BIR Ruling No. 590-12

October 19, 2012 BIR RULING NO. 590-12 Section 282 of the Tax Code of 1997, as amended; Finance Regulation No. 1; RMO 12-93; RR 16-2010; RMO 46-2011; BIR Ruling No. 054-2010; BIR Ruling No. 075-2010; BIR Ruling No. 099-2010; BIR Ruling No. 056-2010 Danilo A. Lihaylihay 25 Kaunlaran St., Batasan Hills Quezon City Sir : This refers to your letter dated March 20, 2012 relative to your "final demand for you to release the payment of my P160,288,080.42 informer's rewards on the payments made by the TOYOTA BALINTAWAK, INC. after availing the benefits of VAP (RMO No. 63-97) covered by my sworn information dated May 3, 1994 and supplemental CI No. 43-98 dated October 2, 1998, inclusive of 6% legal interests from 1997 to 2011, having already filed my demand letters dated September 5, 2005 and August 2, 2005", relying on the provisions of Republic Act (RA) No. 9485 and its Implementing Rules and Regulations. DHIcET 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 "[t]he new law, RA 9485 and its IRRs, strictly provides that the processing of REWARD, etc. shall not be longer than ten (10) working days from receipt of the request of informer. The said law also provides that all agencies/offices of government shall adopt a FRONTLINE SERVICE for purposes of processing the rewards, etc. Unfortunately, the BIR refused to comply/abide by the said mandatory provisions of the new law." is erroneous for want of legal basis. Your reliance on the provisions of Republic Act (RA) No. 9485 and its Implementing Rules and Regulations is misplaced. We reiterate that Section 3 of RA No. 9485 (otherwise known as the "Anti-Red Tape Act of 2007") explicitly excludes those government offices which perform judicial, quasi-judicial and legislative functions. The provisions of Republic Act (RA) No. 9485 and its Implementing Rules and Regulations are inapplicable in the processing of claim of informer's reward. 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) 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." SDHETI An evaluation and determination of whether an informer is entitled to an informer's reward is essentially a quasi-judicial function. Hence, such function falls outside the ambit of Section 8 (b) (1) RA No. 9485 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. 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) 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. (BIR Ruling No. 054-2010 dated September 15, 2010; BIR Ruling No. 075-2010 dated September 16, 2010; BIR Ruling No. 099-2010 dated October 8, 2010) caHASI With the advent of the Run After Tax Evaders (RATE) Program in 2005, the BIR has received an increased number of information from concerned citizens against taxpayers, individual or corporate, who allegedly violated the pertinent provisions of the NIRC of 1997, as amended. Confidential information against denounced taxpayer shall be under oath and shall be personally executed and filed by the Informer before the Chief, Prosecution Division, BIR National Office pursuant to Section 4 of RR No. 16-2010. RMO No. 46-2011 dated December 22, 2011 was issued to define the responsibilities of the different BIR offices involved in the filing and investigation of confidential information and processing of claims for informer's reward, prescribed under RR No. 16-2010. It stated therein that the provisions of RR No. 16-2010 are prospective in application. Accordingly, the confidential information filed prior to the effectivity of RR No. 16-2010, and the claim for informer's reward relevant thereto, shall be processed by the Law Division pursuant to the provisions of Revenue Administrative Order No. 11-2009. Based on the abovementioned procedures, prior to the Bureau's payment of your alleged informer's reward, in case you are entitled thereto, the appropriate procedures shall be complied with, which ultimately requires the recommendation of the Commissioner of Internal Revenue and the approval of the Secretary of Finance. (BIR Ruling No. 056-2010 dated September 15, 2010) Hence, the established procedures under RMO No. 12-93, RR No. 16-2010 and RMO No. 46-2011 shall be followed, giving the Legal and Inspection Group, its Services and Divisions the authority to process and recommend to this Office the Bureau's position as to your entitlement to informer's reward. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue