BIR Ruling [DA-161-01]

September 03, 2001 BIR RULING [DA-161-01] Mr. Danilo H. Lazaro # 12 SMC, Celery Dr., Valle Verde 5, Pasig City S i r : This refers to your letter dated April 18, 2001 addressed to Her Excellency, President Gloria Macapagal-Arroyo, claiming reward for being the informer who filed Confidential Information No. 111-92 against HAYAMA INDUSTRIAL CORPORATION (HIC for brevity) for alleged tax evasion regarding subject-taxpayer's income and VAT liabilities for the years 1989 and 1990. You stated in your letter dated January 27, 1992 that Very clearly, Mr. W.G. GUI's intention was not only evade payment and possibly, the Income Tax too, but also to take a claim that will deny us of our share in the liquidated assets of TECHNOPLAST INTERNATIONAL TRADING, INC. which is under liquidation. Notably, this faked claim is sufficient enough to wipe-out the company's established Net Realizable Assets. We cannot allow this unscrupulous thing to happen. Your investigation will probably reveal some defrauding acts inimical to the interest of the government. Very likely, the amount they could have reflected in their 1989 gross sales was the 12.6 MILLION worth of bogus P.O.'s only, instead of the real and bigger sales contracts amounting to Hundred Million Pesos from big companies like Coca Cola Bottlers, San Miguel Corporation, and others. However, the revenue officers of the Tax Fraud Division who conducted the reinvestigation of HIC's 1989 and 1990 VAT and income tax cases refuted your aforestated allegations. Part of their report dated April 23, 1994 is hereby quoted as follows: IHaECA "FINDINGS "The assertion of informant that the P12.6 Million worth of purchase Orders are bogus, fictitious and fabricated as contained in his letters dated January 27, 1992 and October 21, 1992 is totally inconsistent and in effect negated the imposition of any internal revenue taxes on the same amount as this could no longer be considered undeclared revenue which could have given rise to a fraudulent intent to evade payment of the taxes due. "As previous audit of the original examiners indicated nothing irregular on the schedule of the accounts payable non-trade item of P2.4 Million (see page 5) and, likewise, no investigation has been authorized on Technoplast books of accounts, confirmation of the nature of the transaction is limited to the facts as presented in the financial statements of Hayama and therefore, this item being a liability account, should not be subjected to tax." "Conversely stated, apparently, the informant tried to point out that there was no payable in view of the fact that there was no such recognition of income in the books of Technoplast International Trading, Inc. which should in the first place be taxed against Technoplast International Trading, Inc. should be looked into for probable non-reporting thereof. It begs of many questions than answer. "RECOMMENDATION "In view of the foregoing facts obtaining under the case, the undersigned revenue officers found the lack of any cogent reasons to reiterate the previous findings of deficiency taxes. It is hereby recommended that this report of reinvestigation be given due course and that this case be considered closed and terminated . . ." True enough, the Bureau of Internal Revenue was able to collect from HIC the amounts of P254,032.30 and P149,016.15 representing the total amount of income tax and VAT for the years 1989 and 1990, however, the collection of the same was not by reason of your confidential information. Our records show that immediately after the revenue officers of the Tax Fraud Division submitted their report of investigation, HIC voluntarily filed an application for abatement of penalties pursuant to Revenue Memorandum Order No. 45-93 and paid the aforesaid amounts which offer was accepted by the Commissioner of Internal Revenue. Evidently, the purpose of HIC in availing the privileges granted by RMO No. 45-93 was to come up with a clean slate and not to compromise the alleged fraudulent scheme imputed by you. It should be noted with emphasis that to be entitled to reward under Section 282(A) [formerly Section 281(a)] of the 1997 Tax Code, the offender has offered to compromise the violation of law committed by him and his offer has been accepted by the Commissioner and collected from the offender. This is not present in the instant case because there was no violation of law committed by HIC, as per findings of the reinvestigating examiners of the Tax Fraud Division. While you should be commended for your concern for the public interest, the informer's reward does not apply under the circumstances and should not be awarded for the above reasons. In view thereof, your claim for informer's reward is hereby denied for lack of legal basis. IEHTaA Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service