CHICAGO (fAXX/jGLi) – Hall of Fame Top Rank promoter Bob Arum schooled Thursday (Jan. 2) some Filipino tax experts, who were quoted as saying that boxing icon Manny Pacquiao does not need “to file and pay income tax in the United States out of his earnings from boxing there” because Manny Pacquiao is a “non-resident alien” in the U.S.
In an exclusive interview with the Fil Am Extra Exchange, the ageless Harvard-trained lawyer said, “I hope the person quoted in the news story is not going to give advice to aliens in the U.S. because they (not filing and not paying income taxes from earnings in the U.S.) certainly are not the U.S. law.
“It’s true if you are an alien, you don’t have pay income in the U.S. only if you did not earn income in the U.S.”
But if one is an alien and had worked, say as an entertainer in the U.S., and earned income, he has to pay income tax from that earning to the U.S. Internal Revenue Service (I.R.S.), the counterpart of the Philippine Bureau of Internal Revenue (B.I.R.), Arum said.
MANNY NOT A GREEN CARD HOLDER
“Green card holder (U.S. Permanent Resident) or not, one has to file income tax if one had earned income in the U.S. And Manny had filed taxes every year,” according to Arum, who confirmed the immigration status of Manny Pacquiao as not a Green Card holder but as a non-resident alien.
Arum said, “ I know he (Manny) is not a Green card holder. But it is not a sine qua non for triggering an obligation to file income tax as long as you earn income in U.S., you have to pay taxes.”
Under U. S. domestic corporation law, when Manny fights, Arum said, whatever Top Rank pays Manny, “whether with one dollar or $40-Million dollar, we withhold 30% of the gross of his income within the week of the fight. We make the payment by wire transfer to the U.S. I.R.S. and we received confirmation that the IRS received our wire transfer.
“If Manny fights or makes endorsements, we religiously withhold 30% of his gross income. With regard to “offers,” if Manny is entitled to certain revenue, also before we make any payment, we deduct and withhold 30% of the gross and wire the payment to IRS. At the end of the year, we file with the IRS Form 1042 and we send Manny copy of that form. We do that to all foreign fighters, not just Manny. That’s what the law requires.
“At the end of the year, Manny and other aliens prepared and filed tax returns, claiming deductions and whatever, and taking as a credit shown amount in their withholding taxes. That’s how the system works. We file Form 1042, which memorializes all payments at the amounts that we withheld.”
30% OF MANNY’S GROSS INCOME IS WITHHELD
“If Manny earns $20-Million in pay-per-view, we withhold 30% of the gross income. If after four months later, and if Manny is entitled to another $5-Million, we deduct again 30% gross to pay for the IRS.”
As far as he is concerned, Arum said, “there is no tax cases nor tax liens (pending against Manny’s property) in the U.S. against Manny” nor his bank account being frozen.
“Any tax levy and lien put on Manny by the IRS have been released. I have copies of those documents sent to me by Manny’s (U.S tax) accountant and his (U.S.) tax lawyer from IRS.
“He has no liability to U.S. Some returns have been audited now because of deduction but it is a normal process. No lien and levy against Manny. None.”
It was reported earlier that the US IRS is also demanding around $18 million in alleged back taxes from Pacquiao.
Regarding the tax case of Manny in the Philippines, Arum said, “I have no knowledge about it. He gets tax credit to prevent double taxation for any taxes he paid in U.S. If he may have other incomes in Philippines, they are not subject to US tax. But he has to pay taxes on those. It’s not my concern. I’m sure they can work those out.
“They (BIR) asked us information for our payment to Manny and the non-withheld which we complied with. Former documentations that we had, we (had) sent (to BIR). But the BIR asked for certification from IRS of the returns that Manny filed. That is relatively difficult to get from IRS. It’s a whole new procedure. But Manny’s lawyers have obtained those documents certifications and sent them to the Philippines last week or so.
“I could not get those documents because I am not the taxpayer. Such documents can only be obtained by the taxpayer or his taxpayer’s representative.”
Manny Pacquiao’s Los Angeles, California-based accountant Glynn Michael and tax lawyer Steve Toscher could not be reached for comment.
Arum agreed with the BIR that accepting Manny’s original tax returns “is self-serving” for Manny. “Who knows if he really filed? But he did. But the BIR needs certification, which Manny’s lawyer had now sent.”
Photo of Bob Arum. (FAXX/jGLi Photo by Joseph G. Lariosa)