Elusive tax evasion cases

Internal Revenue Commissioner Kim Jacinto-Henares was being nice when, in a recent interview by the Inquirer, she said too much stress on due process is derailing the Bureau of Internal Revenue’s efforts to go after tax evaders. According to her, out of about 200 complaints the BIR has filed with the Department of Justice since she was appointed to her post three years ago, only 10 cases have so far been cleared for prosecution. The rest are still under preliminary investigation or were dismissed for lack of probable cause.

Tactfully, observing inter-government office courtesy, Henares refrained from blaming the DOJ for the delay or dismissal of the complaints. She stated that, in the country’s history, only one tax evasion case has been successfully prosecuted, tried and decided by our courts. This is the case of Gloria Kintanar, an independent contractor of Forever Living Products Philippines Inc., who was sentenced to two to four years of imprisonment for failure to pay taxes worth P6.3 million.

Unfortunately, the otherwise unprecedented feat is yet to be considered an achievement because Kintanar has evaded arrest up to the present. There is no record of her having left the country so there is a strong possibility that she still around living the life of a fugitive from justice.

Investigation

Although the BIR is the country’s chief tax regulator, it is severely hobbled in the performance of its mandate by a legal constraint that has defied solution for many years.

Under our laws, no tax-related case can be filed or prosecuted in court without the approval of DOJ. This means the BIR has to first file the complaint with DOJ and the latter shall, like any other criminal complaint, conduct a preliminary investigation, which requires giving the respondents the opportunity to present their side on the issue. If, after investigation, DOJ finds the complaint in order, it shall file the proper case in court. If it thinks the evidence submitted is insufficient or the respondents were not given due process before the filing of the complaint, it can order its dismissal. In case of dismissal, the BIR may file a motion for reconsideration or elevate the matter to the Court of Appeals for further review.

Considering the heavy volume of other cases the DOJ (with its limited manpower) investigates, it is not unusual for tax evasion cases to take a minimum of 15 months to be investigated, evaluated and resolved on whether they shall be filed in court or dismissed.

And if the BIR is obliged to ask for reconsideration or run to the appellate court for relief, at least another 12 months have to be added to the waiting period on the evolution of the case.

Prosecution

The undue delay in the resolution of tax-related cases makes a mockery of the oft-repeated pronouncement of the Supreme Court that taxes are the lifeblood of the country. So important are taxes that the tribunal frowns upon tax exemptions or strictly construe them against the party that claims them. Thus, revenue measures are seldom overturned unless they are clearly unconstitutional.

In an effort to improve the BIR’s enforcement capability, several bills have been filed in Congress before that sought to dispense with the “going through DOJ” requirement and instead authorize the BIR to file and prosecute tax-related cases in court. According to the proponents of the bill, the tax case referrals to DOJ have “become a breeding ground for corruption due to the connivance of some prosecutors with the affected taxpayers to either delay the resolution of the cases or decide them in their favor.”

As expected, following the bureaucratic dogma of what-is-mine-is-mine-and-what-is-yours-is-negotiable, DOJ opposed the proposed diminution of its powers over tax-related cases. It argued, among others, that the handover of investigative authority will distract the BIR from its duty to be the principal revenue collection agency of the government.

Expertise

For crimes against life, property and other facets of daily living, or those defined in the Revised Penal Code, the DOJ prosecutors can proudly claim mastery and competence. But it is doubtful if the same boast can be made for the specialized areas of law practice.

In cases, for example, involving taxes, securities regulation, customs and insurance, it is not uncommon for DOJ lawyers to request briefings or “tutorials” on these subjects from the legal experts in the government regulatory offices concerned.

Like the medical profession, the field of law has multifarious aspects that no lawyer, no matter how bright he may be, can honestly assert all encompassing skill. It is for the same reason the Supreme Court created special courts to handle commercial and family relations cases. The judges’ mastery in these fields assures their efficient and able handling.

Tax cases are not the run-of-the-mill type that any lawyer can competently handle. Unlike ordinary crimes, they require expertise in the interpretation of complicated provisions of the Tax Code. An understanding of accounting principles is also essential to make sure financial computations conform to the standards of the industry or business to which the tax provisions relate.

Responsibility

The BIR lawyers do not need any tutorial on taxes. They practically breathe, eat and live tax laws every day. They know by heart the provisions of our tax laws and the Supreme Court decisions that have interpreted them.

Given this background, there is no reason why the BIR cannot be entrusted with the investigation and prosecution of tax-related cases. The transfer of investigative power will accomplish two objectives: First, it will hasten the prosecution of these cases; second, the DOJ will be able to devote more time and staff to the investigation of other criminal cases.

If the BIR loses in court, it will have nobody to blame but itself. And because the prestige of the office is on the line, its lawyers will make sure their evidence is sufficient to convince the court to rule in their favor.

Legalities aside, there’s more than meets the eye in DOJ’s objection to giving the BIR a free hand in the investigation and prosecution of tax-related cases.

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