BIR Ruling

December 1, 1997 The Provincial Treasurer & The Provincial Accountant Province of Bohol Tagbilaran City Gentlemen : This refers to your protest against the assessment involving the amount of P771,290.12 including increments, representing deficiency withholding tax for taxable year 1993, under Assessment No. 84-WT-13-93-96-12-220, dated December 20, 1996. Records show that the foregoing assessment resulted from your failure to withhold the 1% creditable withholding tax at source and the withholding tax on compensation paid to employees of the province of Bohol. In disputing the assessment you invoked the following defenses, to wit: 1. That you required every employee of the Provincial Government to submit a xerox copy of their respective Income Tax Return for the year 1993 to show that every employee paid the correct and exact tax due the government and almost all employees had presented proof of their tax compliance; 2. That the cause of the under-remittance of withholding tax on compensation is the resistance of some employees and officials of the Provincial Government to have the correct tax on their compensation withheld for the reason that it is difficult and will take months or years sometimes to get a refund in case of excess deductions. 3. That each employee of the Provincial Government is given their respective W2 and it is this W2 that is made the basis of the computation of the tax due the government payable by each employee. The payment therefore, of the under-remittance and deficiency withholding tax on compensation would be tantamount to double taxation which is unconstitutional; 4. That since the Provincial Government of Bohol and the individual employees had paid commensurate tax for the year 1993 as shown by the above-mentioned ITRs, you believe that the imposition of a surcharge is not in order. prcd In reply, please be informed that in the reinvestigation conducted by our revenue officers, all the evidences/documents you have submitted were duly considered and contrary to your contention that the under-remitted withholding taxes were duly paid by each and every employee as reflected in their respective income tax returns, it was verified that there was still an under-remittance of the taxes withheld from the compensation of employees in the sum of P599,550.80 and the creditable withholding tax at source in the amount of P69,461.01. Taking, the under-remitted taxes as basis, your deficiency withholding tax was computed as follows: Creditable withholding tax at source 1 % P69,461.01 (expanded withholding tax (RR 6-85) Deficiency withholding tax on compensation 599,550.80 Total 669,011.31 Less: Taxes remitted 281,544.01 Deficiency tax due 387,467.30 Add: Surcharge 96,866.82 Interest 274,456.00 Compromise penalty 12,500.00 TOTAL AMOUNT COLLECTIBLE P771,290.12 ========= Your claim that the under-remittance of the withholding tax on compensation was caused by the resistance of some employees and officials of the Provincial Government of Bohol to have the correct tax withheld from their salaries could hardly elicit approval from this Bureau. The allegation is fraught with undesirable consequences and if such a way out were open to a taxpayer, every other taxpayer would be entitled to a similar treatment. The disastrous effect on tax collections is not difficult to discern. Nor is it confined solely to revenue matters. For if such a defense were available, the State would not be in a position to carry out a statutory policy, to assure observance of which a penalty for non-compliance is imposed. All that the offending party need allege for conduct contrary to its terms to be overlooked is the mere plea that there was overwhelming resistance to the implementation of a law and therefore his infraction is to be forgiven. On this score, it must be considered that ours is a government of laws and not of men and that the welfare of the State must at all times be upheld rather than the baseless objections of those who might be affected by the implementation of a law. cdpr The imposition of penalties is based on Sections 251 and 247(b) of the Tax Code, pertinent provisions of which read as follows: "SEC. 251. Failure of a withholding agent to collect and remit tax. Any person required to collect, account for, and remit any tax imposed by this Code or who willfully fails to collect such tax, or account for and remit such tax, or willfully assists in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, he liable to a penalty equal to the total amount of the tax not collected, or not accounted for and remitted. "SEC. 247. General Provisions . (a) . . . (b) If the withholding agent is the Government or any of its agencies, political subdivisions or instrumentalities, or a government-owned or controlled corporation, the employee thereof responsible for the withholding and remittance of the tax shall be personally liable for the additions to the tax prescribed herein. Based on all the foregoing, we find the decision of the Regional Director, Revenue Region No. 13, Cebu City, denying your protest to be consistent with law and jurisprudence on the matter. It must be emphasized here also that violations of the withholding tax law, whether for non-withholding or non-remittance or under remittance of withheld taxes are never compromised by this Office. In view thereof, your request for reconsideration of the above-mentioned assessment is hereby DENIED. Consequently, you are requested to pay the deficiency assessment covered under Assessment Notice No. 84-WT-13-93-96-12-220 involving the amount P771,290.12 to the Revenue District Office No. 84, Tagbilaran City within thirty (30) days from your receipt hereof; otherwise collection will be enforced by means of the summary remedies prescribed by law. prll This constitutes the FINAL decision of this Office on the matter. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue