FINEX
Folio
By
Benedicta Du-Baladad
Posted
on March 17, 2017 [ bworldonline.com ]
Can
the President compromise taxes? NO. The Tax Code vests in the Commissioner of
Internal Revenue (the Bureau of Internal Revenue Commissioner) the power and
the authority to compromise tax liabilities. He alone can compromise taxes. Not
the President. Not the Secretary of Finance.
In
acts resulting in violations of the Tax Code, there are two aspects of
liability involved -- the criminal aspect, and the civil aspect. These are two
separate liabilities. One is not dependent on the other. A conviction of one
does not imply a conviction of the other, neither is the acquittal of one a bar
to the filing of a case on the other.
Thus,
when we talk of tax compromise, we talk of two separate liabilities to
compromise. And these are governed by separate and different rules.
CRIMINAL
LIABILITY
All
criminal violations of the Tax Code may be compromised by the Commissioner,
with the exception of two instances: (a) those already filed in Court, and (b)
those involving fraudulent acts. (Section 204, Tax Code)
Fraud
is a willful intent to evade taxes. It consists of deception, intentional
wrongdoing, willfully and deliberately done or resorted to in order to evade
the payment of taxes. Fraud is a serious charge and therefore it must be
actual, proven by clear and convincing evidence and never presumed.
Using
fake stamps to evade the payment of excise taxes, if proven, is a fraudulent
act that is beyond the authority of the BIR Commissioner to compromise. A mere
signal to compromise a criminal liability for tax evasion will destroy order
and discipline in the payment of taxes.
CIVIL
LIABILITY
Civil
liability, on the other hand, may be compromised but only on two instances --
when the assessment is of doubtful validity or when the taxpayer is financially
incapable to pay the liability. Civil liability pertains to the amount of
unpaid taxes plus surcharges and penalty interest that runs from 20% to 40%
annually, in case of delinquency.
While
the Tax Code allows civil compromises, there is a limitation as to how much the
Commissioner can compromise. If due to doubtful validity, the minimum
compromise rate is 40% of the basic tax assessed. If due to financial
incapacity of the taxpayer, it is 10%.
Examples
of doubtful validity are jeopardy (or harassment) assessments issued without
the benefit of audit, or arbitrary assessments issued without any factual and legal
basis. Examples of financial incapacity, on the other hand, are bankruptcy or
the business has ceased to operate, or when there is impairment of capital by
at least 50%, or when the taxpayer has no other source of income.
Civil
cases may be compromised lower than the above rates but the approval of a
collegial Board called the National Evaluation Board composed of the four
deputy commissioners and the Commissioner is required. The same is true for all
compromises where the basic tax involved exceeds P1 million.
Because
compromises effectively condones, waives the collection of taxes, or gives away
revenues belonging to the government, any tax compromise granted not in
accordance with these rules is a ground for graft and corruption or even
plunder.
In
practice, notwithstanding the authority to compromise granted to the
Commissioner, applications for compromises undergo a very strict and rigid
process involving many layers of technical evaluation and approval. It is a
long and tedious process, understandably, because it involves giving away
government funds.
Thus,
when an act constitutes a clear case of tax evasion, done willfully with intent
to evade the payment of taxes, and the liability is clearly established, there
is no room for tax compromise, both on the criminal aspect and the civil
aspect. The taxpayer must be prosecuted and brought to court, and the amount
due the government must be collected in full inclusive of penalties.
In the
case of corporations, the penalty shall be imposed on the president, general
manager, branch manager, treasurer, officer-in-charge, and the employees
responsible for the violation. Likewise, any person who wilfully aids or abets
in the commission of tax evasion shall be liable in the same manner.
The
opinions expressed here are the views of the writer and do not necessarily
reflect the views and opinions of FINEX.
Atty.
Benedicta Du-Baladad is the managing partner and CEO of Du-Baladad and Associates
(BDB Law) and president of FINEX.
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