BIR Ruling No. 099-10

October 8, 2010 BIR RULING NO. 099-10 Section 3 of RA No. 9485; Finance Regulations No. 1; RMO No. 12-93; RAO No. 011-09 Mr. Danilo A. Lihaylihay 25 Kaunlaran Street, Batasan Hills Quezon City Sir : This has reference to your letter dated July 15, 2010 requesting this Office to "urgently direct/order the Law Division to transmit to the Accounting Division or Financial Service, BIR, the entire tax dockets of the Bangko Sentral ng Pilipinas (BSP) and Bank of America for the immediate PROCESSING OF PAYMENT or DISBURSEMENT of my claims for reward pursuant to law and the rules." The above-mentioned cases stemmed from your claim for disbursement or payment of your alleged informer's rewards in the amount of PhP900,000,000.00 in relation to the internal revenue tax case of Bangko Sentral ng Pilipinas (BSP) for taxable years 2004, 2005, 2006 and 2007, as well as your request for the disbursement or payment of Php54,375,886.26 informer's reward on the compromise payments made by Bank of America (BA) on its internal revenue tax case for taxable year 1995 and prior years. In reply, we regret to inform you that your request cannot be granted for lack of factual and legal basis. Please be informed that your contentions that "the Bureau of Internal Revenue (BIR), as the agency concerned is strictly required TO PROCESS THE REWARD within ten (10) working days from receipt of the request by the informer", is untenable. Your reliance on the provisions of Republic Act (RA) No. 9485 and its Implementing Rules and Regulations is misplaced. Section 3 of RA No. 9485 (otherwise known as the "Anti-Red Tape Act of 2007") particularly excludes those government offices which perform judicial, quasi-judicial and legislative functions. Section 3 provides: SEC. 3. Coverage. This Act shall apply to all government offices and agencies including local government units and government-owned or -controlled corporations that provide frontline services as defined in this Act. Those performing judicial, quasi-judicial and legislative functions are excluded from the coverage of this Act. (emphasis supplied) DEcITS In Midland Insurance Corporation vs. IAC (143 SCRA 458, 462 [1986]) , the Supreme Court has defined the function of a quasi-judicial body as "a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts, hold hearings, and draw conclusions from them, as a basis for their official actions and to exercise discretion of a judicial nature." It must be stressed that the Legal Service of the BIR and its divisions and sections are performing quasi-judicial functions, which removes them from the ambit of Section 2 (g) Rule II and Section 2 (4) Rule VI of the Implementing Rules and Regulations (IRR) of RA No. 9485, requiring the processing of requests within the period of ten (10) working days in the case of complex transactions from the time the request or application was received. Thus, your conclusion that the provisions of RMO No. 12-93 and Finance Regulations No. 1 has been repealed by RA No. 9485 is misplaced. Moreover, your position that "the rule is for the Accounting Division of BIR to process the reward within a maximum period of only ten (10) working days but not to deny, delay, or withhold it. Verily, the Law Division, Legal Service and Legal and Inspection Group have no specific statutory authority to take part in the processing of informer's reward, much less, recommend for the denial thereof" is erroneous for want of legal basis. 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 Tax Code of 1997, as amended, the full text of which is quoted hereunder, viz.: "Section 282. Informer's Reward to Persons Instrumental in the Discovery of Violations of the National Internal Revenue Code and in the Discovery and Seizure of Smuggled Goods. (A) For Violations of the National Internal Revenue Code. Any person, except an internal revenue official or employee, or other public official or employee, or his relative within the sixth degree of consanguinity, who voluntarily gives definite and sworn information, not yet in the possession of the Bureau of Internal Revenue, leading to the discovery of frauds upon the internal revenue laws or violations of any of the provisions thereof, thereby resulting in the recovery of revenues, surcharges and fees and/or the conviction of the guilty party and/or the imposition of any of the fine or penalty, shall be rewarded in a sum equivalent to ten percent (10%) of the revenues, surcharges or fees recovered and/or fine or penalty imposed and collected or One Million Pesos (P1,000,000) per case, whichever is lower. The same amount of reward shall also be given to an informer where 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: Provided, That should no revenue, surcharges or fees be actually recovered or collected, such person shall not be entitled to a reward: Provided, further, That the information mentioned herein shall not refer to a case already pending or previously investigated or examined by the Commissioner or any of his deputies, agents or examiners, or the Secretary of Finance or any of his deputies or agents: Provided, finally, That the reward provided herein shall be paid under rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner. " (emphasis supplied) IaDTES 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, 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. RMO No. 12-93 directs that duly sworn confidential informations on frauds upon or violations of any of the provisions of the NIRC shall be filed with the Legal Service (then with the Legislative, Ruling and Research Divisions) and Part VII thereof provides that the claim for informer's reward shall be processed by the same Office. The authority of the Legal Service and Law Division to process claims for rewards is strengthened by Revenue Administrative Order (RAO) No. 011-09. Under the said revenue issuance, the Law Division is tasked to process the informer's reward and to initiate the action for the payment thereof if the informer is entitled thereto. The Legal Service, under the direct supervision of the Deputy Commissioner for Legal Group, is authorized to review, recommend and/or approve the actions taken by the Law Division relative to the entitlement of an informer to claims for reward. It is true that the Supreme Court, in Meralco Securities Corp. vs. Savellano, et al., (L-36181, Oct. 23, 1982) , ruled that the payment of informer's reward is conditioned upon the payment and collection of unpaid or deficiency taxes. However, prior to the Bureau's payment of any informer's reward, the appropriate procedures shall be complied with. Hence, the established procedures under RMO No. 12-93 and RAO No. 011-09 shall be followed, giving the Legal and Inspection Group, the Legal Service and its Law Division the authority to process and recommend to this Office the Bureau's position as to your entitlement to informer's reward. In view of the foregoing, your claim for payment of the alleged informer's reward is denied for lack of legal basis. Please be guided accordingly. TAcCDI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue