Proprietor and CPA listed for tax evasion

FRITZ J. MIGALLEN EREDIANO (EREDIANO), sole proprietor of “Friendly Rabbit Marketing,” has been added to the tax evasion roll after the Bureau of Internal Revenue (BIR) today filed with the Department of Justice (DOJ) a criminal complaint against him for willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information in his Income Tax and Value Added Tax Returns for taxable year 2006, in violation of Sections 254 and 255 of the National Internal Revenue Code of 1997, as amended.

Charged with EREDIANO is his independent Certified Public Accountant CLEMENTE C. RELAMPAGOS (RELAMPAGOS). EREDIANO resides at Sea Breeze Homes, Saac II, Bry. Mactan, Lapu Lapu City while RELAMPAGOS listed his business address at No.43 St. Martin Village, A.S. Fortuna St., Mandaue City.

Based on the discrepancy discovered as a result of the computerized matching conducted by the BIR on information provided by third party sources against the VAT returns submitted by EREDIANO, the BIR issued a Letter Notice (LN) to EREDIANO. Failing to respond to the LN, Letters of Authority, Checklist of Documentary Requirements and Subpoena Duces Tecum were served on and received by EREDIANO. Still, EREDIANO failed to submit the documents being sought alleging that said documents were already disposed of.

Access letters were sent to EREDIANO’s suppliers to ascertain the true income he received. Suppliers General Milling Corporation and Pryce Gases, Inc. sent their confirmation to the said access letters. An evaluation of EREDIANO’s suppliers’ records per LN, his suppliers’ confirmation to the access letters and his declarations in his income tax and VAT returns disclosed an underdeclaration of sales by 434.34% resulting to a discrepancy of P15.83 million for taxable year 2006.

Furthermore, documents showed that as early as January 2006, EREDIANO already made purchases amounting to P1.2 million but he only changed his registration with the BIR from Non-VAT to VAT on September 12, 2006. He thus filed his VAT return only on the 4th quarter but failed to do so for the first three (3) quarters of 2006.

Under the NIRC of 1997, as amended, an underdeclaration of taxable sales by more than 30% constitutes prima facie evidence of fraud tantamount to tax evasion.

EREDIANO was assessed an estimated total tax liability of P22.24 million, including surcharges and interests, for taxable year 2006 broken down as follows: P16.43 million – Income Tax; and P5.81 million – VAT.

RELAMPAGOS, on the other hand, was included in the complaint sheet for issuing an unqualified opinion in his certification of the 2006 audited financial statements of EREDIANO despite the latter’s underdeclaration in his reported revenues/income.

The case against FRITZ J. MIGALLEN EREDIANO and CLEMENTE C. RELAMPAGOS is the eighty-first (81st) filed under the Run After Tax Evaders (RATE) Program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares. It is likewise the first RATE case of Revenue Region No. 13, Cebu City.