged were its corporate officers Ma. Milagros M. Casas, president for the years 2009 to 2012, Estelita G. Arada, treasurer for the years 2009 to 2011, and Jonalyn S. Quesada, treasurer for the year 2012.

They are accused of four counts of willful attempt to evade or defeat payment of income tax for the years 2009 to 2012 and for deliberate failure to supply correct and accurate information in its Annual Income Tax Returns (ITRs) for taxable years 2009 to 2012.

DMSI, more known as dotPH, is primarily engaged in Internet domain name registration services and holds its office at 27th floor, Jollibee Plaza Building, F. Ortigas Jrc. Road, Ortigas Center, San Antonio, Pasig City.

The company has been criticized by the local Internet community for its “monopolistic” hold on the .ph country code-top level domain (ccTLD). They have argued that this function should be performed by the government and not by a private commercial firm.

Investigation showed that per certification issued by the Withholding Tax Division (WTD) of the BIR, DMSI received P138.24 million (P35.35 million – 2009; P51.75 million – 2010; P51.14 million – 2011) from various clients.

Another certification validating the information given by the WTD of BIR revealed that DMSI received P154.51 million (P7.09 million – 2009; P50.94 million – 2010; P49.96 million – 2011; P46.52 million – 2012) from BDO.

ITRs filed by DMSI with the BIR disclosed gross income of P9.59 million in 2009; P11.0 million in 2010; P9.81 million in 2011; and P10.07 million in 2012.

A comparison of the documents and information gathered revealed that DMSI deliberately underdeclared its taxable income by P25.75 million or 268 percent in 2009; P40.74 million or 370 percent in 2010;P41.33 million or 421 percent in 2011; and P36.45 million or 362 percent in 2012.

Under Sec. 248 (B) of the Tax Code, an underdeclaration of taxable income by more than 30 percent is considered substantial underdeclaration and constitutes a prima facie case of fraud tantamount to tax evasion.

DMSI was sued for a total tax liability of P77.58 million, inclusive of surcharges and interests, broken down as follows: P16.16 million- 2009; P23.26 million – 2010; P21.09 million – 2011; andP17.07 million – 2012.

The case against DMSI is the 176th filed under the Run After Tax Evaders (RATE) program of the BIR.

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