by: Mickey Ingles (Photo credit: Oliver Petalver, The Daily Sports Herald)
The winner of the recently concluded Pacquiao-Horn fight will likely be debated until—if the Bradley-Pacquiao fight were any indication—the next Pacquiao-Horn fight. But whether you rooted for the Pacman or the Hornet, there was always going to be one sure winner: the Bureau of Internal Revenue (BIR). The BIR is likely looking how much it can wring out of the Filipino champion’s purse from the fight—especially given the fighting senator’s previous bouts with the taxman.
So, the question is, is Senator Manny Pacquiao’s earnings from the fight—reported to be more than $10,000,000—within the reach of the Philippine taxman?
Quite frankly, yes. While Pacman’s reach is a mere 67 inches, the Philippine taxman’s reach is 196.9 million square miles—the entire square area of the Earth!—at least as against resident citizens. Section 23 of our trusty Tax Code states that resident citizens are subject to income tax on their sources of income worldwide. And yes, Manny Pacquiao is a resident citizen of the Philippines. He can’t deny being a resident, as this is a Constitutional qualification of his position as a Senator. Hence, his earnings from the fight are taxable in the Philippines.
His earnings, however, are also presumably taxable in Australia. Usually, tax treaties soften the blow of double taxation. But, the Pambansang Kamao won’t be able to find any solace in the Philippine-Australia Tax Treaty, as Article 17 of the Tax Treaty states that income derived by entertainers (such as an athlete) may be taxed in the state where these activities are exercised, which, in this case is Australia.
Wait, does this mean the Senator will be taxed twice for going 12 rounds with the Hornet (and losing)? Isn’t that unfair?
Well, not really. That’s how taxes work. Taxes are—and I roll my eyes every time I say or hear this—the lifeblood of the government. But, in fairness to fairness, Section 34 (C) (3) and (4) of our crusty Tax Code allow taxpayers to either deduct or credit taxes paid to foreign countries, under certain limitations. So, this is good news for the Pacman. Whatever he pays the Australian government can be used to reduce his Philippine tax liability. This, however, must be substantiated with proof, which is ironically what got Pacquiao on the ropes with the BIR with his winnings from the US in 2008 and 2009. (For those interested in the case, you can check the CTA website here for updates. There are reports though that he’s seeking a settlement with the BIR.)
So, let’s see how this goes. It doesn’t seem like the kind of rematch the Pacman wants to take.
Mickey Ingles is the editor-in-chief of Batas Sportiva and the author of Tax Made Less Taxing, a textbook on Philippine taxes. He obviously loves Punch Out!