BIR Ruling No. 331-11

September 1, 2011 BIR RULING NO. 331-11 Secs. 270, 71 of NIRC of 1997; BIR Ruling No. 185-99; BIR Ruling No. DA-387-00; BIR Ruling No. DA-641-06 Presidential Commission on Good Government IRC Building, #82 EDSA, Mandaluyong City Attention: J. Ermin Ernest Louie R. Miguel Director, Legal Department Gentlemen : This refers to your letter dated June 8, 2009 requesting copies of the financial statements of Philippine Telecommunications Investments Corporation (PTIC), Prime Holdings, Inc. (PHI) and Philippine Long Distance and Telephone Company (PLDT) for the years 1986 to 1987. It is represented that in the case entitled "Alfonso T. Yuchengco vs. Sandiganbayan" (G.R. No. 149802 dated January 20, 2006), the Supreme Court adjudicated to the Republic the 111,415 shares owned by PHI invested in PTIC; that in view of the said decision, the Sandiganbayan issued a Writ of Execution in its resolution dated June 13, 2008 in the case entitled "Republic of the Philippines vs. Ferdinand E. Marcos, et al.," (Civil Case No. 0002); that the said Writ of Execution ordered PTIC to submit an accounting of the stocks and cash dividend pertaining to the 111,415 shares; that in compliance thereto, PTIC submitted financial statements covering the years 2000 to 2007 only; that accountings for the years 1986 to 2000 have yet to be submitted by PTIC; that the Philippine Commission on Good Government (PCGG), in collaboration with the Commission on Audit, as directed by the Court, and the Office of the Solicitor General, is in the process of determining the accuracy of the declaration of dividends made by PTIC and PLDT; and that in connection therewith, the PCGG is now requesting copies of the financial statements of PTIC, PHI and PLDT. In reply, please be informed that the requested documents contain information regarding the business and/or income of taxpayers which are considered confidential under Section 270 of the 1997 Tax Code, as amended. The pertinent provision reads: "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." EHCDSI It is evident from the above provision that under the "unlawful divulgence" rule, BIR personnel cannot divulge information gained from taxpayers concerning the latter's business income, or estate as well as the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer. Section 270 is clear in its intent to protect taxpayers from having their otherwise sensitive and private information unnecessarily revealed to other parties. Thus, in its letter to the Fact Finding and Intelligence Bureau, Office of the Ombudsman, this Office had occasion to rule as follows: "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." Based on the foregoing, we cannot grant the request in view of the prohibition under Section 270 of the Tax Code of 1997." (BIR Ruling No. 185-99 dated November 26, 1999; BIR Ruling No. DA-387-00 dated November 9, 2000) In BIR Ruling No. DA-641-06 dated October 27, 2006 , where the financial statements of a taxpayer was being requested in connection with his petition before the Land Transportation Franchising & Regulatory Board (LTFRB), this Office held as follows: EAaHTI "In this regard, there is apparently nothing in LTFRB's request that would warrant the BIR's release of information on delinquent taxpayers as such data is considered as confidential and fully within the coverage and protection of Section 270. There is no indication in your request that Mr. Padayhag has failed to comply with the LTFRB's order to submit copies of his financial statements, thereby necessitating the production of such statements within the BIR's possession. In addition, there is no express order from the President of the Philippines directing this Office to produce copies of Mr. Padayhag's financial statements in accordance with Section 71 of the same Tax Code." Based on the foregoing, and considering that the purpose of PCGG's request is to determine the accuracy of the declaration of dividends made by PTIC and PLDT, and that there is no indication that PTIC has failed or refused to comply with the Sandiganbayan's orders, or that there is an express order from the President of the Philippines to produce copies of the requested financial statements, we regret to inform you that this Office is constrained to withhold such information pursuant to Section 270 of the same Tax Code as the subject of the request does not fall under any of the instances where confidential information of taxpayers may be revealed. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue