DOJ Opinion No. 115, s. 1985

DOJ OPINION NO. 115 , s. 1985 September 23, 1985 The Acting Commissioner Bureau of Internal Revenue Quezon City Sir : This has reference to your request for opinion on "whether the Bureau of Internal Revenue can verify bank records for a correct determination of the amount of deposits for purposes of the imposition of estate tax on a deceased depositor in the light of Republic Act No. 1405 relative to the confidentiality of bank deposits." dctai You state that in order to collect the correct amount of a deceased person's estate tax, the Bureau has to determine the gross estate of the deceased, which includes his bank deposits, deposit substitutes, and contents of safety deposit boxes; hence, it is necessary to investigate the bank records of the deceased person; otherwise, it will be compelled to issue tax clearances without verification, thereby encouraging estate tax evasions. You further state that since the estate tax accrues upon death, the State already has a pecuniary interest in the estate of the deceased person, hence, the confidentiality of bank deposits should not be used against the Bureau whose investigation is directed towards the ascertainment of the State's interest in the estate of the decedent. Section 2 and 3 of the cited act state as follows: "Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person government official, bureau or office, except when the examination is made in the course of a special or general examination of a bank and is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity, or when the examination is made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the result thereof shall be for exclusive use of the bank, or upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty, of public officials, or in cases where the money deposited or invested is the subject matter of the litigation". "Section 3. It shall be unlawful for any official or employee of a bank to disclose to any person other than those mentioned in Section Two hereof, or for an independent auditor hired by a bank to conduct its regular audit to disclose to any person other than a bank director, official or employee authorized by the bank, any information concerning said deposits." (As amended by P.D. No. 1792) prcd The foregoing statutory provisions have already been the subject of several interpretative opinions of this Ministry. In two of these rulings, the absolutely confidential nature of bank deposits were affirmed. (See Opns., Secretary of Justice, No. 318, s. 1959 and No. 168, s. 1961) The first mentioned opinion, which incidentally was addressed to that Bureau, said that a provision in the Tax Code requiring banks to file returns setting forth the names and address of depositors to whom interest of P1,800 in any taxable year has been paid is incompatible with the quoted provisions of R.A. 1405 and, therefore, deemed repealed or modified accordingly. More pertinently, it was stated in the same opinion that "In Opinion No. 54, s. 1956, this Office said among things that the prime purpose of Republic Act No. 1405 is to keep bank accounts from prying eyes, or in the words of its sponsor, from 'fishing expeditions', by those who for one reason or another especially for tax assessment, would find whether a given person has money in a bank and if so where, when or how he got it. And as pointed out by a learned predecessor in office, Justice Tuason, in reiterating his ruling that personnel of the Central Bank's Department of Supervision and Examination are not embraced by the prohibition of Republic Act No. 1405, the persons and officials who are banned from [looking into bank] deposits are . . . tax collectors, police officers, creditors in 'fishing expedition' unrelated to the conduct and administration of banks; and it is from these persons and officials that the depositors' fear for the safety of their deposits and of themselves from molestation could come." It is noted that the original version in the then lower house (HB 3977) of R.A. 1405 was a bill to exempt "deposits in banks from inquiry or investigation for the purpose of taxation" (See Explanatory Note, H.B. No. 3877, Congressional Record, Vol. II, Party IV, p. 3386). While the final version did not include such explicit language, R.A. 1405 as finally worded, actually widened the scope of the prohibition against inquiries into bank deposits by allowing such investigations only in those instances expressly mentioned in the law. It bears emphasis that the law does not make any distinction as to the nature of the bank deposit or its ownership. Moreover, it is noted that P.D. No. 1792 amended R.A. 1405 to include two or more exceptions to the rule on confidentiality of bank deposits, namely, "when the examination of a bank and is specifically authorized by the Monetary Board" and "when the examination is made by an independent auditor hired by the bank to conduct its regular audit". The failure to include investigation for estate tax purposes among the exceptions added by the aforesaid decree is another indication of the legislative authority's intent not to exclude such inquiries from the prohibition contained in the law. prcd True, the view expressed herein may encourage tax evasions, but Congress was evidently aware of this statutory loophole when it enacted R.A. 1405 and its declared sentiment as expressed in the Explanatory Note was that "the benefits that will accrue to the economy in enacting this bill into law will counter-balance immeasurably the losses of the Government from such tax evasion" ( Idem ). The accepted rule is that questions regarding the wisdom or expediency of the law should not be taken into account in its interpretation, its determination being a legislative prerogative (Rubi vs. Provincial Board, 39 Phil. 661, De los Santos vs. Mallare, 89 Phil 289). LLjur In view thereof, the abovestated query should be, as it is hereby, answered in the negative. Very truly yours, (SGD.) ESTELITO P. MENDOZA Minister of Justice