Taxes are what we pay for an orderly, refined, advanced, humanized and developed society. Taxes are what we pay for the existence our government. Taxes are what we pay literally to finance the expenditures of the government. It is basically the wherewithal in order for the government to operate and perform its task, duties and responsibilities.
Taxes are what we pay so that it will comprise the government’s national budget. In law school, this is synonymous with the Lifeblood Theory. The very life, the very blood of the nation rest upon taxation. It follows, without taxes, the government will simply collapse if not will be paralyzed for lack of fuel to run its machinery, for lack of power to stimulate it.
For this reason, despite human’s nature refusal to pay taxes, despite natural reluctance to surrender the fruit of your hard labor, like it or not, one’s hard earned income when taxable, an obligation to pay arises! This, without need of a demand.
Obligation to pay taxes arises from law. It is an obligation to pay because the law says so. The law mandates such obligation. It is not dependent upon the will of the income earner. It is not dependent upon a certain condition, that may or may not happen.
It is not even dependent upon the fact that one is not entirely, solely, or even partially benefited by the actions or services rendered by the government. While it is true that there is a symbiotic relationship between the government and taxpayers, that is: the government in return for such enforced contribution by way of taxes, is not only expected, but is likewise obliged under the same spirit of the law to respond and take action in the form of tangible and intangible services, provide real, visible and quantifiable benefits, improve the lives of the Filipino people and heighten the right to life, so that one can really enjoy the basics of life: food, clothing, shelter, peace and security.
Noteworthy, while it is true that the taxpayer has the right to complain, this is only possible when the tax collector has not observed the law.
This is only true under the concept of the taxpayer’s suit: a taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed or a claim for improper use of public moneyor a simple claim that public funds are consumed through an enforcement of an invalid or unsconstitutional law.
But of course as the old saying goes, he who comes to court must come with clean hands. First thing first, are you a legitimate taxpayer? Are you an obedient taxpayer? Are you a religious taxpayer? Are you a clean taxpayer? Are you not a tax evader?
The rigors of doing business is fathomable. The burden of compliance is challenging and strenuous. The intention to minimize tax dues, obligation, liability or exposure is legally permissible.
But the taxpayer’s recalcitrance, stubbornness, defiance and disobedience to the taxing authority and the Tax Code itself is intolerable.
That is why, when one engaged himself outside any lawful means as a tax saving device or a way of escaping the burden of taxation is guilty of tax evasion. In fact, it is settled that the crime is complete when the taxpayer has knowingly and willfully filed a fraudulent return with the intent to evade and defeat the tax.
Tax evasion is a scheme used outside of lawful means to avoid or minimize the payment of taxes, and when employed or availed of, it subjects the taxpayer to civil or criminal liabilities.
Tax evasion connotes the integration of three factors: (1.) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2.) an accompanying state of mind which is described as being “evil,” in “bad faith,” “willful,” or “deliberate and not accidental”; and (3.) a course of action or failure of action which is unlawful. (See Commissioner v. Estate of Toda, Jr., G.R. No. 147188, 14 September 2004)
BIR’s Run After Tax Evader Program
Tax Evasion has been and always been a serious problem in this jurisdiction. For this matter, the BIR in its campaign against tax evasion introduced the RATE Program. To qualify under the RATE Program, a case must conform to the following conditions:
a. Cases representing violations under any of:
- Section 254 – Attempt to evade or defeat tax,
- Section 255 – Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation,
- Section 257 – Making false entries, records report or using falsified or fake accountable forms
- Sections 258 – Unlawful pursuit of business
- 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 tax deficiency is at least One Million Pesos (P1,000,000) per year and per 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). [Par. D, RMO 24-2008]
But it does not mean, that outside the foregoing will excuse the taxpayers for being branded as tax evader. The Tax Code under Title X, Chapters II, III, and IV provides for crimes, other offenses, and forfeitures. As point of emphasis, the said chapter even provides for a conviction of a crime penalized under the NIRC, in addition to being liable for the payment of tax, be subject to the penalties as may therein be provided.
Exceptiontothisruleistheaforementioned Chapters II, III, and IV which enumerated expressly thecriminal liabilities of any person convicted of a crime penalized under the NIRC. Moreso, since taxes are enforced contribution, the source of obligation is derived from law. The obligation to pay
taxesemanatesbecausethelawsaysso.Thisisevenbolsteredby the provision under Article 1157 (a) of the Civil Code on sources of obligation derived from law. Once this obligation is violated or not complied with, tax law becomes penal in nature. That is, violations of the related provisions on the said Chapters are considered crimes, hence,punishable.
In fact, tax evasion has the following legal consequences against the taxpayer on top of his basic tax liabilities: (1.) the period of assessment is 10 years from the discovery of fraud; (2.) a surcharge of 50% of the tax or of the deficiency tax; (3.) 20% per annum interest; (4.) jail term in case of conviction plus fine; (5.) closure of business; (6) forfeitures, garnishment, levy on real properties and distraint on personal properties; and (6.) the pain of dealing with either criminal or civil case or both, as the case may be. The taxpayer is not even exonerated as to his civil liability despite a judgment of acquittal. And, even the subsequent satisfaction of tax liability will not operate to extinguish such criminal liability.
Taxpayer’s Acquittal
Under the Penal Code the civil liability is incurred by reason of the offender’s criminal act. Stated differently, the criminal liability gives birth to the civil obligation such that generally, if one is not criminally liable under the Penal Code, he cannot become civilly liable thereunder.
The situation under the income tax law is the exact opposite. Civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of any criminal act committed by him. The criminal liability arises upon failure of the debtor to satisfy his civil obligation.
The incongruity of the factual premises and foundation principles of the two cases is one of the reasons for not imposing civil indemnity on the criminal infractor of the income tax law. Another reason, of course, is found in the fact that while section 73 of the National Internal Revenue Code (Old Code) has provided the imposition of the penalty of imprisonment or fine, or both, for refusal or neglect to pay income tax or to make a return thereof, it failed to provide the collection of said tax in criminal proceedings.
The only civil remedies provided, for the collection of income tax, in Chapters I and II, Title IX of the Code and section 316 thereof, are distraint of goods, chattels, etc. or by judicial action, which remedies are generally exclusive in the absence of a contrary intent from the legislator. (People vs. Arnault, G.R. No. L-4288, November 20, 1952; People vs. Tierra, G.R. Nos. L-17177-17180, December 28, 1964) Considering that the Government cannot seek satisfaction of the taxpayer’s civil liability in a criminal proceeding under the tax law or, otherwise stated, since the said civil liability is not deemed included in the criminal action, acquittal of the taxpayer in the criminal proceeding does not necessarily entail exoneration from his liability to pay the taxes.
It is error to hold, as the lower court has held, that the judgment in the criminal cases Nos. 2089 and 2090 bars the action in the present case.
The acquittal in the said criminal cases cannot operate to discharge defendant appellee from the duty of paying the taxes which the law requires to be paid, since that duty is imposed by statute prior to and independently of any attempts by the taxpayer to evade payment.
Said obligation is not a consequence of the felonious acts charged in the criminal proceeding, nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged. (Castro vs. The Collector of Internal Revenue, G.R. No. L-12174, April 20, 1962). [RP vs. Pantanao, 20 SCRA 712 G.R. No. L-22356 (1967)]
The filing of a false and fraudulent income tax return and the failure to pay the tax necessarily makes the delinquent taxpayer amenable to the penal provisions of Section 73 of the Code (Old Code). Any subsequent satisfaction of the tax liability, by payment or prescription, will not operate to extinguish such criminal liability, since the duty to pay the tax is imposed by statute independent of any attempt on the part of the taxpayer to evade payment.
Whether under the National Internal Revenue Code or under the Revised Penal Code, the satisfaction of civil liability is not one of the grounds for the extinction of criminal action.
The failure of the government, therefore, to enforce by appropriate civil remedies the collection of the taxes, does not detract from its right criminally to prosecute violations of the Code. The criminal actions subsist so long as there are no legal grounds that would bar their prosecution. [People vs. Tierra, G.R. No. L-17177-80 (1964)]
Always remember that, in filing a tax evasion case against erring taxpayer, the requirement of probable cause to indict for tax evasion is simply to show that a tax is due from him. Probable cause, for purposes of filing a criminal information, is defined as such facts that are sufficient to engender a well-founded belief that a crime has been committed, that the accused is probably guilty thereof, and that he should be held for trial.
It bears stressing that the determination of probable cause does not require actual or absolute certainty, nor clear and convincing evidence of guilt; it only requires reasonable belief or probability that more likely than not a crime has been committed by the accused.Although, as to whether one is guilty of tax evasion is an issue that must be resolved during the trial of the criminal case, the quantum of proof required is proof beyond reasonable doubt. [BIR v. CA,G.R. No. 197590, November 24, 2014]
Blame the Accountant or Representative as an Alibi
Normally speaking, when a taxpayer, individual or juridical entity, is caught by the BIR for certain infractions or violations of the Tax Code, their natural tendency to excuse themselves, their first line of defense to exculpate themselves, their palpable reason, their self-evident account, their ordinary justification, their expected plea, their inherent pretext, their unpretentious apology, their standard allegations, their typical confession, their customary, common and habitual explanation, expression of regret and request for forgiveness, is that “it is my accountant”.
It is my accountant or representative who should be faulted and be held responsible. The taxpayer even exalts himself in saying that these are technical matters and are better left to the discretion of his accountant. One may even utter, it is precisely the reason why I hired my accountant. I don’t know any of these. Hence, I am not liable. But a caveat, ignorantialegis non excusat. (Ignorance of the law excuses no one from compliance therewith).
Our Tax Code consists of two hundred ninety-two provisions (292) plus nineteen (19) others if we include the amendments, but none of these encompass that it is the accountant who is solely, individually, separately, independently and exclusively liable for the infractions of the Taxpayer, the principal. In fact, this blame-game excuse of the taxpayer had long been settled by the Supreme Court under the doctrine of willful blindness.
Under the doctrine of willful blindness, a taxpayer may claim that he did not actively participate in the filing of his Income Tax Return, or other mandated BIR Tax Returns; that the taxpayer entrusted such duty to his accountant or representative to perform such duties and obligations with the diligence of a good father of a family; and that by virtue of such trust and confidence reposed upon the accountant, the latter is duty bound to ensure that the financial and tax responsibilities is fully lodged to the accountant.
Unfortunately, this is not so. Prudence dictates, due diligence mandates, cautiousness if not judiciousness, commands and prescribes the taxpayer to inquire, ensure, check, validate and even examine if not to warrant all the representations to be made for the account of the taxpayer.
In hindsight, whether or not the accountant or representative has complied and conformed with our Tax laws, existing rules and regulations and has observed, meet the terms and abide by the accounting standards of the Philippines.
These are obligations arising from law. Demand is not necessary. If the answer is no, as many as CTA en banc cases, these are branded as: neglect or omission tantamount to “deliberate ignorance” or “conscious avoidance”. Reliance on the accountant or representative, that alone, is an indicia of deliberate lack of concern on the part of the taxpayer to fulfill his obligations arising under the law. The taxpayer should know how much are his tax liabilities, the facts and details stated on his BIR returns, annexes and attachments therewith, as these are matters concerning his business and finances.
The taxpayer cannot simply doubt BIR officials and claim that the latter acted with grave abuse of discretion in finding the alleged assessment, or the eventual filing of a tax fraud case as without basis and has no leg to stand on for lack of merit. Taxpayers are engaged in doing business. The business acumen of doing business is the primary tool to engage in business.
Taxpayer cannot, at the end of the day, deny knowledge of the factual circumstances of his business. He certainly knows his tax obligations. Having an accountant is not a valid ground to justify any noncompliance in tax obligations.
An accountant provides economic information, of financial character, to provide basis in making an economic decision. It is not the accountant who makes the business decision. The presence of the accountant helps the taxpayer, armed the latter with the financial tools to quantify matters to enable the taxpayer, the business owner at that, to render his business decision. It is not the accountant that makes the decision. That is why, accountants are mere representatives. They cannot even act beyond the scope of their authority.
In one classic case, December 2010, the CTA en banc promulgated its decision on Criminal Case Nos. 0-033 and 0-034. This is a landmark case considering that the Supreme Court introduced the “Doctrine of Willful Blindness” in thistax evasion case decided in year 2012.
Under this doctrine, the taxpayer’s deliberate refusal or avoidance to verify the contents of his or her ITR and other documents constitutes “willful blindness” on his or her part. It is by reason of this doctrine that taxpayers cannot simply invoke reliance on mere representations of their accountants or authorized representatives in order to avoid liability for failure to pay the correct taxes.
In this case, the Supreme Court on January 24, 2011 denied “with finality” the taxpayer’s’s motion for reconsideration citing no compelling reason exists and no substantial arguments were raised to warrant its reconsideration.
