Rate of Informer's Reward Given to Persons Instrumental in the Delivery and Seizure of Smuggled Goods

March 9, 2012 DOF OPINION Hon. Leila M. de Lima Secretary Department of Justice Padre Faura St., Manila Dear Secretary De Lima : We respectfully seek confirmation of our opinion that informer's rewards given to persons instrumental in the delivery and seizure of smuggled goods shall be equivalent to ten percent (10%) of the fair market value of the smuggled and confiscated goods or One Million Pesos (P1,000,000) per case, whichever is lower, in accordance with Section 282 (B) of the National Internal Revenue Code (NIRC), 1 to wit: SEC. 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. xxx xxx xxx (B) For Discovery and Seizure of Smuggled Goods. To encourage the public to extend full cooperation in eradicating smuggling, a cash reward equivalent to ten percent (10%) of the fair market value of the smuggled and confiscated goods or One Million Pesos (P1,000,000) per case, whichever is lower, shall be given to persons instrumental in the discovery and seizure of such smuggled goods. The cash rewards of informers shall be subject to income tax, collected as a final withholding tax, at a rate of ten percent (10%). The provisions of the foregoing Subsections notwithstanding, all public officials, whether incumbent or retired, who acquired the information in the course of the performance of their duties during their incumbency, are prohibited from claiming informer's reward. TaCIDS In DOJ Opinion No. 48, s. 2010, issued pursuant to the query of present BIR Commissioner Kim S. Jacinto-Henares regarding the interpretation of the provisions of Section 282 (B) of the NIRC, the DOJ pronounced that the Internal Revenue Code is not a general law but like R.A. No. 2338, is a special law. Thus, as rightfully held by the Court of Tax Appeals in CTA Case No. 7515 (Lihaylihay v. Commissioner of Internal Revenue, November 23, 2009), a special law, being irreconcilable with P.D. No. 1158, another special law, may be deemed to have been nullified by the later law. Further, the DOJ provided that "the foregoing considered, we are of the considered view that absent any subsequent law amending Section 282 of the NIRC of 1997, the informer's reward amounts 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." It should also be emphasized that DOJ Opinion No. 48, s. 2010 pronounced that, "This supersedes the unnumbered opinion subject of the instant request for clarification. Opinion No. 18, s. 2005 is likewise amended accordingly. " 2 Applying the foregoing, it is thus our position that Section 282 (B) of the NIRC is applicable in determining the informer's rewards of persons instrumental in the discovery of seizure of smuggled goods, in connection with both customs and internal revenues recovered pursuant to such information. Stated otherwise, Section 3513 3 of the Tariff and Customs Code of the Philippines (TCCP) that grants informers a cash reward equivalent to 20% of the fair market value of the smuggled and confiscated goods is deemed repealed and replaced by Section 282 (B) of the NIRC. Accordingly, Section 282 (B) of the NIRC, to the exclusion of Section 3513 of the TCCP, governs the determination of informer's rewards of persons instrumental in the discovery of seizure of smuggled goods. In this regard, we likewise maintain that such provision applies regardless of whether the government income involved is internal revenue as administered by the Bureau of Internal Revenue, or customs revenue as administered by the Bureau of Customs. This interpretation necessarily follows from a cursory reading of the entire text of Section 282. 4 Paragraph (A) thereof refers to the informer's rewards to individuals who give information leading to the discovery of frauds upon the internal revenue laws or violations of any of the provisions thereof, while paragraph (B) thereof refers to Informer's Rewards for individuals instrumental in the discovery and seizure of smuggled goods. Any violation of internal revenue laws committed in the course of smuggling is already addressed in Section 282 (A), yet the legislature deemed it appropriate to include a separate provision specifically on smuggling. This could only mean that the legislature intended 282 (B) to apply to not just internal revenue taxes, but also to customs duties and taxes. Further, considering our opinion that Section 282 (B) of the NIRC is the applicable provision in such instances, we are likewise of the opinion that the last paragraph of Section 282 (B), which states: The provisions of the foregoing Subsections notwithstanding, all public officials, whether incumbent or retired, who acquired the information in the course of the performance of their duties during their incumbency, are prohibited from claiming informer's reward. is applicable to both internal revenue and customs officials. Simply put, all public officials are prohibited from claiming informer's rewards, regardless of whether the income recovered by the government was internal revenue or customs revenue. Based on the foregoing, and considering that the NIRC was promulgated much later than the TCCP, we, thus, reiterate our position that Section 282 (B) of the NIRC, to the exclusion of the provisions of the TCCP, should govern the determination of informer's rewards of persons instrumental in the discovery of seizure of smuggled goods, for both taxes and customs duties. Thank you for your usual support and cooperation. TSacID Very truly yours, (SGD.) CESAR V. PURISIMA Secretary Footnotes 1. Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997. 2. DOJ Opinion No. 48, s. 2010. 3. Sec. 3513. Reward to persons instrumental in the discovery and seizure of smuggled goods. The provisions of general law and special laws to the contrary notwithstanding, a cash reward equivalent to twenty per centum (20%) of the fair market value of the smuggled and confiscated goods shall be given to the officers and men and informers who are instrumental in the discovery and seizure of such goods in accordance with the rules and regulations to be issued by the Secretary of Finance. The provisions of this section, and not those of Republic Act Numbered Twenty-three Hundred and Thirty-Eight shall govern the giving of reward in cases covered by the former. 4. SEC. 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. (B) For Discovery and Seizure of Smuggled Goods. To encourage the public to extend full cooperation in eradicating smuggling, a cash reward equivalent to ten percent (10%) of the fair market value of the smuggled and confiscated goods or One Million Pesos (P1,000,000) per case, whichever is lower, shall be given to persons instrumental in the discovery and seizure of such smuggled goods. The cash rewards of informers shall be subject to income tax, collected as a final withholding tax, at a rate of ten percent (10%). The provisions of the foregoing Subsections notwithstanding, all public officials, whether incumbent or retired, who acquired the information in the course of the performance of their duties during their incumbency, are prohibited from claiming informer's reward.