BIR Ruling No. 067-13

February 13, 2013 BIR RULING NO. 067-13 Atty. Marlyn T. Galvez Director, Public Assistance Bureau Office of the Ombudsman Agham Road, Diliman Quezon City Madam : This refers to your letters dated 30 April 2012 and 3 July 2012 (Reference Code: RAS-C-12-2362) relative to assistance sought by Mr. DANILO A. LIHAYLIHAY, President, Philippines Association of Revenue Enforcers, Inc.,regarding his claim for informer's reward from the Bureau of Internal Revenue (BIR) dated 19 April 2012 requesting " ...to immediately collect from the Marcoses and Fortune Tobacco Corporation (FTC) their P258-B and P118-B tax delinquency liabilities, respectively, and to earmark or deliver to me my 25% informer's rewards thereof ... ". In reply, please be informed that Mr. DANILO A. LIHAYLIHAY's course of seeking assistance from your Office was initiated as a desperate attempt to resurrect his claims for informer's rewards that, as will be discussed below, have already been properly denied by the BIR. His claims are inaccurate and tend to mislead and deceive your Office as to the true nature of claim for his alleged informer's reward. Mr. DANILO A. LIHAYLIHAY conveniently failed to disclose to your Office that his alleged pending claims in the abovementioned tax cases have already been acted upon and denied by the BIR for utter lack of factual and legal basis . Income and Estate Tax Cases of Spouses the Late President Ferdinand E. Marcos and Imelda Romualdez-Marcos Records show that on 22 January 2009, Nelson M. Aspe, Deputy Commissioner for Operations Group, sufficiently informed Mr. DANILO A. LIHAYLIHAY that his demand to immediately earmark/set aside and immediately deliver to him his allege claim for informer's award has been denied. The letter clearly states: TCDHIc "In connection therewith, please be informed that on November 20, 2008 the Records Division of this Bureau issued a certification that you are not officially registered as the Confidential Informer of the above subject (Annex "A").Likewise, on December 10, 2008, the Assistant Commissioner of the Legal Service also of this Bureau, issued Memo-05-2008 (Annex "B") indicating that the information you have given fell short of the requisite provided for under Section 4 of the Finance Regulations No. 1 which provides, viz. : 'SEC. 4. Result of the information which deserves reward. In order to entitle an informer to a reward, the information given by him must lead to or be instrumental in the discovery of fraud ...,and results in the recovery or collection of revenue, ...' In view thereof and while we are working for the immediate collection of the above tax liabilities, we regret to inform you that this office cannot act on your demand for the earmarking/setting aside and immediate delivery of the amount of P58,358,154,720.50 as informer's reward." Tax Case of Fortune Tobacco Corporation and/or Lucio Tan, et al . Records show that as per Certification dated September 24, 2012 issued by the Records Management Division of this Bureau, although Mr. DANILO A. LIHAYLIHAY is the officially registered confidential informer regarding the alleged tax evasion of Fortune Tobacco Corporation and/or Lucio Tan, et al.,then OIC-Commissioner of Internal Revenue Jose Mario C. Buag issued a letter dated 14 June 2005 appropriately apprising Mr. DANILO A. LIHAYLIHAY of the denial of his alleged claim for informer's reward, explicitly pronouncing: ACaEcH "From the foregoing, it clearly appears that you are no longer entitled to any reward since the information that was supplied in your confidential information against Fortune Tobacco Corporation for the year 1992 refers to a case already previously investigated or examined by the Bureau and for which there is now a pending legal proceeding with the Metropolitan Trial Court (MeTC) of Marikina City. In fact, records of the Bureau show that at least four (4) Letter/s of Authority (LOAs) had already been issued against the subject company for the year 1992 alone. Please note that the original deficiency assessment of P7.6 Billion against Fortune Tobacco Corporation for 1992 was a result of the previous investigation conducted by examiners belonging to the Intelligence and Investigating Office (IO),the precursor of the Tax Fraud Division (now National Investigation Division)" Discussion This Office has been implementing a system of reward to informants on tax evasion and tax frauds and other violations of the internal revenue laws. This is expressly provided for under Section 282 of the National Internal Revenue Code of 1997, as amended. To effectively implement the aforequoted section of the Tax Code of 1997, the Bureau issued Revenue Memorandum Order (RMO) No. 12-93 (dated February 1, 1993), Revenue Regulations (RR) No. 16-2010 (dated November 25, 2010) and RMO No. 46-2011 (dated December 22, 2011), which provides for the guidelines, rules and procedures in the filing of confidential information for violation of the NIRC in relation to Finance Regulation No. 1 of the Department of Finance, which also adheres to the mandates of the aforequoted section. The mere filing of an affidavit denouncing a certain taxpayer does not automatically entitle the informer to the corresponding reward. The established guidelines, rules and procedures under RMO No. 12-93, Revenue Regulations (RR) No. 16-2010 and RMO No. 40-2011 must be followed in order to ascertain the validity of an informer's claim for reward. The Commissioner of Internal Revenue is mandated to independently evaluate or assess the merits of the case involving matters or issues under the National Internal Revenue Code, in particular the validity and qualifications of confidential information, as what she did in the aforesaid cases. cAaETS With the denial of his claim for informer's rewards, Mr. DANILO A. LIHAYLIHAY's proper recourse is to elevate the same to the Secretary of Finance, who is mandated by law to approve or grant informer's reward upon recommendation of the Commissioner of Internal Revenue 1 in accordance with Section 3 2 of DOF Department Order No. 7-02 dated May 2, 2007 3 on request for review by the Secretary of Finance on adverse rulings from the Commissioner of Internal Revenue. Notwithstanding the Commissioner of Internal Revenue's recommendation for payment, the Secretary of Finance shall have the final decision on the matter. The Secretary may either adopt the Commissioner of Internal Revenue's recommendation of payment of reward or overturn and deny the claim. Apparently, Mr. DANILO A. LIHAYLIHAY undeniably failed to obtain such remedy and instead, persistently insists that the BIR should favorably rule on his claims for informer's reward despite the previous denials duly issued therefor. In the case of Mr. DANILO A. LIHAYLIHAY, being a well-known tax informer who files tax denunciations against certain tax evaders and smugglers in the country and as the supposed president of Philippine Association of Revenue Informers, Inc./Philippines Association of Revenue Enforcers, Inc., it can be reasonably presumed that he is educated and knowledgeable with the intricacies of the law and established procedures in filing information, denunciations and claiming for rewards thereafter, and that he is fully aware of the requirements under Section 282 (A) of the 1997 Tax Code, as amended, Finance Regulations No. 1, RMO No. 12-93, Revenue Regulations (RR) No. 16-2010 and RMO No. 46-2011, as well as his remedy to elevate his denied claims to the Department of Finance under Department Order No. 7-02, all of which have the force of law and are entitled to great weight. Attached herewith are copies of the aforementioned letters to Mr. DANILO A. LIHAYLIHAY for your reference. For your information. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Section 282 of the NIRC, as amended, provides "[T]hat the reward provided herein shall be paid under rules and regulations issued by the Secretary of Finance upon recommendation of the Commissioner". Section 15 of Finance Regulation No. 1 of the Department of Finance also provides that, " [I]n no case shall any amount be paid to the informer without prior approval of the Secretary of Finance. " 2. "Section 3. Rulings adverse to the taxpayer . A taxpayer who receives an adverse ruling from the Commissioner of Internal Revenue may, within thirty (30) days from the date of receipt of such ruling, seek its review by the Secretary of Finance. The request for review shall be in writing and under oath, and must: a) be addressed to the Secretary of Finance and be filed with the Legal Office, Department of Finance, DOF Building, BSP Complex, Roxas Boulevard corner Pablo Ocampo St.,City of Manila; b) contain the heading "Request for review of BIR Ruling No. _____"; c) allege and show that the request was filed within the reglementary period; d) indicate the Tax Identification Number of the taxpayer; e) allege the material facts upon which the ruling was requested; f) state that exactly the same facts were presented to the BIR; g) define the issues sought to be resolved; h) contain the facts and the law relied upon to dispute the ruling of the Commissioner; i) be signed by or on behalf of the taxpayer filing the appeal; provided that, only lawyers engaged by the taxpayer and/or tax agents accredited by the BIR may sign on behalf of the taxpayer; j) be accompanied by a copy of the Commissioner's challenged ruling; and k) contain a stamp of the Office of the Commissioner of Internal Revenue, indicating that a copy of the request to review the ruling was received by the Commissioner; and l) specifically state that the taxpayer does not have a pending assessment or case in a court of justice where the same issues are being considered. Furthermore, the taxpayer must, at the time of filing of the request for review, submit a duplicate copy of the records on file with the BIR pertaining to his request, which set of records must be authenticated and certified by the BIR. The Secretary of Finance may dismiss with prejudice a request for review that fails to comply with these requirements." 3. ''Providing for the Implementing Rules of the First Paragraph of Section 4 of the National Internal Revenue Code of 1997, Repealing for this Purpose Department Order No. 005-99 and Revenue Administrative Order No. 1-99."