Intensification of Criminal Prosecution of Tax Fraud Cases

May 9, 1983 REVENUE MEMORANDUM ORDER NO. 15-83 SUBJECT : Intensification of Criminal Prosecution of Tax Fraud Cases TO : All Internal Revenue Officers and Others Concerned It has been observed that neither the continuous voluntary tax compliance campaigns undertaken by the Bureau nor the magnanimous gestures of the State in the form of a series of tax amnesties have succeeded in reforming many taxpayers who persist in their tax evasion activities. Reports from the field offices and computer statistics indicate that a very small percentage of the potential tax filers, both individual and corporate, are complying with their tax obligations. Consistent with previous announcements to criminally prosecute those who will persist in flouting revenue laws, the Bureau will now pursue a course of action of vigorously pursuing its tax fraud program to the full extent of the law. At this initial stage, priority shall be given to the criminal prosecution of taxpayers who refused to file the tax returns as required by law. By way of implementing this policy, the following orders are hereby issued for compliance by all concerned: I. Field Offices aa. Regional Directors and Revenue District Officers shall undertake expeditious measures to ferret out, identify and document cases involving taxpayers within their jurisdiction who, being required by law to file tax returns, have repeatedly failed to do so within the time or times required. cdt bb. Pursuant to the provisions of Section 82 of the Tax Code the list of taxpayers for the preceding taxable year in each municipality or city shall be posted at the main entrance of the respective municipal building or city hall. cc. These potential taxpayers in each revenue district must be made aware of the following penalties for non-filing: 1. Administrative penalties/increments for non-filing of income tax return and late payment of income tax: a. 50% surcharge if no income tax return has been filed due to willful intent or a return was filed but found later to be fraudulent or false with intent to evade the tax; or b. 25% surcharge if the income tax return is voluntarily filed after the due date but there is no meritorious case for the delay; c. 10% surcharge for late payment; d. In addition to either of the above surcharges, 20% interest per annum on the tax due. 2. Civil and/or criminal penalties: a. In case of individuals a fine of not more than P2,000.00 or imprisonment of not more than six months, or both; b. In case of corporations, which includes duly registered general co-partnership, a fine of not exceeding P20,000.00; c. In addition thereto, any individual or any officer of such entity who is responsible for the filing of the return and payment of tax shall be punished by a fine of not less than P5,000.00 and imprisonment of not less than two years. dd. Once these non-filers are identified and their reportable income/receipts, whether complete or partial, are established, their cases shall be referred to the Legal Branches for evaluation and, if warranted by the evidence, for filing of the appropriate criminal charge. ee. A monthly report of performance, as well as monthly list of non-filers shall be submitted by the Revenue District Officer, thru the Regional Director, to a Monitoring Committee which shall be headed by the Revenue Service Chief (Legal Office) with the Chiefs of the Tax Fraud and Prosecution Divisions as members. ff. The compromise penalties for non-filing or late filing of returns shall not be collected in any case so discovered without the recommendation of the Monitoring Committee and the approval of the Commissioner. II. Regional Special Investigation Units aa. The regional Special Investigation Units created under Revenue Administrative Order No. 5-80 dated November 6, 1980, shall intensify and expedite their tax fraud investigation and development programs in accordance with the procedures, guidelines and techniques prescribed under Revenue Memorandum Order No. 5-83 dated February 25, 1983 and shall report for prosecution purposes at least one (1) quality tax fraud case a month, starting June, 1983. bb. Quality tax fraud case shall be understood as one involving a tax assessment, wherein the intention to evade payment of tax is clearly and convincingly established by the evidence gathered. cc. Every quality tax fraud case developed and reported which results in tax assessment and collection and/or criminal prosecution of the taxpayer shall be credited to the examiner/s concerned who shall thus be rated accordingly for promotion and assignment purposes. III. Enforcement Divisions in the National Office aa. The different enforcement divisions in the National Office are hereby directed to develop and report tax fraud cases within their areas of jurisdiction. However, tax fraud investigation reports emanating from these divisions shall be subject to review and evaluation by the Tax Fraud Division which, may either refer the case to the Prosecution Division for criminal action, return the same to the division of origin or undertake further documentation thereon. bb. The same incentives as provided in paragraph II, cc., shall be accorded to all examiners from enforcement divisions who shall submit quality tax fraud reports that result in tax assessment and collection and or prosecution of the taxpayer. cd i Strict compliance with this Order is hereby enjoined. (SGD.) ROMULO M. VILLA Acting Commissioner