Guidelines in the Proper Enforcement of Tax Laws

July 8, 1980 REVENUE MEMORANDUM CIRCULAR NO. 04-81 SUBJECT : Guidelines in the Proper Enforcement of Tax Laws TO : All Internal Revenue Officers and Others Concerned A study conducted on the problem of harassment reportedly being committed by or against BIR personnel has resulted in pinpointing five (5) areas of concern on harassment committed by BIR personnel and four (4) areas of concern on harassment committed by taxpayers. casia The five (5) areas of concern as listed under harassment of taxpayers by BIR personnel are as follows: 1. Fantastic and/or arbitrary assessment as determined by the Revenue District Officer in the Regional level and Chief of Investigating Division in the Central Office as the case may be; 2. a) Arrogant and/or disrespectful behavior; b) Non-observance of punctuality and/or disrespectful behavior; 3. Indiscriminate issuance of the five (5) days letter conference; 4. Unreasonable delay in the investigation and processing of tax cases; and 5. Requiring the taxpayer to prepare working papers, and other documents which are normally on file in the BIR like income tax return of partner and list of inventories. The four (4) areas of concern on harassment of BIR personnel by taxpayers are: 1. Unfounded denunciations; 2. "Padrino System" and name-dropping (padrino is any person who wield influence); 3. Frame-up by resorting to entrapment; and 4. a) Hostility and/or non-cooperation of taxpayer under investigation; b) Non-observance of punctuality of appointment with examiner by taxpayer. In order that the abovementioned areas of concern affecting both revenue personnel and taxpayers could be considerably minimized if not altogether eradicated, it is enjoined that the guidelines herein prescribed should be scrupulously followed, viz: a. Fieldman should be very careful in preparing reports of assessments and said reports of assessments should be thoroughly studied by their supervisors and superiors for their validity and substance and demerits imposed on erring examiners and supervisors. b. Supervisors should monitor the activities of their fieldmen and closer supervision should be exercised over them. c. Any fieldman duly authorized to obtain valuable information on potential taxpayers from outside sources should as a rule, submit a written feedback to the Revenue District Officer or Chief of Investigating Division, as the case may be, within sixty (60) days from date of the written authority. d. The Revenue District Officer or the Chief of the Investigating Division concerned should sign all official communications/tax assessments emanating from their level of authority. e. Letters of authority should definitely specify the taxable year under investigation and the name of the examiner authorized to conduct the investigation; and in cases of unverified prior taxable years, a written request shall be forwarded to the Regional Director for approval in the Regional Office; and to the Commissioner by the Chief of Investigating Division in the Central Office. cd f. The Revenue District Officer/Regional Director in the District/Regional Office and the Chief of Investigating Division in the Central Office should conduct periodic seminars on human and public relations among their fieldmen. g. Any findings, except errors in mathematical computation, involving a change of assessment after review of reports of examination by higher authority of the BIR should be returned to the unit which handled the original field investigation for comment and/or further examination. Failure of the examiner to return the tax docket within a period of thirty (30) working days with the desired comment and/or observation shall make him liable to administrative action (underlining supplied). h. Examiners are required to submit reports on the tax cases assigned to them within the reglementary period of one hundred and twenty (120) days or progress report thereof except in transfer tax cases where the gross estate is in the amount of P100,000.00 or below, the report of which shall be submitted within a period of thirty (30) working days, shall likewise apply to verification of tax dockets, use of cash registers and use of loose leaf invoice or books. i. The Revenue District Officer and Chief, Assessment Branch of the Regional Office and the operating divisions and the Direct and Indirect Taxes Division in the Central Office shall require a uniform check list on the contents of the report of investigation. j. All BIR offices concerned shall make available working papers and other documents normally on file, and when not available, the taxpayer shall then present for reproduction his/its copy at the expense of the BIR. Relative to unfounded denunciations, the Bureau, as a policy, shall not entertain complaints/affidavits unless corroborated by a witness to the tax case investigation and unless preliminary inquiry has been conducted as to its veracity. Examiners shall not be administratively charged nor preventively suspended, until after confrontation whereby a prima facie case is established against him/her by the Regional Director in the Regional Office or the Deputy Commissioner/Assistant Commissioners in the Central Office. Taxpayer's denunciation filed after substantial valid assessments or collections have been submitted to the Revenue District Officer by the fieldmen should be regarded as retaliatory action by the taxpayer unless proven otherwise. Fieldmen/supervisors should not entertain anonymous letters including telephone calls. Whenever taxpayers resort to name-dropping or use of padrino, a written report thereon should be submitted to their immediate superior, copy furnished the Commissioner of Internal Revenue. In tax investigations, all taxpayers should submit the written authority of the person/persons authorized to represent him/it in the tax investigation and said written authority should be incorporated in the report; and any other person/persons not mentioned in the written authority should be disregarded. Unless the circumstances so warrant, entrapment should not be resorted to. It is desired that a uniform list of books of accounts and accounting records be adopted to be presented simultaneously to the letter of authority. All internal revenue officers and others concerned are hereby enjoined to comply strictly with the guidelines hereinabove set forth so that effective and proper enforcement of tax laws could be achieved. casia Provisions of other Circulars inconsistent herewith are hereby repealed. This Circular takes effect immediately. RUBEN B. ANCHETA Acting Commissioner