COMPLAINT- AFFIDAVIT

REPUBLIC OF THE PHILIPPINES]
CITY OF MANILA ] 5.5.
COMPLAINT- AFFIDAVIT
We, AURORA FLOR, MARIA LOURDES SANTE, VIRMA
CLEMENTE, AMELITA AQUINO, FERDINAND MALONZO, LEONESTO
BERNAL and SIXTO JR. DY, a" of legal age, Filipinos and with postal
address c/o Rm. 411 RATE Room, BIR National Office Building (NOB),
Agham Road, Quezon City, after having been duly sworn to in accordance
with law, do hereby depose and state: - THAT -
1. We are duly designated revenue officers of the Bureau of Internal
Revenue (BIR) who are currently assigned at the National Investigation
Division (NID) authorized to conduct a tax investigation on individuals and
entities that may have committed violations of the provisions of the National
Internal Revenue Code (NIRC) of 1997 and to perform such other duties &
functions that may be assigned to us pursuant to law.
2. In our official capacities, we are recommending that a criminal
action be taken and initiated against the spouses JUAN MIGUEL M.
ARROYO (Mr. Arroyo) and MA. ANGELA M. ARROYO (Mrs. Arroyo) after
it was ascertained that they both violated pertinent provisions of the NIRC of
1997, which are contrary to law, in the manner stated in this affidavit.
3. Mr. and Mrs. Arroyo are hereby being charged with Attempt to
Evade or Defeat Tax for taxable years 2004 to 2009 under Sections
51(A)(1)(a) and 74 in relation to Section 254 of the NIRC of 1997 which
provide:
"SEC. 254. Attempt to Evade or Defeat Tax. - Any person
who willfully attempts in any manner to evade or defeat any tax
imposed under this Code or the payment thereof shall, in
addition to other penalties provided by law, upon conviction
thereof, be punished by a fine not less than Thirty thousand
(P30,OOO)but not more than One hundred thousand pesos
(P100,OOO)and suffer imprisonment of not less than two (2)
years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be
a bar to the filing of a civil suit for the collection of taxes."
4. Mr. and Mrs. Arroyo are also being charged with Failure to File
Return & Pay Tax for taxable years 2005, 2008 and 2009 under Section
255 of the same Code, which provides:
"SEC. 255. Failure to File Return, Supply Correct and
Accurate Information, Pay Tax Withhold and Remit Tax
and Refund Excess Taxes Withheld on Compensation. -

Any person required under this Code or by rules and
regulations promulgated thereunder to pay any tax, make a
return, keep any record, or supply such correct and accurate
information, who willfully fails to pay such tax, make such
return, keep such record, or supply correct and accurate
information, or withhold or remit taxes withheld, or refund
excess taxes withheld on compensation, at the time or times
required by law or rules and regulations shall, in addition to
other penalties provided by law, upon conviction thereof, be
punished by a fine of not less than Ten thousand pesos
(P10,000) and suffer imprisonment of not less than one (1)
year but not more than ten (10) years. "
5. Mr. Arroyo is a registered taxpayer of Revenue District No. 39,
South Quezon City with TIN:914-841-267-000. He was the Vice-Governor
of Pampanga province for the years 2001 to 2004, and was later elected as
Congressman of the 2 nd District of Pampanga for two (2) consecutive terms
from years 2004 to present.
6. Mrs. Arroyo is a registered One Time Transaction (ONETT)
taxpayer of Revenue District No. 50, South Makati with TIN:185-405-985-
000. She and Mr. Arroyo were married last June 23, 2002. Both may be
served with summons and other processes of this Honorable Office at the
following address/es:
Respondent
Address/es
#15 Badjao St., La Vista Subd., Katipunan Ave., a.c.
Juan Miguel M. Arroyo
House of Representatives
Batasang Pambansa Complex, Constitution Hills,
a.c.
#15 Badjao St., La Vista Subd., Katipunan Ave., a.c.
Ma. Angela M. Arroyo
#132 Cambridge Circle, North Forbes Park Subd.
Makati City
7. As resident citizens of the Philippines, Mr. & Mrs Arroyo are
mandated by law to declare their estimated income for each taxable year as
well as to file the required tax returns and to pay the corresponding taxes

due thereon as required by Sections 24(A)(1)(a)1, 51(A)(1)(a)2 and 74(A)3 of
the NIRC of 1997.
Moreover, as an elected public official from years 2001 to 2010, Mr.
Arroyo is mandated under R.A. No. 6713 to accomplish and annually submit
declarations under' oath of his Statement of Assets, Liabilities or Networth
(SALN), including that of his spouse and children under 18 years of age who
are living in their household.
I Section 24. Income Tax Rates.
(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the
Philippines.
(1) An income tax is hereby imposed:
(a) On the taxable income defined in Section 31 of this Code, other than income subject to
~x .
under Subsections (8), (C) and (0) of this Section, derived for each taxable year from
all
sources within and without the Philippines be every individual citizen of the
Philippines
residing therein;
xxx xxx xxx
2 Section 51. Individual Return. -
(A) Requirements. -
(1) Except as provided in paragraph (2) of this Subsection, the following individuals are
required to file an income tax return: .
(a) Every Filipino citizen residing in the Philippines;
(b) Every Filipino citizen residing outside the Philippines, on his income from sources
within
the Philippines;
(c) Every alien residing in the Philippines, on income derived from sources within
the
Philippines; and
(d) Every nonresident alien engaged in trade or business or in the exercise of
profession
in the Philippines.
xxx xxx xxx
3 Section 74. Declaration of Income Tax for Individuals. -
(A) In General. - Except as otherwise provided in this Section, every individual subject to
income tax under Sections 24 and 25(A) of this Title, who is receiving self-employment
income, whether it constitutes the sole source of his income or in combination with
salaries, wages and other fixed or determinable income, shall make and file a declaration
of his estimated income for the current taxable year on or before April 15 of the same
taxable year. In general, self-employment income consists of the earnings derived by the
individual from the practice of profession or conduct of trade or business carried on by him
as a sole proprietor or by a partnership of which he is a member. Non-resident Filipino
citizens, with respect to income from without the Philippines, and non-resident aliens not
engaged in trade or business in the Philippines, are not required to render a declaration of
estimated income tax. The declaration shall contain such pertinent information as the
Secretary of Finance, upon recommendation of the Commissioner, may, by rules and
regulations prescribe. An individual may make amendments of a declaration filed during
the taxable year under the rules and regulations prescribed by the Secretary of Finance,
upon recommendation of the Commissioner.
xxx xxx xxx

8. Based on the information and documents gathered during our
investigation, it was disclosed that Mr. & Mrs. Arroyo were able to acquire
real, personal and other properties for the years 2004 to 2009, which are
worth several millions.
8.1. Among those properties are residential houses in Lubao,
Pampanga & La Vista Subdivision in Quezon City, motor vehicles,
stock shares, jewelries, clothes and other personal effects as
enumerated in the Statement of Assets, Liabilities & Net Worth
(SALNs) of Mr. Arroyo as of December 310f the years 2002 to 2009.
Copies of the said SALNs are hereto attached as Annexes "A" to "G".
9. Verification of Mr. Arroyo's tax records with the BIR shows that he
originally registered on April 18, 2001 as a One Time Transaction (ONETT)
taxpayer with Revenue District No. 21 B, South Pampanga under TIN:210-
543-613-000. Later, on June 19, 2002, he again registered with Revenue
District No. 39, South Quezon City under TIN:914-841-267-000. Thus, on
July 22, 2009, the ONETT TIN of Mr. Arroyo was ordered cancelled due to
multiple TIN. A copy of the certification issued by Maria Elena A. Nuguid,
Chief of the Taxpayer Service Section of Revenue District No. 21 B, South
Pampanga, certifying the cancellation of the ONETT TIN of Mr. Arroyo is
hereto attached as Annex "H".
1O. The tax records of Mrs. Arroyo indicate that she registered as a
One Time Transaction (ONETT) taxpayer of Revenue District No. 50, South
Makati on September 11, 2002 under TIN:185-405-985-000, and that she
failed to file any Income Tax Return. Copies of the registration of Mrs.
Arroyo as ONETT taxpayer and the certification of her non-filing of any
Income Tax Return are hereto attached as Annexes "I" and "J",
respectively.
11. Despite the receipt of. substantial amounts of income, as
shown by their acquisition of numerous properties, Mr. & Mrs. Arroyo had
repeatedly failed to file any Annual Income Tax Return (ITR) and to pay the
corresponding taxes and for the years that Mr. and Mrs. Arroyo filed their
ITRs, they understated their income.
12. Verifications made with Revenue District Office No. 39, South
Quezon City and Revenue District Office No. 21, Pampanga revealed that
Mr. and Mrs. Arroyo did not file any ITR for the following taxable years:
Taxpayerls
Taxable' Yearls
Juan Miquel M. Arroyo 2005, 2008 & 2009
Ma. Angela M. Arroyo 2003 to 2009
A copy of the Certifications issued by the said SIR Offices are
hereto attached as Annexes "K" and "L", respectively.

13. The fact of non-filing of Annual ITRs by Mr. and Mrs. Arroyo
for the said years is confirmed by the Certification issued by Victoria V.
Santos, Assistant Commisioner for Information Operations Service of the
SIR on March 22, 2011. The same Certification also shows the amount of
income declared and the corresponding income taxes paid by Mr. and Mrs.
Arroyo for taxable years 2004, 2006, and 2007. A copy of the Certification
is hereto attached as Annex "Mil.
14. Through the use of the Net Worth Method of tax investigation,
it was ascertained that Mr. Arroyo had substantially underdeclared his
income for taxable years 2004 to 2009.
15. Using the Net Worth Method, the unreported income of Mr. &
Mrs. Arroyo were established by a comparison made between their
increase in net worth and the reported taxable income over time in order to
determine the legitimacy of the taxpayer's reported income. A table showing
the increase in the networth of the spouses is hereto attached as Annex
UN".
15.1. The Net Worth Method of proof is a long-established
indirect method of proof regularly used in establishing taxable
income in criminal tax cases. This method of proof is useful in
reconstructing taxable income when the government is unable to
establish income through direct evidence.
15.2. The Net Worth Method was first used in the U.S. in the
case of Capone v. United States. In the Philippines, the use of the
said method as a way of reconstructing income was sanctioned by
the Supreme Court in the cases of Eugenio Perez vs. CTA & CIR
(G.R. No. L-10507 dated May 30, 1958); Jose Avelino vs. CIR (G.R.
No. L-14847 dated Sept. 19, 1961 and G.R. No. L-17715 dated July
31, 1963); CIR vs. William Li Yao (G.R. No. L-11875 dated
December 28, 1963); and Maria S. Castro vs. CIR (G.R. No. L-12174
dated April 20, 1962).
15.3. This method is a re-statement of a basic accounting
principle which states that assets minus liabilities equals
networth. Thus, under this method, "the taxpayer's networth is
determined both at the beginning and at the end of the same taxable
year. The increase or decrease in networth adjusted by adding all
non-deductible items and subtracting therefrom non-taxable receipts.
The resultant figure is the taxable net income before statutory
personal and additional exemptions. The general theory underlying
this method is that the taxpayer's money and other assets in excess
of liabilities and after accurate and proper adjustment of nondeductible
and non-taxable items not accounted for in his tax return
is deemed to be unreported income. Otherwise stated, the theory is
that the unexplained increase in networth of a taxpayer is presumed.

to be derived from taxable income." [see Aban, Benjamin B., Law of
Basic Taxation in the Philippines, 1994, p. 116)].
16. Thus, the difference between the declared income of Mr. &
Mrs. Arroyo per ITRs for taxable years 2004, 2006, and 2007 and total
amount of unreported income for the same years constitute a substantial
underdeclaration of more than thirty (30%) percent, and such
underdeclaration is considered as prima facie evidence of a fraudulent
return under Sec. 248(B) of the NIRC of 1997. The act of non-filing of ITR
for taxable years 2005, 2008 and 2009 by Mr. and Mrs. Arroyo is evident of
their fraudulent scheme to defeat payment of taxes. A table showing the
computation of the tax liabilities of the spouses for taxable years 2004 to
2009 is hereto attached as Annex "0".
16.1. The tax liabilities of Mr. and Mrs. Arroyo is summarized
as follows:
2004 2005 2006 2007 2008 2009
BASICTAX DUE 21,717,225.56 101,000.00 3,457,960.00 2,130,129.50 765,000.01 636,999.78
SURCHARGE 50% 10,858,612.78 50,500.00 1,728,980.00 1,065,064.75 382,500.01 318,499.89
INTEREST(UP TO
APRIL 15, 2011) 26,060,670.67 101,000.00 2,766,368.00 1,278,077.70 306,000.00 127,399.96
DEFICIENCY
INCOME TAX 58,636,509.01 252,500.00 7,953,308.00 4,473,271.95 1,453,500 .02 1,082,899.63
17. Clearly, such continuous and deliberate failure of Mr. & Mrs.
Arroyo to file the mandated ITRs for several years and their substantial
underdeclaration of income demonstrate their propensity and willful intent to
evade the taxes due the government.
18. The elements of Section 254 of the NIRC of 1997 are:
a. a tax imposed under the NIRC of 1997;
b. a person, natural or juridical, is liable to that tax;
and
c. such person willfully attempts in any manner to
evade or defeat such tax.
19. From the foregoing narration, it can be clearly seen that Mr.
and Mrs. Arroyo were liable to pay taxes for taxable years 2004 to 2009 but
managed to evade payment thereof by non-filing of ITRs for taxable years
2005, 2008, and 2009, and by substantially underdeclaring their income for
taxable years 2004, 2006 and 2007. Such acts of non-filing of ITR and

underdeclaration of income show a scheme calculated to willfully defeat
payment of correct amount of taxes badly needed by the government.
20. The elements of Section 255 of the NIRC of 1997 are:
a. a person is required under the NIRC of 1997, or
by rules and regulations, to pay any tax, make a return,
keep any record, or supply correct and accurate
information;
b. at the time or times required by law or rules and
regulations;
c. such person willfully fails to make such return,
keep such record, supply such correct and accurate
information, or withhold or remit taxes withheld, or refund
excess taxes withheld on compensation; and
d. as a result, such person failed to pay the correct
tax.
21. As earlier discussed, Mr. and Mrs. Arroyo are required to file
their annual income tax returns which they willfully failed to do, as
evidenced by their repeated non-filing of ITR for taxable years 2005, 2008,
and 2009.
22. This Affidavit is being executed to attest to the truth of the
foregoing, and to cause the institution of the corresponding criminal
complaints against JUAN MIGUEL M. ARROYO and MA. ANGELA M.
ARROYO for the aforesaid crimes defined and punished under the NIRC of
1997.
Affiants further say no more.
City of Manila, __ day of April 2011.
Affiants
CERTIFICATION

Subscribed and sworn to before me this __ day of April 2011, in the
City of Manila. This is to certify that the affiants personally appeared before
me and verified that they executed this affidavit-complaint, has read the
same and that the contents thereof are true and correct of their own
knowledge and information and based on the available records.
STATE PROSECUTOR