Office of the Auditor

August 31, 2007 BIR RULING [DA-474-07] Section 270; DA-443-04 Office of the Auditor Commission on Audit Bureau of Internal Revenue NOB Diliman, Quezon City Attention: Ms. Maribeth F. De Jesus Supervising Auditor Gentlemen : This refers to your letter dated August 14, 2007 indorsed to this Office by Assistant Commissioner Ma. Rosario Charo E. Curiba, requesting for a copy of the database pertaining to tax collections and corresponding returns through eFPS, LBDES, PDES (for non-computerized RDOs), CBR (for computerized RDOs), M-Payment and eFTIS covering the month of January 2007 and confirmation data provided by PAYBIR to taxpayer for M-Payment transactions for the month of January 2007. As represented, the above request is in line with the Information Systems Audit at the Bureau of Internal Revenue (BIR) being conducted by the teams from the Commission on Audit. In reply, please be informed that Section 270 of the Tax Code of 1997 provides "SEC. 270. Unlawful Divulgence of Trade Secrets . Except as provided in Section 71 of this Code and Section 26 of Republic Act No. 6388, any officer or employee of the Bureau of Internal Revenue who divulges to any person or makes known in any other manner than may be provided by law information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer , knowledge of which was acquired by him in the discharge of his official duties, shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more than five (5) years, or both." The only exception to the rule that BIR officials shall be held criminally liable for divulging information on the income tax return of a taxpayer, which necessarily includes furnishing copies thereof, is if the divulgence or furnishing of copies of the return is made upon the order of the President of the Philippines in accordance with the rules and regulations issued by the Secretary of Finance (Section 71, Tax Code of 1997). In Opinion No. 72, Series of 1991, the Secretary of Justice opined that individual income tax returns under the first paragraph of the aforequoted Section "shall constitute public records and be open to inspection as such upon the order of the President of the Philippines under rules and regulations to be prescribed . . . by the Secretary of Finance." The existing rules on inspection of such returns provide that such inspection is allowed only to (a) BIR officials and employees whose official duties require such inspection; (b) the person who made the return, or his duly constituted attorney-in-fact; (c) the administrator, executor, or trustee of the taxpayer's estate or the duly constituted attorney-in-fact of such administrator, executor, or trustee where the maker of the return has died; and (d) in the discretion of the Commissioner of Internal Revenue, one of the heirs of law or next of kin of such deceased person upon showing that he has a material interest which will be affected by the information contained in the return. On the other hand, in the case of a corporation, the return shall be open to inspection (a) by the officers and employees of the Bureau of Internal Revenue whose official duties require such inspection; and (b) upon satisfactory evidence of identity and official position, by the president, vice-president, secretary, treasurer, or any of the members of the board of directors, or any executive or principal officer of such corporation (Section 9, Regulations No. 33). Section 10 of Regulations No. 33 dated October 13, 1922 outlines the procedure in the request by an executive department for the inspection of a taxpayer's return, viz: "Section 10. Inspection of returns at the instance of other executive departments . When the head of an executive department (other than the Department of Finance) or of any other bureau or office of the Philippine Government, desires to inspect or to have some other officer or employee of his branch of the service inspect a return in connection with some matter officially before him, the inspection may, in the discretion of the Secretary of Finance, be permitted upon written application to him by the head of such executive department or other Government bureau or office. The application must be signed by such head and must show in detail why the inspection is desired, the name and address of the taxpayer who made the return, the name and official designation of the one it is desired shall inspect the return. When the head of a bureau or office in the Department of Finance, not a part of the Bureau of Internal Revenue, desires to inspect a return in connection with some matter officially before him, other than an income tax matter, the inspection may, in the discretion of the Secretary, be permitted upon written application to him by the head of such bureau or office showing in detail why the inspection is desired. The reasons submitted for permission to inspect as provided in this section shall be considered by the Secretary and a decision reached by him whether the reasons are sufficient to permit inspection." Accordingly, if a head of an executive department (other than the Department of Finance) or other Government bureau or office requests the Bureau of Internal Revenue to inspect a taxpayer's return, the following must be complied with: 1. A written application by the head of such executive department (other than the Department of Finance) or other Government bureau or office to the Secretary of Finance; 2. The application must be signed by such head and must show in detail why the inspection is desired, the name and address of the taxpayer who made the return, the name and official designation of the one it is desired shall inspect the return; 3. The application and inspection of the return must be in connection with a matter officially pending before him, other than an income tax matter; and 4. Such application must be approved by the Secretary of Finance. Based on the foregoing, your request may be granted provided the above-mentioned conditions are complied with. aEcTDI Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner