BIR Ruling No. 540-12

August 30, 2012 BIR RULING NO. 540-12 Section 282 (A) of the 1997 Tax Code, as amended; Finance Regulations No. 1; RMO No. 12-93; BIR Ruling No. 419-2012; BIR Ruling No. 134-2010; BIR Ruling No. 134-2011; BIR Ruling No. 099-2010; BIR Ruling No. 085-2010; BIR Ruling No. 075-2010 Danilo A. Lihaylihay 24-A Don Gregorio Street Don Antonio Heights Subdivision Holy Spirit, Commonwealth Avenue Quezon City Gentlemen : This refers to your letter dated May 15, 2012 requesting for the payment of your informer's reward relative to your supplemental denunciation letter dated June 27, 2007 to Confidential Information (CI) No. 110-2006 which stemmed from your claim against the internal revenue tax case of Bangko Sentral ng Pilipinas (BSP) on the purchase of gold from small-scale miners for the years 2001 to 2006. In reply, we regret to inform you that your request cannot be granted for lack of factual and legal basis. It is emphasized that your CI No. 110-2006, which covers the issue on the investigation of the tax liabilities of BSP which culminated in the issuance of deficiency assessment notices against BSP in the aggregate amounts of P3,935,142,421.95 representing deficiency gross receipts tax (GRT) and final withholding tax (FWT) for taxable year 2004 and P7,371,309,929.28 representing deficiency FWT on the Overnight Reverse Repurchase Agreements (RRP-Onites) for taxable years 2005, 2006 and 2007, was already denied with finality by this Office under BIR Ruling No. 419-2012, 1 which sustained our earlier view in BIR Ruling Nos. 099-2010, 2 085-2010 3 and 075-2010. 4 AaSHED Moreover, the issue involved in your supplemental denunciation letter is different from the issues covered by CI No. 110-2006. Hence, your supplemental denunciation letter is invalid for failure to follow the essential requirements set forth under Section 282 (A) of the 1997 Tax Code, as amended, Finance Regulations No. 1 and Revenue Memorandum Order (RMO) No. 12-93. 5 To effectively implement the provisions of the Tax Code, on the grant of informer's reward, the Bureau issued 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. Please note that the mere filing of letter denouncing a certain taxpayer does not automatically entitle the informer to the corresponding reward. Established guidelines, rules and procedures must be followed in order to ascertain the validity of an informer's claim for reward. Parts II and III of RMO No. 12-93 provide for the proper filing of duly sworn confidential information with the Law Division (then the Legislative, Ruling and Research Divisions), which provide: "II. Filing of Information: Pursuant to Section 5 of Finance Regulations No. 1, in relation to Section 281 of the NIRC, duly sworn confidential information on frauds upon or violations of any of the provisions of the NIRC, shall be filed with the Legislative, Ruling and Research Division (LRRD) for scrutiny and verification to determine if the information given is in accordance with the Regulations. The information must be accompanied with a sworn statement and the informer shall appear in person and execute under oath the statement, specifying the particular violation by the denounced person and the kind of tax or taxes allegedly not paid." cISDHE "III. Transmittal of the Information and Documents: Having taken cognizance of the Confidential Information, the same shall be transmitted by the LRRD to the Records Division, BIR, National Office, for numbering and recording in the Confidential Entry Book provided for the purpose. The individual entries to be made by the Records Division shall indicate the day and time the information is received, the name and address of the informer, name and address of the person denounced, names and addresses of the witnesses, if any, the subject matter of the information and the list of records, documents and books submitted, if any. The informer shall retain a duly stamped received and initialed copy of his sworn information which shall serve as his identification or evidence that he is the true informer. The Original Copy of the information/sworn statement, together with the documents submitted, if any, shall be returned to the LRRD where it shall be filed and kept strictly confidential. Only the copies thereof shall be referred to the Intelligence and Investigation Office (IIO) or the Special Investigation Branch (SIB) of the Regional Office for investigation and assessment of the tax/taxes. SEDIaH In no case shall an information filed with other units of the Bureau be the subject of an action or investigation without the same having been verified in accordance with Rule II of this Order." Furthermore, your supplemental denunciation letter fell short in conforming to the requirements set forth under Sections 2 and 6 of Finance Regulations No. 1, which provide the manner by which a confidential information is made and rendered as previously resolved in BIR Ruling No. DA-546-07 dated October 18, 2007. Sections 2 and 6 provide: SEC. 2. Form and Contents of the information. The information shall be in the form of a sworn statement given voluntarily and shall state definitely the facts or acts consisting the fraud upon or violation of the Internal Revenue or the Tariff and Customs Laws (as defined in Section 1, Republic Act No. 2338) . . . SEC. 6. Information to be recorded in an entry book. Any information received must be entered immediately in a confidential entry book provided for the purpose by the Official to whom the information is given directly, and the entire entries shall be consecutively numbered in order of time the information is received. The individual entries must indicate the day and time the information is received ... TcICEA In your case, 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. (PARI)/PHILIPPINE ASSOCIATION OF REVENUE ENFORCERS, INC. (PARE), it can be reasonably presumed that you are educated and knowledgeable with the intricacies of the law and established procedures in filing information, denunciations and claiming for rewards thereafter, and that you are fully aware of the requirements under Section 282 (A) of the 1997 Tax Code, as amended, Finance Regulations No. 1 and RMO No. 12-93, all of which have the force of law and are entitled to great weight. (BIR Ruling No. 134-2011 dated April 15, 2011 and BIR Ruling No. 134-2010 dated December 1, 2010) In view of the foregoing, your claim for payment of the alleged informer's reward is denied for lack of factual and legal basis. Insofar as this Office is concerned, this denial is final. You are advised to request for review of the said ruling to the Secretary of Finance pursuant to Department Order No. 7-02. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Dated June 25, 2012. 2. Dated October 8, 2010. 3. Dated October 6, 2010. 4. Dated September 16, 2010. 5. Guidelines in the Filing of Confidential Information for Violations of the National Internal Revenue Code (NIRC) and Investigation by Authorized Revenue Officer.