Re-Compromises in extra-judicial settlement of violations of penal provisions of the Tax Code

March 7, 1968 REVENUE MEMORANDUM ORDER NO. 10-68 TO : All Regional Directors, Revenue District Officers Collection Agents and All Concerned SUBJECT : Re-Compromises in extra-judicial settlement of violations of penal provisions of the Tax Code It has come to the attention of this Office that Collection Agents have been indiscriminately accepting compromise payments in extra-judicial settlement of taxpayer's violation of the penal provisions of the Tax Code without prior authority from this Office or from the Office of the Regional Directors concerned to the embarrassment of this Office. Instances of this embarrassment are the acceptance by the Collection Agent of Tanza, Cavite of the amount of P400.00 from Mr. Lino Bocalan as compromise payment of his failure to file income tax returns for 1961 and 1962; the acceptance by the Collection Agent of Imus, Cavite, of the amount of P155.00 from Mr. Lope Sarreal, Sr. as compromise payment for his failure to file income tax returns for 1962, 1964 and 1965; and the acceptance by the Collection Agent of Cotabato City of the amount of P60.00 from Mr. Aguedo Gepte as compromise payment of his failure to file income tax returns for 1954 and 1960, notwithstanding the wide publicity in the metropolitan papers to the effect that complaints for the criminal prosecution of the abovenamed taxpayers for violation of the penal provision of the Tax Code have been filed with the Fiscal's Office concerned. The acceptance by the Collection Agents of compromise payment in the cases adverted to above is unauthorized as the said Collection Agents did not first report the aforesaid violations of the Tax Code to the Revenue Directors concerned as required by Revenue Administrative Order No. 3-62 dated May 31, 1963. Besides, under Section 309 of the Tax Code, the power to compromise any case, civil or criminal, is vested exclusively in the Commissioner of Internal Revenue (Allison J. Gibbs and Esther K. Gibbs vs. Collector of Internal Revenue and Court of Tax Appeals, G.R. No. L-13453, February 29, 1960). Apart from my instruction to the Prosecution Division to inform Regional Directors and Collection Agents concerned of the filing of criminal complaints against taxpayers and to enjoin them from accepting compromise payments in extra judicial settlement of their violation of the provisions of the Tax Code, Collection Agents are hereby directed not to accept payment of compromise penalty without prior authority from this Office or from the Office of the Regional Directors concerned who will determine the merit of the compromise in each case. Collection Agents are further enjoined from accepting compromise payment suggested in demand letters if payment is effected after one (1) month from date of receipt of said demand without prior authority from this Office or from the Office of the Regional Director concerned. However, payment of the amount of the tax involved in criminal prosecution for failure to pay plus delinquency penalty, except compromise penalty, may be accepted, since payment does not extinguish criminal liability (People vs. Ildefonso Tierra, G.R. Nos. L-17177 to 17180 December 28, 1964). In this connection, however, the initiative for the dismissal of the complaint filed with the Fiscal's Office for failure to pay should come from the Fiscal's Office and never from the Bureau of Internal Revenue in pursuance of the joint circular of the Secretary of Finance and Secretary of Justice (Department Order No. 131, of the Department of Finance) dated November 22, 1950. aisadc Strict compliance hereto is enjoined. MISAEL P. VERA Commissioner of Internal Revenue