BIR Ruling [DA-129-01]

July 24, 2001 BIR RULING [DA-129-01] Hon . Jose Isidro N . Camacho Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Mr. Menandro R. Tablante under Section 282(A) of the Tax Code of 1997, including the pertinent papers relative to the deficiency withholding tax case of the Bangko Sentral ng Pilipinas (BSP) for the year 1997. TaCDcE The records show that on March 9, 1998, the abovenamed informer submitted an affidavit which was recorded as Confidential Information No. 14-98 denouncing BSP for non-withholding of tax on its payment of Economic Relief Assistance to all official and employees in the amount of P15,000.00 each; that on March 16, 1998, Letter of Authority No. 134084 was issued by this office to a group of revenue officers of the Tax Fraud Division to examine the books of accounts and other accounting records of BSP for all internal revenue tax purposes for the period from January to December 1997; and that on November 20, 1998, the revenue officers who conducted the investigation of the withholding tax liabilities of BSP for the year 1997 submitted their report recommending that deficiency assessment be issued against subject-taxpayer for the following deficiency withholding taxes, viz: Deficiency Withholding Tax on Compensation P 53,573,668.02 Deficiency Final Tax on Taxable Securities 472,843,668.83 Deficiency Final Tax on Reverse Repurchase 1,766,607,564.23 Total 2,293,024,901.08 ============= One of the accounts not subjected to the withholding tax on compensation is the payment of economic relief assistance subject-matter of the instant confidential information. The investigating examiners reported thus " Economic Relief Assistance It was noted that in December, 1997, BSP officials and employees received an economic relief assistance allowance in the total amount of P53,808,000.00. This was booked under the Other Services Account. As previously mentioned the term compensation refers to all forms of payment of the employer for services performed by the employee except those specifically mentioned in Sec. 28(b) and 71 of the Tax Code. The officers in charge alleged that there was an undertaking between BSP and the employees, wherein the responsibility for not declaring it as taxable compensation is shifted on them as evidenced by their conformity through the affixture of their signatures. In doing so, it passed on to the income payees its primary duty as a withholding agent which is in violation of Sec. 51 of the Tax Code." The deficiency withholding tax due on the said Economic Relief Assistance of P53,808,000.00 amounted to P13,269,045.37 which was paid on February 4, 1999 as evidenced by Ticket No. A-000006, Sequence No. 02 and corroborated by a Certification issued on March 17, 1999 by Director Amelia R. Calvan of the Accounting Department of BSP to the effect that ". . . the amount of P13,269,045.37 reflected in our ITW remittance schedule for January 1999 as "Adjustment-Add'l Tax Deficit '98" correspond to the approximate tax due with the inclusion of the Economic Assistance '97" which was covered by an "Undertaking" in 1997 but deemed final payment in 1998 ." The objection of Head Revenue Executive Assistant Benedicta Baladad that "the investigation of the case and the deficiency covering the CI has been discovered by the examiners long before the receipt of the CI by this Office" is not correct. Obviously, she was referring to the denunciation made by two (2) former officials of the Bureau of Treasury against BSP for alleged failure of the latter to pay the 20% withholding tax and documentary stamp tax on government securities covering the periods 1994 to 1996. The records further show that the information furnished by the informer was in writing and under oath; that it was not yet in the possession of the Bureau of Internal Revenue nor is the aforesaid tax liability pending or previously investigated by any official or employee of this Bureau or by the Department of Finance; and that the informer is, as represented, not related to any internal revenue official or employee or to any public officer within the sixth degree of consanguinity. It appearing that the information furnished by Mr. Menandro R. Tablante was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes which otherwise would not have been effected, it is respectfully recommended that he be rewarded the amount equivalent to 10% of the tax collected or one million pesos (P1,000,000.00), whichever is lower, which shall be subject to a final withholding tax at the rate of ten percent (10%), pursuant to the last paragraph of Section 282(A) of the Tax Code of 1997. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue