BIR Ruling [UN-333-95]

September 12, 1995 BIR RULING [UN-333-95] Hon. Jose C. De Venecia, Jr. Speaker, House of Representatives Quezon City, Metro Manila S i r : This refers to your letter dated August 2, 1995 which was referred to this Office by Mr. Ernesto P. Martinez, Assistant Executive Secretary, Office of the President, Malacaang, Manila, on August 25, 1995 relative to your endorsement of the organization of a "Taxpayers Foundation" by the private sector in every province and city; that the Foundation is intended to boost voluntary compliance, widen taxpayer base, assist small business taxpayers, improve tax administration and increase revenue collections; that in your consultations with taxpayer groups, the private sector expressed their fears that the devolution of powers and functions to the revenue district offices further strengthened the coercive powers of the revenue examiners; that to address this, they suggested regular dialogues between taxpayers groups and top leaders of the BIR whom they perceive to be more sincere; that the Foundation shall therefore serve as an effective link between taxpayers group and the BIR to identify measures on how to enhance monitoring scheme, simplify systems and procedures, and develop third party information system for more efficient tax audit and assessment; that the Foundation shall educate its members through seminars, symposia, group discussions and information dissemination; that it shall promote voluntary compliance or self-assessment and protect small and "vulnerable" taxpayers from harassment by corrupt BIR examiners; that through the organization of a taxpayers Foundation, tax consciousness and value reorientation will be intensified thus, ensuring a sustainable revenue base for the national government; and that recently you received word that the Philippine Chamber of Commerce and Industry prepared the draft code of by-laws and articles of incorporation of the Tax and Tariff Foundation, Inc. which will be registered with the Securities & Exchange Commission. In connection therewith, you are proposing that the Bureau of Internal Revenue and the Department of Finance be directed by the Office of the President to establish a regular process of dialogue with the Taxpayers Foundation, provide them access to information and extend the necessary assistance. In reply thereto, please be informed that the BIR welcomes the organization of the aforementioned "Taxpayers Foundation" since its purposes and objectives are laudable and beneficial to both the BIR and the taxpayers in general. However, insofar as providing the taxpayer's Foundation access to information is concerned, both the BIR and the taxpayers are restricted by the provisions of Sections 269 and 277 of the Tax Code, as amended which impose penal sanctions upon any BIR official or employee who discloses "information regarding the business, income, or estate of any taxpayer", knowledge of which was obtained by him in the discharge of his official duties, unless such disclosure comes within the purview of Section 64 of the Tax Code, which reads: "SEC. 64. Disposition of income tax returns; publication of lists of persons filing returns and paying taxes . 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 Commissioner, shall be filed in the office of the Commissioner 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 within sixty days from the date of the effectivity of this Code by the Secretary of Finance. The Commissioner of Internal Revenue may in each year cause to be prepared and published in any newspaper and otherwise make available to public inspection upon written request and pursuant to regulations to be prescribed by the Secretary of Finance, lists containing the names and addresses of persons who have filed income tax returns with the amount of income declared and the income tax paid by each. The list of taxpayers for the preceding taxable year in each municipality or city shall be posted at the main entrance of the respective municipal buildings or city hall." By the first paragraph of the aforequoted provision of law, individual income tax returns "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 official 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. (See Section 4 of Regulations No. 33 cited in de Leon, The National Internal Revenue Code Annotated, 1989 Ed., pp. 501-502; See also Vera vs. Cusi, Jr., 91 SCRA 153). (See Opinion No. 72, S. 1991 dated April 24, 1991). Moreover, Section 277 of the Tax Code provides: "SEC. 277. Procuring unlawful divulgence of trade secrets. Any person who causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income, or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, profits, losses, or expenditures appearing in any income tax return, 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." Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue