Run after tax evaders

Run after tax evaders

Recently, several news stories have been published on the efforts of the Bureau of Internal Revenue (BIR) to prosecute alleged tax evaders in the country.  As some of us may well know, there are prosecuted cases involving hundreds of millions up to a billion peso-worth of deficiency tax assessments.  What a huge sum of money, indeed!  And with the current administration which, as I understand, does not intend to impose additional taxes and is very keen on tax collection enforcement, an enhanced Run After Tax Evaders (RATE) program is a predictable consequence. 

The Run After Tax Evaders (RATE) program of the BIR actually started in 2005, and we could observe that the on-going implementation of this program has garnered considerable attention from the media, wherein taxpayers who have been convicted of committing tax evasion could be, aside from being assessed for huge sums of money, sentenced to imprisonment.  Yes, the penalty could be imprisonment.

Now, what is tax evasion?  Is the prosecution limited to individuals?  How about the prosecution of corporate taxpayers?

In an old Supreme Court case of Yutivo Sons Hardware Company vs. Court of Tax Appeal (G.R. No. L-13203, dated January 28, 1961), “tax evasion” was defined as a term that connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes.  Thus, the term points to a deliberate intent on the part of a taxpayer to illicitly defeat the tax collection.

To be specific, in relation with the tax evasion cases, to qualify under the RATE Program of the BIR, a case must conform to the following conditions:

       a. Cases representing violations under any of Sections 254 (Attempt to Evade or Defeat Tax), 255 (Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax, and Refund Excess Taxes Withheld on Compensation), 257 (Penal Liability for Making False Entries, Records or Reports, or Using Falsified or Fake Accountable Forms), and 258 (Unlawful Pursuit of Business) of the NIRC of 1997, including One-Time Transactions, etc.;  

      b. High-profile taxpayers or taxpayers well-known within the community, industry or sector to which the taxpayers belong; and

      c. Estimated basic tax deficiency is at least One Million Pesos (P1,000,000) per year and tax type, but priority should be given to tax cases where the aggregate basic tax deficiencies for all tax types per year is Fifty Million Pesos (P50,000,000) or more.

Thus, if a case falls under the foregoing conditions, a taxpayer should expect the BIR chasing after him under the RATE Program.  But is the prosecution limited to individual taxpayers?

Under section 253 of the 1997 Tax Code, as amended, in the case of associations, partnerships or corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer, officer-in-charge, and the employees responsible for the violation.

Hence, the officers of a company and the employees responsible for the violation of tax laws could be charged, and consequently sentenced to imprisonment of not less than one and not more than 10 years, depending on the circumstances of each case.  Now, you would be probably thinking of who signs the tax returns of a company.  But yes, you should be… as he/she, by signing the tax returns, represents the company in the eyes of the BIR under the law. 

What then should be done by the taxpayers?

To answer the question, two key words should be remembered – knowledge and compliance.  The taxpayers should have sufficient knowledge of its tax responsibilities – from the simple requirement of being registered with the BIR up to the rules that must be complied with in the filing of various tax returns and paying the tax dues. 

Needless to say, mere knowledge of the tax rules would be of no use without compliance to these rules.  Hence, the taxpayers must also ensure that they conform with the tax rules applicable to their transactions.  In this regard, the taxpayers should, by themselves or through a tax consultant, consider reviewing their current tax practices and prompt the necessary corrections as soon as possible.   

The recently heightened efforts of the BIR under its RATE program, coupled with the constant pressure to meet the country’s target tax collections, would leave the taxpayers with no other option but to be particularly vigilant in complying with the tax laws. 

Undoubtedly, the bottom line is: compliance with tax rules will spare the taxpayers from distressing penalties, hefty interests and surcharges, huge deficiency taxes, and restless thoughts of possible imprisonment.