BIR Ruling [DA-273-99]

May 7, 1999 BIR RULING [DA-273-99] Hon. Edgardo B. Espiritu Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Mr. Salvador Estrella under then Section 281(1) of the Tax Code, as amended (now Section 282(A) of the Tax Code of 1997) including the entire docket relative to the internal revenue tax case of SM Prime Holdings (formerly SM Mega Holdings, Inc.) for the year 1994. The records show that on June 2, 1995, the informer submitted an affidavit which was denominated as Confidential Information No. 59-95 denouncing SM Investment, Inc., SM Inc. and SM Mega Holdings (now SM Prime Holdings Inc.) for not paying correct income, business and documentary stamp taxes. On the basis of the preliminary report submitted by revenue enforcement officers of the Tax Fraud Division, Letter of Authority No. 71729 was issued a group of revenue enforcement officers of the Tax Fraud Division on June 9, 1995 to investigate SM Prime Holdings Inc. for income, VAT and withholding taxes for the years 1993 and 1994. In a letter dated June 15, 1995, the informer submitted additional information that the shares of subject-taxpayer were listed through Initial Public Offering (IPO) on July 5, 1994 and paid the amount of P204,457,035.30 as IPO tax but included the said IPO tax payment as an item of expense from the taxable income thus resulting in a reduced rate of income tax paid for the year 1994. This fact was found to be true by the investigating examiners in their report of investigation dated October 2, 1997 as follows: "The examiners concerned thoroughly examined the books of account and other related accounting record of the corporation and were able to substantiate, validate the (sic) truthfullness of the information, that it was indeed charged and included in the determination of the 1994 income tax of the above-named subject . . ." The examiner's recommendation to assess subject-taxpayer for deficiency income tax, inclusive of increments in the amount of P117,894,157.47 was rendered naught after the latter presented Banco de Oro Official Receipt No. 1122300 dated June 20, 1997 showing payment of the amount of P102,771,868.77 as deficiency income tax for the year 1994 but without the corresponding 25% surcharge which was waived by virtue of BIR Ruling No. DA-088-97 issued by former Commissioner Liwayway Vinzons-Chato in favor of subject-taxpayer. acAESC 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. Salvador Estrella 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 paid the amount equivalent to 15% of P102,771,868.77 or the amount of P15,360,780.20 as informer's reward pursuant to Section 281(1) of the Tax Code, as amended, the law applicable herein. The said reward shall not be subject to the 10% final tax imposed under Section 282(A) of the Tax Code of 1997 for the reason that R.A. No. 8424 does not contain provision providing for its retroactive application. (Opinion No. 67, S. 1998 of the Secretary of Justice) Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue