BIR Ruling

November 22, 1971 The Honorable The Secretary of Finance Manila S i r : This refers to Department Order No. 115-70 dated November 26, 1970 which provides for the system of payments of rewards where "blue seal" cigarettes are burned under Department Order No. 114-70 dated November 26, 1970. Under Department Order No. 114-70, that Department, pursuant to Section 313 in relation to Section 172, of the Tax Code, declared a policy to destroy by burning all untaxed "blue seal" cigarettes within fifteen (15) days after their apprehension. Under Department Order No. 115-70, promulgated by authority of Section 346 of the Tax Code, as amended by Republic Act No. 4713, a reward equivalent to 20% of the value of the confiscated cigarettes shall be paid to the informers and apprehending personnel, which reward shall be appropriated from the special fund consisting of 1% of the proceeds from the percentage taxes as provided for in Section 358 of the Tax Code, which reads as follows: "SEC. 358. Disposition of proceeds of certain taxes . One per cent of the proceeds from the percentage taxes provided in Title V shall accrue to a special fund which shall be disbursed for the effective implementation of the provisions of this Code, including research, the purchase of necessary vehicles and equipment, and confidential tax information . This amount shall be considered receipts automatically appropriated, and shall be retained and disbursed by the Commissioner of Internal Revenue. The provisions of any law, rules or regulations to the contrary notwithstanding, any disbursement from this fund shall be accounted for solely on the certificate of the Commissioner of Internal Revenue. After deducting the special fund stated herein and the existing special allotments, the balance of the proceeds shall be disposed of in accordance with Section three hundred and sixty-two as amended." (Emphasis ours) The above provision of the Tax Code, speaks of purchase of confidential tax information. Such being the case, doubt is being entertained by this Office as to the legality of the disbursements already made which were paid as reward to informers and apprehending personnel as provided by Department Order No. 115-70. For it will be noted that when the Commissioner of Internal Revenue pays the reward, it cannot be said that confidential tax information was purchased by him. Furthermore, if we are to allow the payments of the reward in question out of the special fund prescribed in Section 358 of the Tax Code, such payments might deplete the said fund, thereby preventing this Office from making disbursements for other expenditures which could also effectively implement the provisions of the Code. For it should be noted that there is no indication as to the number of smuggling cases which might occur as well as the amount which shall be disbursed as reward on said cases. In view thereof, it is respectfully recommended that Department Order No. 115-70 be revoked insofar as it appropriates the reward prescribed in Section 346 of the Tax Code, as amended by Republic Act No. 4713, out of the special fund consisting of 1% of the percentage taxes provided under Section 358 of the same Code. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue