Proposal in the Formulation of a "Standard Operating Procedure"

September 22, 1958 BIR RULING NO. 520-58 MEMORANDUM FOR The Chief, Investigation Division This refers to your memorandum dated September 20, 1958, informing this Office that the Presidential Committee on the Enforcement of Price Control has submitted for consideration of this Office the following proposal regarding its participation in the formulation of a "Standard Operating Procedure": "(c) BUREAU OF INTERNAL REVENUE To determine profiteering, blackmarketing or hoarding, its authorized agents shall: 1. Determine the cost of production of the commodities of locally produced, or its landed cost if imported. 2. Determine the cost of distribution which shall include the cost of transportation, storage and sale of the commodities. 3. Determine the reasonable margin of profit which should be allowed to insure continuous supply of the commodities and storage of the local products therefor. 4. Examine, bills of landing, bills of sales, invoices, books, records and other pertinent documents or papers of any importer, wholesaler, or retailer. 5. Inspect premises, bodegas, warehouses or storerooms where stocks of commodities are kept." You now request opinion on the legality of the proposed actions to be taken by this Office. It is within the authority of this Office to gather the abovementioned data and to examine books, records and documents for tax purposes, but it is seriously doubted if it can do so for such purposes as the determination of the existence of profiteering, blackmarketing or hoarding. Moreover, Section 347 of the Tax Code prohibits any officer or employee of this Office from divulging to any person or making known in any manner than may be provided by law information regarding the "business, income, or inheritance of any taxpayer, the secrets, operation, style of 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". The employee or officer found violating said prohibition shall be fined in a sum of not more than two thousand pesos or imprisoned for a term of not less than six months nor more than five years, or both. cdll The prohibition is all-embracing, the only exception being that provided for in Section 81 of the Tax Code, the pertinent part of which reads as follows: "After the assessment shall have been made, as provided in this Title, the returns, together with any corrections thereof which may have been made by the Collector, shall be filed in the Office of the Collector of Internal Revenue and 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 ." (Emphasis supplied) There is no other exemption provided for in the Tax Code. It would appear, therefore, that the only exception to the prohibition are income tax returns and even such documents may not be inspected unless upon previous order of the President of the Philippines. Thus under the National Internal Revenue Code documents other than income tax returns may not be inspected, nor can data or information therein stated be divulged, even with the approval of the President. However, the law which authorizes the President to create the abovementioned committee may have given him authority to cause the inspection, seizure and submission of records, books of accounts, invoices, and other documents of any importer, wholesaler, or retailer. If such be the case, then agents of this Office, in pursuance of the directive of the President, may inspect, seize and submit to the said committee documents needed by it and render reports on matters assigned to them for determination. (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue