Can Royale Business Club survive tax evasion case?

James Ryan Jonas

Is Royale Business Club guilty of tax evasion?
Yes, according to the Bureau of Internal Revenue (BIR) as the agency filed a P359.75 million tax evasion case against the popular popular multi-level marketing (MLM) company.

royale-mlm-bir-tax-caseAccording to the BIR, Royale “willfully attempted to evade or defeat tax” and “deliberately failed to supply correct and accurate information in its annual income tax returns and quarterly value added tax returns” in the past three years 2011, 2012, and 2013.
The BIR said Royale’s aggregate deficiency tax liability during the three-year period has reached P359.75 million, inclusive of surcharges and interests, broken down as follows:

  • Tax liability in 2011: P135.87 million
  • Tax liability in 2012: P115.39 million
  • Tax liability in 2013: P108.49 million

The BIR’s complaint stated that Royale Business Club earned muti-million peso income deposited to the company’s bank accounts that were heavily understated in the company’s Income Tax Return filings.
For example, the company’s bank accounts in BPI, BDO and Metrobank showed that the company allegedly received combined income deposits of P190.79 million in 2011, P236.38 million in 2012 and P354.06 million in 2013.
However, the BIR said that the company declared only the amounts of P39.14 million in 2011, P106.69 million in 2012 and P196.68 million in 2013 as gross sales in its Income Tax Return, hence the tax liability. (See table below)

Gross Sales (deposited in Royale's BPI, BDO and Metrobank accounts)Gross Sales (declared in Royale's Income Tax Return)Tax Liability of Royale Business Club (as computed by the BIR)
2011P190.79 millionP39.14 millionP135.87 million
2012P236.38 millionP106.69 millionP115.39 million
2013P354.06 millionP196.68 millionP108.49 million
TOTALP781.23 millionP342.51 millionP359.75 million

Included in the tax evasion charge sheet were the following executives and employees of Royale Business Club:

  • Julius Allan Nolasco – President
  • Isa Angela Bautista – Vice President for Finance
  • Jeanette Maghirang and Imelda Pedron – Assistant Treasurers
  • Marjorie Molina – Assistant Accounting Manager

According to the BIR, members of Royale do not face the same tax evasion charge because the deficiency was a tax liability of the company, not the members.
Still, members must prove they paid the correct taxes from the commissions earned from Royale, otherwise, they could also be guilty of tax evasion, according to BIR Commissioner Kim Henares.
Royalé Business Club is a networking firm / multi-level marketing company manufacturing and distributing food supplements, cosmetics, and pharmaceutical products. Its headquarters is located at Royale Centre 1363A Quezon Avenue, West Triangle in Quezon City.
Do you think Royale Business Club will be able to win this tax evasion case? Let your voice be heard and join the poll below!
See also: Royale discussion thread in the PMT Forum

James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.