Criminal violations of the tax code

Always file and pay the correct taxes and ensure all reported information are accurate” is wisdom that bears repeating because noncompliance may have dire consequences.

According to Section 253 of the Tax Code, any person who violates the provisions of the Code or causes someone to commit a violation, and those who willfully assisted them, will be held liable. If the offender is a public officer or an employee, he will receive the maximum prescribed penalty and be “perpetually disqualified from holding any public office, to vote and to participate in any election.”

Persons who attempt to evade or defeat taxes shall be punished with a fine of at least P500,000 but not more than P10 million. They shall also be imprisoned for six to 10 years.

If the offender is a legal entity (such as a corporation, partnership or association), the president, partner, general manager, branch manager, treasurer, officer in charge and employees responsible for the violation will all be held liable. In addition to the penalties imposed on liable individuals, the legal entity shall pay a fine of at least P50,000 but not more than P100,000.

Criminal offense

Some of the offenses that are considered criminal violations are: failure to file tax returns; failure to pay taxes; deliberate and substantial underdeclaration of income by more than 30 percent; hiding or transferring of assets or income; nonremittance of withholding taxes; deliberate and substantial overstatement of amount of deductions by more than 30 percent; claiming of personal expenses as business expenses; claiming of false deductions; use of fake certificate authorizing registration, tax clearance certificate or other accountable forms; failure to register with the Bureau of Internal Revenue (BIR); keeping more than one set of books of accounts and making false entries in books and records.

The case of Pharmally

A startup company with no track record bagged a P10-billion contract with the Department of Health to procure COVID-19 medical supplies. Tax lawyers and senior CPAs working with the Right to Know, Right Now! Coalition found “overdeclared cost of goods by 50 percent” and “possible tax deficiency of 30 percent.”

As such, Pharmally, its officials and involved employees may be liable. The Senate Blue Ribbon Committee has already recommended the deportation and filing of criminal charges against Chinese businessman Michael Yang, Pharmally’s financier and guarantor.

Ghost of taxes past

Another timely case involves Ferdinand “Bongbong” Marcos Jr. The Court of Appeals convicted him for his failure to file income tax returns (ITRs) from 1982 to 1985, when he served as vice governor and then governor of Ilocos Norte. He was ordered to pay his deficient income taxes due with interest, as well as a fine of P2,000 per count of nonfiling of ITRs from 1982 to 1984. For his 1985 ITR, he must pay P30,000 for his failure to file plus surcharges. This complicates his presidential bid as groups cite this alleged criminal offense as ground for disqualification. As mentioned earlier, public officials found guilty of tax evasion shall be “perpetually disqualified from holding any public office, to vote and to participate in any election.”

The Marcos camp released a BIR certification indicating that he had already paid the penalties in 2001. The petitioners countered with two certifications indicating “no record of any compliance/payment of fine” coming from the Quezon City Regional Trial Court (QC RTC) and QC RTC Clerk of Court.

The 1st division of Commission on Elections (Comelec) has dismissed the consolidated disqualification cases. While petitioners may still appeal before the Comelec en banc and the Supreme Court, taxpayers must not misconstrue the Comelec decision stating that failure to file tax returns is not a grave offense.

Many of us dream of a better Philippines, but only a few take seriously our civic duty of paying the right taxes and voting for good leaders who are hopefully honest taxpayers.

Tax season is around the corner. April 15 is the deadline for filing our annual ITRs. Are you ready? Email us at [email protected] for free annual tax health check to know your level of tax compliance and readiness in filing ITR and/or proper settlement of tax audit. INQ

This article reflects the personal opinion of the author and not the official stand of the Management Association. The author is member of the MAP Ease of Doing Business Committee, founding chair and senior tax advisor of Asian Consulting Group and co-chair of Paying Taxes–EODB Task Force.