ABS-CBN: Big Dipper and AFI are no tax shields

ABS-CBN stood by its claim that it is paying the right taxes to the government as it disputed allegations that it has used its subsidiary Big Dipper Digital Content and Design Inc. (Big Dipper) and the ABS-CBN Foundation Inc. (AFI) as tax shields.

“Big Dipper is not a tax avoidance scheme. We applied for and qualified for the PEZA incentives that were set in 2009. There were specific requirements there in terms of investment and export and over the years we’ve met those requirements,” said ABS-CBN Group chief financial officer (CFO) Ricardo Tan at the tenth legislative hearing for the ABS-CBN franchise in the House of Representatives yesterday (July 1).

Big Dipper, which is engaged in digital archiving and repurposing of content for export, is entitled to tax incentives as an IT enterprise registered with the Philippine Economic Zone Authority (PEZA). Among these incentives are a six-year tax holiday, which already ended in 2015, and tax and duty free importation. Currently, Big Dipper pays taxes worth five percent (5%) of its gross income.

In the hearing last Tuesday (June 30), Tan said Big Dipper’s investment in equipment will exceed P1 billion by the end of the year. He added that it has generated “over $237 million in foreign exchange inflows, created jobs, and helped bring Filipino content to a global audience.”

ABS-CBN Corporation CFO Aldrin Cerrado also maintained that ABS-CBN, which wholly-owns Big Dipper, does not use or share the equipment of Big Dipper.

“Big Dipper is used solely for the services that is being offered by Big Dipper to its clients. It so happens that ABS-CBN is a client of Big Dipper but none of the Big Dipper assets is actually being used by ABS-CBN in any production of its content,” he said.

He said among these services are digitizing, dubbing, closed captioning, and reformatting of content such as shows and movies depending on the platform it will be played and the standards in the territory it will be shown outside the country.

Cerrado said without Big Dipper, which is accredited by iTunes and Amazon Video, ABS-CBN would have to outsource these services abroad, as they do not know of any local company offering the same services.

“Kung ganon po ang mangyayari, at wala kaming facilities, or ang Big Dipper, the facility to do the repurposing, siguro po i-outsource po ito sa ibang bansa. Mas mamahal pa po, at ibang bansa ang kikita nito,” he said.

PEZA director general Charito Plaza told solons yesterday that they considered Big Dipper as a “pioneer” and among those who use a new technology in the digital platform.

She also shut down any insinuation that companies may take advantage of PEZA to avoid paying taxes, emphasizing that the PEZA board - which includes the Department of Science and Technology, Department of Finance, and the National Economic Development Authority - reviews and evaluates applications for incentives. Even the importation of equipment by PEZA-registered companies, she said, undergoes a stringent procedure of approval and inspection.

“There is no such thing as making PEZA as a tax shield because these incentives are being evaluated by these agencies of government,” she said.

The Bureau of Internal Revenue (BIR) also said they have yet to find any violation of tax laws in the operation of Big Dipper.

“I think in terms of tax payments, they are paying correctly,” said BIR regional director (Region 7A) Alvin Galanza.

Meanwhile, ABS-CBN also belied accusations that the network has used AFI, which is a BIR-registered foundation, as a tax shield.

Cerrado argued that any tax relief the network receives due to the donations it makes to AFI is prescribed by the law. "Donations, under the revenue code, is a deductible expense," he said.

AFI managing director Susan Afan shared that ABS-CBN donated P129 million from 2015 to 2019 to AFI for its various programs such as Sagip Kapamilya, Bantay Bata 163, and Bantay Kalikasan.

She added ABS-CBN also recently gave P52 million for ABS-CBN Foundation’s “Pantawid ng Pag-ibig” campaign that provides relief goods to Filipinos affected by the community quarantine due to the COVID-19 pandemic, and delivers personal protective equipment (PPE) to medical frontliners. So far, the campaign has raised a total of P425 million in donations and pledges and served over 820,000 families.