BIR Ruling [DA-330-04]

June 21, 2004 BIR RULING [DA-330-04] Hon. Juanita D. Amatong Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Ms. Rose M. Gonzaga of #60 SM Homes, Novaliches, Quezon City, under Section 281(1) of the Tax Code, as amended, including some pertinent papers (certified photocopies only) bearing on the internal revenue tax case of Pacific Banking Corporation ("PaBC", for brevity) for the years 1986 to 1991. The records show that on July 9, 1992, an affidavit which was recorded as Confidential Information No. 63-92 was filed by the above-named informer denouncing PaBC for some alleged tax evasion practices. On the basis of said confidential information and documents submitted by the informer, it was ascertained in the investigation that PaBC, thru its Liquidator, had indeed, committed the violations on income, business and withholding taxes for the years 1985, 1986, 1987; 1988, 1989, 1990 and 1991. IaAHCE Based on the recommendation of the investigating examiners, this Office issued various assessment notices and letters of demand all dated December 15, 1993, requiring PaBC to pay the total amount of P407,157,980.53 representing deficiency income, percentage and expanded withholding taxes, including the 50% surcharges, 25% surcharges and 20% interest covering the years 1985 to 1991. PaBC, thru its Liquidator, PDIC, paid the amount of P193,918,318.88 on April 25, 1997 representing percentage and withholding taxes and on December 18, 2001, paid the sum of P213,239,661.65 for deficiency income tax including all surcharges and interest thereon as of December 15, 1993. All these payments with a total amount of P407,157,980.53 were verified and certified by our Accounting Division to have been remitted to the government. In our letters dated July 2, 1997 and April 4, 2002, we forwarded to your Office for approval the payment of the claim for informer's reward of Ms. Rose M. Gonzaga under Section 281 of the Tax Code, as amended. Under 1st Indorsement dated August 16, 2000 and November 26, 2002, respectively, your Department approved the payments of which Ms. Gonzaga was fully paid of her reward. Revenue refers to all the funds or income derived by the government, whether from tax or from whatever source and whatever manner ( Muir vs. Murray ; 55 Utah 368; 37-A Words and Phrases, 270). As applied to taxation, "revenue" is the product or fruit of taxation. Taxes are the enforced proportional contribution from persons and properties levied by the law-making body of the state by virtue of its sovereignty for the support of the government. (1 Cooly 1) Tax on income, estate and donor's taxes, value-added tax, other percentage taxes, excise taxes on certain goods, documentary stamp tax, etc., are all enforced contribution from persons or properties levied by the state for the support of the Government. When a violation of any of the aforesaid taxes exist, or any failure to comply therewith on the part of any person or property, then statutory offenses are committed. ( Title X, 1997 Tax Code ) Accordingly, surcharges, interest, and fine or penalty or forfeiture ( Sections 248, 249, 253 and 254 respectively, all of the same Code ) are imposed as part of the tax. Hence, the amount so added shall be collected at the same time, in the same manner and as part of the tax. In particular, under Section 249(c)(3) of the Tax Code, as amended, in case of failure to pay a deficiency tax or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest of 20% thereof until the amount is fully paid, which interest shall form part of the tax. The failure to pay the basic deficiency tax, surcharge, and interest on the due date appearing in the notice and letter of demand issued by the Commissioner, an interest shall be assessed and collected until the amount is fully paid. Meaning that the basic deficiency tax, surcharges and interest originally computed in the assessment notice, and letter of demand are again subjected to additional interest. Once collected, the amount representing interest automatically forms part of the revenue. IaESCH On the basis of the aforesaid Section 249(c)(3) of the Tax Code, as amended, taxpayer was assessed and has fully paid on December 22, 2003 the total amount of P184,405,791.89 representing the 20% interest on the deficiency income tax in the sum of P213,239,661.65 from December 15, 1993 to December 18, 2001. The Revenue Accounting Division, National Office has verified and certified on March 23, 2004 that the aforesaid sum of P184,405,791.89 have been remitted to the government. The records further show that Ms. Rose M. Gonzaga, as represented, is neither an internal revenue officer/employee nor a public officer or her relative within the sixth degree of consanguinity; that the information furnished by her was in writing and under oath; and that the same was not in the possession of the Bureau of Internal Revenue or the Department nor is the aforesaid tax liability pending or previously investigated or examined by an official or employee of this Office or by the Department of Finance. In view thereof, and it appearing that the information furnished by Ms. Rose M. Gonzaga was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes, it is respectfully recommended that she be paid the amount of P27,660,868.78 which is equivalent to 15% of P184,405,791.89, as informer's reward pursuant to Section 281(1) of the Tax Code, as amended. Very truly yours, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue