BIR to appeal local court ruling exempting Filipino ADB employees from income tax

Internal Revenue Commissioner Kim Henares. INQUIRER FILE PHOTO

MANILA, Philippines—The government shall appeal the Mandaluyong court ruling stating that Filipino employees of the Manila-based multilateral lender Asian Development Bank (ADB) are exempted from paying income taxes.

“We will be filing a motion for reconsideration, of course,” Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares said in a text message on Wednesday night, when sought for reaction on the ruling of Mandaluyong City Regional Trial Court Branch 213 Judge Carlos A. Valenzuela on September 30. Valenzuela ruled that Revenue Memorandum Circular (RMC) No. 31-2013, particularly Section 2(d)1, issued in April last year, was “void for being issued with no legal basis, in excess of authority, and/or without due process of law.”

Such was the ruling on the case MC14-8775 filed by two ADB employees Erwin Salaveria and Portia Gonzales in behalf of the multilateral lender’s employees’ group last February.

It was under the RMC that the BIR went on a spree of filing tax evasion cases against ADB employees before the Department of Justice (DOJ), the latest of which were filed last week against six personnel for alleged tax deficiencies.

Section 2(d)1, in particular, provided that “only officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax,” citing the agreement between the ADB and the Philippine government regarding the establishment of the lender’s headquarters in the country.

Article XII, Section 45 of the government agreement with the ADB states that: “Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: Exemption from taxation on or in respect of the salaries and emoluments paid by the Bank subject to the power of the Government to tax its nationals.”

According to the Mandaluyong court ruling, Section 2(d)1 was “void in absence of legislation and/or regulation to the contrary.”

But Henares argued: “First, a treaty ratified by the Senate forms part of the law of the land. What we quoted in [Section 2(d)1] is lifted verbatim from the agreement between ADB and the Philippines. So how can there be no basis in law?”

“So is the court saying that the agreement between ADB and the Philippine government is void? Then what is ADB doing here? That is the implication of the decision,” Henares pointed out.

Liwayway Vinzons-Chato, legal counsel of the ADB, said in an interview last Wednesday that they would seek the dismissal of charges and removal of all Filipino ADB employees from the Run After Tax Evaders (RATE) campaign being spearheaded by Henares.

As of last week, more than 300 persons have been slapped tax evasion cases under RATE.

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