Case Summary and Outcome

This is one of more than 20 cases brought against journalist Maria A. Ressa or her news organization, Rappler, Inc, by authorities in the Philippines since 2018.  On November 14, 2018 a criminal case was filed against Rappler Holdings Corporation (RHC) and Ressa (the defendants), charging them with being in violation of section 255 of the National Internal Revenue Code, 1997. The complaint alleged that the defendants provided inaccurate information in the tax return of RHC for the second quarter of tax year 2015. Almost five years later, on September 12, 2023, a Regional Trial Court of the National Capital Judicial Region of the Philippines acquitted the defendants. Ressa, a world-renowned journalist with more than 35 years of experience and a Nobel Peace Prize laureate argued that the case was politically motivated and was filed as a form of restraint to the press freedom of Ressa and RHC’s subsidiary – Rappler, Inc. The defendants argued that the government was misusing the power to tax to “silence their freedom [of expression]”. While the court did not discuss the arguments relating to freedom of expression, it acquitted RHC and Ressa of violating section 255 of the National Internal Revenue Code, 1997. As a result, Ressa avoided a potential maximum sentence of 10 years’ imprisonment.

Facts

On March 5, 2018, the Bureau of Internal Revenue served a Letter of Authority (LOA) to examine RHC’s accounting records for the period of 1 January 2014 to 31 December 2015. Only three days later, the Revenue Officers instituted Criminal Complaints against RHC, RHC’s auditor and Ressa with the Department of Justice (DOJ). The Criminal Complaints were filed without conducting an actual examination of RHC’s books.

The DOJ filed five criminal tax evasion charges against RHC and Maria Ressa in two separate courts, the Court of Tax Appeals and the Regional Trial Court of Pasig City. The Court of Tax Appeals case consisted of 1 count of tax evasion under section 245 of the National Internal Revenue Code (NIRC) and three counts of failure to supply the correct information in tax returns in violation of section 255 of the NIRC. The maximum sentence that Ms Ressa faced for these charges was 30 years’ imprisonment. She and the other defendants were acquitted of these charges in January 2023.

The Regional Trial Court case comprised one count of violating section 255 of the NIRC with a maximum penalty of 10 years’ imprisonment. The complaint alleged that Ressa “willfully and unlawfully fail[ed] to supply correct and accurate information” in the value-added tax return of RHC for the second quarter of tax year 2015. [p. 1] According to the prosecutors, Ressa failed to report sales receipts coming from its alleged issue and sale of Philippine Depositary Receipts (PDRs) to two foreign corporations – NMB Rappler, L.P and Omidyar Network Fund LLC – in the amount of Php 2,452,154 (approx. USD 43,867) as a “dealer in securities”, which resulted in a deficiency value-added tax (VAT) of Php 294,258 (approx. USD 5,264). [p. 1]

As a result of these charges, on November 28, 2018, a court issued an arrest warrant against Ressa, after which she posted a cash bond of Php 60,0000 (approx. USD 1,073) on December 3, 2018.

The defense argued that RHC and Maria Ressa were wrongly accused of tax evasion on the basis that Ressa and RHC were not under any obligation to pay VAT on the two PDR transactions as RHC is not a “dealer in securities”. It is only dealers in securities that are liable to pay these taxes on profits made on their sale of securities. The defense argued that RHC is not a dealer in securities – but rather a holding company, as its name suggests. And in any event, the defense contended that RHC did not realize any taxable gain from the PDR issuance. Without realized income, there is no basis to make RHC liable for the taxes alleged owed, even if it was a dealer in securities. In addition, the defense noted that a number of other mass media companies had previously raised funds through their parent companies by way of PDR issuance, without being held liable to pay the tax that the defendants were allegedly liable for.

The defense asserted that the criminal case against RHC and Ressa was filed due to their connection with Rappler, Inc., a digital newsgroup providing “independent and fearless journalism in the Philippines.” The case was filed soon after Rappler Inc. reported on the human rights violations and allegations of corrupt transactions by the government.

The defense contended that the criminal cases were “politically motivated” and part of a broader attempt by the government to “silence the freedom of journalists of Rappler” as well as Maria Ressa.  They also highlighted previous altercations with the government, such as in 2016-2017 when President Rodrigo Duterte accused Rappler of being an American-owned newspaper. The defense also recalled a press address of the President on July 8, 2020, where he called Ressa a “fraud”. The defense claimed that soon after this incident, the investigation began against them, which resulted in criminal complaints and ten warrants of arrest against Ressa.

Ressa also argued that the government was misusing the power to tax as a “power to destroy/harm a citizen taxpayer and amount[ed] to a prior restraint to the freedom of the press.” She asserted that the criminal case constituted a severe form of “prior restraint,” strategically designed to impede Rappler Inc.’s global expansion plans and limit Rappler’s journalists’ and Ressa’s access to press briefings and official events during May 2019 elections. The imposition of travel restrictions on Ressa further caused her financial harm as she had to post bail of Php 60,000 (approx. USD 1,070) and had to regularly obtain permission from the court to travel abroad, all of which cost her Php 1,150,000 (approx. USD 20,556) as cash bond with a remaining deposit of Php 1,000,000 (approx. USD 17,875).

Ressa asserted that the wrongful accusations of tax evasion constituted unnecessary restrictions on press freedom and violated her constitutional rights. She cited the Supreme Court’s decision in Chavez v. Gonzales, which stated that “[f]reedom of the press is crucial and so inextricably woven into the right to free speech and free expression, that any attempt to restrict it must be met with an examination so critical that only a danger that is clear and present would be allowed to curtail it.”  She also cited Burgos v. Chief of Staff, where the Supreme Court held that the closure of a broadcasting company was a violation of press freedom that amounted to a “previous restraint or censorship abhorrent to the freedom of the press guaranteed under the fundamental law”, constituting “a virtual denial of petitioners’ freedom to express themselves.”

Decision Overview

Judge Ana Teresa T. Cornejo-Tomacruz of the Regional Trial Court of the National Capital Judicial Region of the Philippines delivered this judgment. The central issue for determination was whether the accused RHC and Ressa had evaded their tax liability by providing false and inaccurate information.

While the Court’s decision did not analyze the arguments related to freedom of expression, it acquitted RHC and Ressa of violating section 255 of the NIRC. The Court held that “RHC could legally engage in transactions involving PDRs to raise funds for its wholly-owned subsidiary”, that the issuance of the two PDRs was “consistent with the purpose for which it was created” and that it did not “transform RHC from a holding company to a dealer in securities”. Consequently, RHC “did not act as a dealer in securities” and was “not liable to pay VAT” on the PDR transactions.

The Court also concluded that RHC did not gain any profit from the transactions, and therefore that RHC was not required to declare any gain, profit or income arising from the PDR issuance in its VAT return. As a result, the Court ruled that RHC did not file an inaccurate VAT return and thus absolved RHC and Ressa from any criminal or civil liability in this case. [p. 18]