Privilege under R.A. 1405, for Secrecy of Bank Deposits Shall Be Waived if Taxpayer's Request for Compromise Settlement is Premised on His Financial Incapacity to Pay the Tax Assessed

October 21, 1987 REVENUE MEMORANDUM ORDER NO. 26-87 SUBJECT : Privilege under R.A. 1405, for Secrecy of Bank Deposits Shall Be Waived if Taxpayer's Request for Compromise Settlement is Premised on His Financial Incapacity to Pay the Tax Assessed TO : All Internal Revenue Officers and Others Concerned 1. Statutory requirement . - Section 16(f) of the National Internal Revenue Code, as amended by Presidential Decree No. 1994, provides: ". . . In case a taxpayer offers to compromise the payment of his tax liabilities on the ground that his financial position demonstrates a clear inability to pay the tax assessed, his offer shall not be considered unless he waives his privilege under the said law and such waiver shall serve as authority of the Commissioner to inquire into the bank deposits of said taxpayer." 2. Mode of procedures : 2.1 - The waiver required under this memorandum order shall only apply to a taxpayer whose request for a compromise settlement is solely premised on his financial incapacity to pay the tax assessed. 2.2 - The taxpayer-applicant shall file with his request a waiver of his privilege under R.A. 1405 (ANNEX "A"), where by the said taxpayer (a) shall attest that he has no sufficient bank deposit account/s to answer for the tax assessed; (b) that he waives his privilege under R.A. 1405 for the secrecy of his bank deposits; (c) that he authorizes the Commissioner of Internal Revenue or the Commissioner's duly authorized representative to inquire into his bank deposit accounts for purposes of determining veracity of his attestation re his financial condition; (d) that he agrees that the compromise settlement forged, based on his request, shall be nullified by the Commissioner in the event said inquiry on his bank deposits shows that he has bank deposits accounts sufficient to fully cover payment of the tax assessed; and (e) that he waives his right to prescription of the Government's right to collect the tax assessed in the event the Commissioner nullifies the compromise agreement because of subsequent findings that he has actually bank deposit accounts sufficient to fully cover payment of the tax assessed, inclusive of applicable increments. cdt 2.3 - If in the opinion of the Commissioner or his duly authorized representative, there is reason to believe that inquiry on the taxpayer-applicant's bank deposit account/s is necessary, based on the background and circumstances of the said taxpayer, after forging of the compromise agreement, he shall order for the immediate inquiry on the said taxpayer's bank deposit accounts. Where such inquiry has been made, certification by the corresponding bank/s shall be secured and attached with the records of the case for scrutiny by the Commissioner or his duly authorized representative. 2.4 - Where such inquiry has been deemed necessary, based on the background and circumstances of the taxpayer, inquiry shall be made from at least three (3) leading banking institutions. cdt 3. Effectivity - This Memorandum Order shall take effect immediately. (SGD.) BIENVENIDO A. TAN, JR. Commissioner