Criminal Prosecution of Taxpayers in Cases where Decisions of the Courts and the Administrative Decisions of the Commissioner of Internal Revenue Have Become Final and Executory

May 8, 1967 REVENUE MEMORANDUM ORDER NO. 32-67 SUBJECT : Criminal Prosecution of Taxpayers in Cases where Decisions of the Courts and the Administrative Decisions of the Commissioner of Internal Revenue Have Become Final and Executory TO : All Internal Revenue Officers Concerned This Office has noted with alarm the failure of many taxpayers to pay their taxes notwithstanding the decisions of the Courts upholding assessments of this Office and ordering them to pay the amount due from them. It has also been noted that despite the fact that the taxpayers can no longer protest or appeal the assessments to the Court of Tax Appeals, which has original and exclusive jurisdiction over disputed assessments, because of the lapse of the 30-day period within which to appeal as prescribed under Section 11 of Republic Act No. 1125, some taxpayers are still prone to delay the payment of their taxes. casia Failure to pay the tax on the dates specified in the Tax Code is sufficient to hold the taxpayers criminally liable as held in the case of "People of the Philippines versus Eduardo Obieta," CA-G.R. No. 17530-R, November 13, 1958, pertinent portions of which are quoted as follows: "It follows from Obieta's admission that he really failed to pay his tax liability when it became due in 1951, not because of his financial inability to do so. He could have paid it in 1951 when his business was good, or in 1952 or 1953 had he made sufficient efforts to do so. The assessment notice (Exhibit B) which he received in May, 1951 is, upon its face, a positive demand for payment. His failure to pay in 1951, when he had ample means to do so, is a willful violation of the law and constitutes sufficient ground for his prosecution and conviction. Article 73 of the National Internal Revenue Code reads as follows: "Section 73. Penalty for failure to file return or to pay tax . Any one liable to pay the tax, to make a return or to supply information required under this Code, who refuses or neglects to pay such tax, to make such return or to supply such information at the time herein specified each year , shall be punished by a fine of not more than two thousand pesos or by imprisonment for not more than six months, or both." "From the foregoing provisions, it is sufficient for the conviction of the appellant that he failed and refused to pay his tax liability within the period fixed in the assessment notice and in the present case Obieta's liability became due on or before August 15, 1951. Therefore his failure to pay it on or before that date is a willful violation of the law and is sufficient to warrant his conviction and the penalty imposed upon him, to wit, P500.00 fine or subsidiary imprisonment in case of insolvency. . . . . . ." However, as the conviction in a criminal case does not include a determination for the civil liability for taxes (People vs. Arnault, G.R. No. L-4288, April 20, 1952; 480G 4805), and since the filing of a civil action to collect the tax is not a bar to the criminal prosecution of the taxpayer for violation of the penal provisions of the Tax Code, all cases in the National Office which have been decided by the Court sustaining the assessments of tax, the decisions on which have become final and executory, as well as cases involving assessments which have become final and unappealable because of the lapse of the 30-day period provided for in Section 11 of Republic Act No. 1125, shall be forwarded to the Legal Department, Attention: Prosecution Division, for screening and evaluation of evidence for possible criminal prosecution of the taxpayer for non-payment of the tax under the applicable provisions of the Tax Code. The criminal prosecution of taxpayers in cases where the assessments or decisions of the Commissioner of Internal Revenue involves amounts within the jurisdiction of the regions, and decisions of the Revenue Directors which have not been appealed to the Court of Tax Appeals because of the lapse the 30-day period, as well as court cases originally handled by Legal Branches of the regions where the decisions against the taxpayers have already become final and executory, shall be initiated by the Revenue Regions concerned. Strict compliance herewith is enjoined. MISAEL P. VERA Commissioner of Internal Revenue APPROVED: EDUARDO Z. ROMUALDEZ Secretary of Finance 1st Indorsement May 19, 1967 Respectfully returned to the Commissioner of Internal Revenue, Manila, the attached proposed Revenue Memorandum Order No. 32-67, dated May 8, 1967, relating to the criminal prosecution of taxpayers in cases where decisions of the courts and the administrative decisions of that Bureau have become final and executory, approved. EDUARDO Z. ROMUALDEZ Secretary May 8, 1967 MEMORANDUM FOR: The Commissioner Enclosed is a proposed Revenue Memorandum Order concerning the criminal prosecution for non-payment of tax under the applicable provisions of the Tax Code in cases where the taxpayer fails to satisfy the judgment of the Courts and in cases where the decisions of the Commissioner of Internal Revenue, or the Revenue Directors, have become final for failure of the taxpayers to appeal to the Court of Tax Appeals the assessments or decisions within the period prescribed by Section 11 of Republic Act No. 1125. cdi There is no incompatibility between a civil action for collection of the tax and the criminal prosecution of the taxpayer for non-payment thereof. Both action may be filed simultaneously. ". . . whether under the National Internal Revenue Code or under the Revised Penal Code the satisfaction of civil liability is not one of the grounds for the extinction of criminal action. The failure of the government, therefore, to enforce appropriate civil remedies the collection of taxes, does not detract from its right criminally to prosecute violations of the Code. The criminal actions subsist so long as there are no legal grounds that would bar their prosecution." (Tierra, G.R. Nos. 17177 to 17180, December 28, 1964). Furthermore, experience has shown that criminal prosecution, as an aid to collection of the tax, is more effective than the ordinary civil action for collection. As regards cases decided by the Courts ordering the payment of the tax due the government, when the decision becomes final and executory and the taxpayer fails to pay the tax due notwithstanding the decision, there is more reason for the government to prosecute the taxpayer because the omission becomes a clear case of willful failure to pay the tax. If the taxpayer is without means to pay the tax as adjudged by the Court, he should be made to feel the force of the law by imprisonment for his failure to pay his tax obligation. In any event, lack of the means to pay is not a bar to prosecution for failure to pay the tax. In view of the foregoing, it is respectfully recommended that the proposed Revenue Memorandum Order be signed for release. cdll Respectfully submitted, ELIAS E. VEGA Revenue Operations Head (Legal)