DOJ Opinion No. 067, s. 1998

DOJ OPINION NO. 067 , s. 1998 June 10, 1998 Hon. Milwida M. Guevara Undersecretary and Chairperson Department of Finance, Committee on Rewards Roxas Boulevard Corner Vito Cruz Street Manila 1004 M a d a m : This has reference to your request for opinion on the correct interpretation of Section 282 of the Tax Reform Act of 1997 (Republic Act No. 8424), which took effect on January 1, 1998, revising the National Internal Revenue Code. The pertinent provisions of which read as follows: "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 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 . 00) 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: 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 (P1,000,000.00) 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 the 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." (stress supplied). You state that the above provisions have amended Section 281 of the former National Internal Revenue Code to the effect that: "1. It (Sec. 282, R.A. 8424) introduced a cap on the amount of informer's reward. The old law set the informer's reward at 15 percent of the revenue, surcharge or fees recovered and/or fine or penalty collected. R.A. 8424 lowered the rate at ten percent of the revenue, surcharge or fees recovered and/or fine or penalty collected. R.A. 8424 lowered the rate at ten per cent of the same base and prescribed a ceiling of P1,000,000 per case, whichever is lower. 2. The cash reward of informers shall now be subject to income tax, collected as final withholding tax, at the rate of ten percent. 3. 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 the informer's reward." You also state that the Department of Finance Committee on Rewards decides on cases recommending the grant of informer's reward as endorsed by the BIR and the BOC; that these cases involve information which had been received by the BIR and BOC from informers, and which had been the bases for collection of taxes and duties; that these cases also involve rewards amounting to more than P1,000,000; and that all the cases pending with the Committee has been filed in 1997 prior to the passage of R.A. No. 8424. Specifically, you want to be clarified on the issue of whether or not the said Section 282 of R. A.. No. 8424 will cover the cases already endorsed to the Committee on Rewards prior to 1998 with particular concern as to the effects of the above amendments upon said cases. In this connection, you mention that one of your consultants suggested that information given prior to 1998 giving rise to the realization of taxes and duties only in 1998 or future years, should be covered by the provisions of the said Section 282. Conversely, if the information was given and the taxes/duties were realized prior to 1998, R.A. No. 8424 may not be applicable. At the outset, we wish to express that the retroactive application of a law should generally be expressly provided for therein. In the absence of such express provision, the rule is that the law should have prospective application. This is in accordance with Article 4 of the Civil Code of the Philippines, which provides "that laws shall have no retroactive effect, unless the contrary is provided". Thus, as held in Nilo vs. Court of Appeals, 128 SCRA 579 (1984): "It is a rule of statutory construction that all statutes are to be construed as having only a prospective operation unless the purpose and intention of the Legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used. In every case of doubt, the doubt must be solved against the retrospective effect. The cases supporting this rule are almost without number. (at p. 525, quoting Ancajas vs. Jakosalem, 24 Phil. 220.) Considering that R.A. 8424 does not contain provisions providing for retroactive application, we believe that the said law should not be given retroactive effect. Therefore, the pending cases that have been endorsed to the Committee on Rewards, assuming that the information on which they are based have led to the realization of taxes/duties, prior to the effectivity of R.A. No. 8424, cannot be subject to its provisions. Please be guided accordingly. Very truly yours, (SGD.) SILVESTRE H. BELLO III Secretary