DOJ Opinion No. 035, s. 1991

DOJ OPINION NO. 035 , s. 1991 March 8, 1991 Senator Alberto G. Romulo Senate Manila Sir : This has reference to your request for our "views and comments" on Senate Bill No. 1623. LLpr The aforesaid bill would require every Filipino citizen who maintains in another country of which he is not a resident a bank deposit amounting to $25,000 or its equivalent in another foreign currency to notify the Commissioner of Internal Revenue of such deposit. Its objectives are to support the government's campaign to raise foreign currency reserves, to assist the tax collection effort of the Bureau of Internal Revenue and to "deter any government official and employee from committing graft and corruption" (see Explanatory Note). Three possible objections could be raised against the bill, to wit: 1. That it could be violative of the constitutional right to property and/or the right to privacy; 2. That it could be violative of the equal protection clause; 3. That it could provide opportunities for abuses. The first two objections affect the constitutionality of the proposal while the third affects its wisdom. As discussed hereunder, the constitutional objections are surmountable. However, the objection relating to the wisdom of the proposal is a policy matter that rests upon the sound judgment of the lawmakers. The subject bill may be assailed as violative of the constitutional right to property and/or the right to privacy in that it would require the affected individual to disclose matters which are of a private nature. Nonetheless, it is well-settled that, as in the case of any other personal right, the right to property or to privacy is subject to the police power of the state. The exercise of this sovereign power, while necessarily infringing upon individual liberties, is valid if it bears a substantial relation to the general welfare of the public and if it is not unreasonable or arbitrary (Benjamin vs. Columbus, 146 NE 2d 854) and that citizens may, for the public good, be restrained in their conduct even with their reference to matters in themselves lawful and right (State v. Kartus, 162 So. 5533). In the case of the subject bill, there is a compelling governmental interest in information regarding the overseas deposits of its citizens not only in connection with its tax collection effort, but also to encourage these citizens to transfer such deposits in local banks to ensure their confidentiality under current bank secrecy statutes (R.A. Nos. 1405 and 6426). The instant bill may likewise be attacked as offensive to the "equal protection" clause of the Constitution in that it would require disclosure of a citizen's foreign deposit accounts, while domestic deposit accounts are immune from governmental inquiry or examination under the abovecited statutes. But it is well-established rule that the standard of equal protection is satisfied if the unequal treatment is based upon substantial and real differences and that all individuals falling within the same class are similarly treated (People vs. Ver, 65 Phil. 56; Tuason v. Land Tenure Administration, 31 SCRA 413). In the present case, there are reasonable distinctions between deposits in local banks and those in foreign financial institutions. Thus, the former are subject to regulation by the Philippine government and have beneficial effects upon the Philippine economy, whereas the latter are beyond reach of Philippine laws and work to the economic advantage of some other country. As previously stated, the wisdom of the subject bill is a matter of policy that pertains to the legislature, However by way of observation, we believe that the proposal might not, after all, be an effective law for the reasons hereunder given: 1. The proposal would penalize a Filipino citizen who fails to notify the BIR of his foreign currency deposit abroad. Since this would be a special penal law, mere failure to notify would already constitute a violation of the law because intent would be immaterial, as in all acts mala prohibita . Considering the relative ease of prosecuting violations of the proposed law, the likelihood of cases being filed for ulterior motives, e.g. extortion or harassment, is not quite remote. Hence, the proposal might only provide another opportunity for committing graft and corruption and work to nullify one of the objectives of the proposal which is to deter graft and corruption. 2. It is doubted if the proposed law could really enhance the tax collection effort of the government in view of the obvious difficulty of monitoring compliance with the provisions thereof. Since foreign banks are not subject to Philippine jurisdiction, they could not be legally compelled to furnish relevant information. prLL Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary