PHILIPPINES’s BIR CHIEF KIM HENARES DELIBERATELY DECEIVED THE FILIPINO PEOPLE.
Bureau of
Internal Revenue (BIR) Commissioner Kim Henares’s excuses to conceal the real
truth about the P1.56-B tax evasion case
involving Philippine Daily Inquirer (PDI) Chair Marixi Rufino-Prieto firm Golden Donuts, Inc. (GDI), the exclusive Philippine
Franchisee of the global brand “Dunkin’
Donuts”:
1.
That GDI’s representatives purportedly
complained to her that my tax assessment against the company was inaccurate;
2. That she ordered two (2)
re-investigations conducted by different groups of revenue officers who
supposedly arrived at the same results, purportedly finding my tax assessment
to be incorrect;
3. That the authority to decide
and declare finality of a certain assessment is a function vested by law upon
the Commissioner of Internal Revenue; and
4.
That the compact disc (CD)
which I presented to the RATE “Run After Tax Evaders” team was allegedly not
compliant with the requirements prescribed under Revenue Memorandum Order (RMO)
No. 29-2002.
The foregoing
assertions are discussed in the same sequence and manner, vis:
1.
That GDI’s representatives purportedly
complained to her that my tax assessment against the company was inaccurate.
My
firm stance:
My
tax audit/investigation resulted in several findings of irregularities which
were properly supported by mathematical computations based on actual data
contained in GDI’s financial records and appropriately substantiated with
pieces of documentary evidence, culminated in the deficiency tax assessment
against GDI amounting to PhP 1.56-B, including increments. Among others, are as
follows:
a. GDI
keeps two (2) sets of books of accounts.
One
is the duly-registered hardbound computer-generated books of accounts which
were the bases of my tax assessment, and the other is the unregistered
not-permanently-bound “manually-posted original books of accounts” which GDI
claimed as the basis of its Trial Balance for financial statements and income
tax return purposes.
Is
it not that keeping two (2) sets of books of accounts, a fraudulent act or
criminal tax violation?
b. GDI
supplied false information on the tax return.
GDI
adopts a “computer-assisted accounting system” with duly-registered hardbound
computer-generated books of accounts.
The
compact disc (CD) submitted by GDI to the Bureau for audit, and the
duly-registered hardbound computer-generated books of accounts, as I have
appropriately validated, reflected a Net Taxable Income amounting to PhP 135.2
million while the Annual Income Tax Return (AITR) reflected a Net Loss of PhP
44.9 million.
On
the basis of these information alone, it can readily be deduced that GDI
under-declared its income on the tax return.
Is
it not that supplying false information on the tax return, a fraudulent act or
criminal tax violation?
c.
GDI under-declared its Sales on
the tax return in two (2) instances:
i.
The CD and the duly-registered
books (hardbound computer-generated), as I have appropriately validated,
reflected a Sales amounting to PhP 1.928 billion while the amount reflected on
the AITR was only PhP 1.031 billion; a huge discrepancy (substantial
under-declaration) amounting to PhP 897 million.
The
SUPREME COURT ruled in the case of Paper
Industries Corporation of the Philippines vs.
Court of Appeals, et al., 250 SCRA 434 that “where the books of
accounts reflected a Sales or Receipts higher than that reflected in the
return, the books of accounts should prevail. This is so, because the books of
accounts are kept by the taxpayer and are prepared under its control and
supervision; and they reflected what may be deemed to be admission against
interest.”
The
representations made by GDI in the CD and duly-registered books submitted and
presented by it to the Bureau for audit and examination amounted to admissions
against interest which it cannot disown and change at its convenience of
pleasure.
Is
it not that substantial under-declaration of Sales on the tax return, a
fraudulent act or criminal tax violation?
ii.
Other independent relevant
documents, such as but not limited to: (a) Franchise Agreement between GDI and
Dunkin’ Donuts of America, Inc.; (2) Technical Service Agreement between GDI
and its affiliate-Antares Management, Inc. (AMI); and other BIR filings of GDI
(i.e. final withholding tax remittance returns and VAT returns), further
revealed that GDI’s Sales topped PhP 2.366 billion but the amount recorded in
its duly-registered books (hardbound computer-generated) was only PhP 1.928
billion; a huge discrepancy (substantial unrecorded and undeclared sales)
amounting to PhP 438 million.
The
information contained in the enumerated documents were utilized in further
determining GDI’s Sales on the basis of the provisions of Section 5(A) of the
1997 National Internal Revenue Code (1997 NIRC), as amended, which reads:
“Power
of the Commissioner to obtain information, and to summon, examine, and take
testimony of persons. – In ascertaining the correctness of any return, or in
making a return when none has been made, or in determining the liability of any
person for any internal revenue tax, or in collecting any such liability, or in
evaluating tax compliance, the Commissioner is authorized:
(A)
To examine any book, paper,
record, or other data which may be relevant or material to such inquiry;”
The
method of validation I used was already upheld by the Court of Tax Appeals in
the case of Asia Coal Corporation vs.
Commissioner of Internal Revenue (CTA Case No. 6803, February 13, 2008)
that “the respondent may utilize any kind of document, x x x to determine the
correct sales of the petitioner…”
Is
it not that deliberate non-recording of sales in the duly-registered books of
accounts and non-declaration of the same on the tax return, are fraudulent acts
or criminal tax violations?
d. GDI
substantially under-remitted VAT.
Under the VAT principle - Output VAT is concomitant to Sales
or Revenue account. Thus,
an under-declaration of Sales results in the under-remittance of VAT.
For
year 2007, GDI substantially under-declared its Sales on the tax return,
consequently VAT was significantly under-remitted.
Is
it not that substantial under-remittance of VAT, a fraudulent act or criminal
tax violation?
Just
to say it again. All the above enumerated findings of irregularities, and all
other discrepancies stated in my audit memorandum report submitted, were
appropriately substantiated with pieces of documentary evidence submitted by
GDI itself.
2.
That she ordered two (2)
re-investigations conducted by different groups of revenue officers who
supposedly arrived at similar results, purportedly finding my tax assessment to
be incorrect.
My
firm stance:
The
PhP 1.56 billion deficiency tax assessment against GDI obtained finality. Thus,
re-investigations are no longer warranted.
Once
the deficiency tax assessment obtained finality, the right of the government to
collect the deficiency tax becomes absolute; thus, precludes the taxpayer from
questioning the correctness of the assessment and from raising any
justification or defense that would pave the way for a re-investigation.
There
is no LAW that authorizes the Commissioner to order two (2) re-investigations
of a FINAL, EXECUTORY and DEMANDABLE assessment.
However,
notwithstanding the ensuing finality of the afore-said deficiency tax assessment
against GDI, no less than the Commissioner herself allowed such
re-investigations.
The “first
re-investigation”, which is no longer warranted because my tax assessment which
remained undisturbed after review and evaluation by high-ranking officers in
the district and regional levels and already covered by Final Assessment Notices
(FANs) bearing Demand No. 41-B072-07 and all dated October 29, 2010 obtained
finality, was assigned to Revenue Officer Stanley Ong, under Group Supervisor
Gregorio S. Tumanguil, who was the same revenue officer who conducted the
review of the case and recommended for the issuance of the statutory notices of
assessment (PAN and FANs) when he was yet with the Assessment Division of the
Regional Office in Quezon City.
I am not a
lawyer though I believe that Revenue Officer Stanley Ong who conducted the “first
re-investigation” could no longer disturb my tax assessment by himself for
reasons of principle of estoppel. The equitable principle of estoppel forbids
the revenue officer who conducted the “first re-investigation” from taking
inconsistent position against his concurrence to my original audit findings
that culminated in the deficiency tax assessment amounting to P1.56 billion
which is already FINAL, EXECUTORY and DEMANDABLE but which was re-investigated
by no other than him.
The second
re-investigation, which again is no longer necessary because my tax assessment
obtained finality, was referred to Atty. Grace Cruz of the National
Investigation Division, BIR National Office in Diliman, Quezon City. I strongly
admire Atty. Cruz of her investigative expertise in administrative cases. Lest
I be misconstrued. I am not saying that Atty. Cruz is short of proficiency in tax
accounting and tax auditing. No result of re-investigation was submitted by
Atty. Cruz.
So, how can
BIR Commissioner Kim Henares claim that her groups of revenue officers who
conducted the two (2) separate re-investigations came up with the same findings
that my tax assessment against GDI was incorrect?
Just to
reiterate. The P1.56-B tax deficit of GDI has become due and demandable; thus,
it already legally belongs to the Filipino people.
3. That
the authority to decide and declare finality of a certain assessment is a
function vested by law upon the Commissioner of Internal Revenue.
My
firm position:
Her
assertion does not find basis in LAW.
It
is the LAW that determines finality of a certain assessment as clearly provided
under Revenue Regulations (RR) No. 12-99 as amended by RR No. 18-2013 which the
Commissioner herself promulgated, in relation to Section 228 of the 1997 NIRC,
as amended.
The
tax assessment against GDI became final, executory and demandable in two (2)
instances, vis:
a. GDI’s
letter of protest against the Final Assessment Notices (FANs) is invalid based on the following facts
and law, and regulations.
The
alleged letter of protest merely stated “protest against PAN adopted in toto”. It did not state the facts, the applicable law, rules and regulations, or jurisprudence
on which the protest was based. It is neither a request for reconsideration nor reinvestigation.
The
rules on protesting an assessment is found in Section 3 subsection 3.1.5 of
Revenue Regulations (RR) No. 12-99, that reads:
“Disputed Assessment. – The taxpayer or his duly authorized
representative may protest administratively against the aforesaid formal letter
of demand and assessment notice within thirty (30) days from date of receipt
thereof.”
“The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence
on which his protest is based, otherwise, his protest shall be considered void and without force and effect.”
“If the taxpayer fails to file
a valid protest against the formal
letter of demand and assessment notice within thirty (30) days from date of
receipt thereof, the assessment shall become final, executory and demandable.”
The
said Regulations must be taken in relation to Section 228 of the 1997 Tax Code,
which reads:
“Protesting an Assessment. –
Such assessment may be
protested administratively by filing a request
for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in such form and manner
as may be prescribed by implementing rules and regulations. x x x otherwise,
the assessment shall become final.”
Clearly,
what the law demands is a valid administrative protest against the formal
letter of demand and assessment notice which required the taxpayer to comply
with the following:
i. The protest must be through a request for reconsideration or
reinvestigation;
ii.
The protest must be in the form
and manner as prescribed under RR No. 12-99, which provides that said protest
must state the facts, the law, rules and regulations, or jurisprudence
on which the protest is based; and
iii.
Must be filed within thirty
(30) days from receipt of the assessment.
The
COURT OF TAX APPEALS in the case of Allied
Banking Corporation vs. Commissioner
of Internal Revenue (CTA Case No. 4581, March 25, 1992) cited
that, “[f]ailure to comply with any or
all of these requirements results in the assessment against the taxpayer
becoming final and unappealable.”
The
letter should not just state “protest against PAN adopted in toto”, because the administrative protest required to be filed
as an answer to the formal letter of demand and assessment notice is distinct
and not the same as the protest filed against the PAN.
The
COURT OF TAX APPEALS emphasized in
the case of Security Bank Corporation vs.
Commissioner of Internal Revenue (CTA Case No. 6564, November 28,
2006) and further accentuated in the case of Bank of the Philippine
Islands vs. Commissioner of Internal
Revenue (CTA Case No. 7397, April 9, 2008) that:
“[A] protest to the preliminary
assessment notice is not the same as the protest required to be filed as an
answer to the final assessment notice. In fact, a preliminary assessment notice
may or may not even be protested to by the taxpayer, and the fact of
non-protest shall not in any way make the preliminary assessment notice final
and unappealable. What is clear from Section 319-A of the Tax Code of 1977, as
amended, is that failure on the part of the taxpayer to protest or reply to a
preliminary assessment notice paves the way for the issuance of a final
assessment notice. However, evident under said Section (now Section 228 of the
1997 Tax Code) is that failure on the part of the taxpayer to file a valid
administrative protest through a request for reconsideration or reinvestigation
on the final assessment notice, shall result in the finality of the said FAN.”
(Annotation supplied)
The
SUPREME COURT in the case of Allied
Banking Corporation vs. Commissioner
of Internal Revenue (G.R. No. 175097, February 5, 2010)
heightened that:
“It is the Formal Letter of
Demand and Assessment Notice that must be administratively protested or
disputed within 30 days, and not the PAN.”
b. GDI
failed to submit the required documents in support of its protest required by
law.
Section
228 of the 1997 National Internal Revenue Code (1997 Tax Code), as amended,
provides:
“Within
sixty (60) days from filing of the protest, all relevant supporting documents
shall have been submitted; otherwise, the assessment shall become final.”
In
the instant case, when GDI submitted documents in support of its protest, it
was already beyond the sixty (60)-day period in violation of the above-cited
provisions of the 1997 NIRC, as amended.
That
GDI filed its INVALID PROTEST against
the Formal Letter of Demand and Final Assessment Notices (FANs) on November 30,
2010 but it submitted documents only on March 24, 2011. Hence, it was already
114 days after the date of its filing of the protest; notwithstanding that said
documents contained the same information as that already contained in the same
documents submitted by GDI on November 27, 2009 covered by its letter dated
November 27, 2009, which I have already considered, and the same were already
taken up in the Adjusted Final Audit Findings sent to GDI covered by the Post
Reporting Notice dated July 19, 2010 which became the bases of the Preliminary
Assessment Notices (PANs) and Final Assessment Notices (FANs).
In
a meeting held sometime on April, 2011 at the National Office in connection
with the instant case which was attended to by Atty. Claro Ortiz, Head Revenue
Executive Assistant; Atty. Sixto Dy, Chief, National Investigation Division;
Atty. Abegail Gamboa, Chief of Staff of DCIR Estela Sales; and myself, it was
ascertained that the tax assessment has become final, executory and demandable,
in view of GDI’s failure to comply with the requirements as prescribed. “These
are scraps of paper”, that’s Atty. Ortiz saying.
4.
That the compact disc (CD)
which I presented to the RATE “Run After Tax Evaders” team was allegedly not
compliant with the requirements prescribed under Revenue Memorandum Order (RMO)
No. 29-2002.
My
firm stance:
The
RATE coordinator, members, and Mr. Wilfredo Reyes, the pioneer CAATTs
(Computer-Assisted Audit Tools and Techniques) user, failed to consider and
evaluate the documents attached to the docket of GDI case and the findings for
deficiency tax assessment which were based on entries per duly-registered books
of accounts (hardbound computer-generated), as I have appropriately validated;
and other independent relevant documents, such as but not limited to, Franchise
Agreement; Technical Service Agreement, and other BIR returns filed by GDI,
such as: VAT returns and Final Withholding Tax Remittance Returns.
The
CD, which was neither mentioned nor objected to by GDI in its INVALID PROTEST, that I presented to
the RATE team is used by Henares and her minions as scapegoat in not filing tax
evasion case against GDI by claiming that said CD is not compliant with the requirements
prescribed under RMO No. 29-2002 - that it should be properly labeled with the
name of the taxpayer, taxable year and serial no. and volume no. and signed by
the taxpayer and RDO.
I
pointed out that GDI adopts a “computer-assisted accounting system” wherein it
is still required to register a “hardbound computer-generated books of
accounts” which were the bases of my audit findings. Thus, the CD, which they
used as scapegoat in not filing fraud case against GDI, need not be strictly
compliant with the requirements provided under the aforesaid RMO in regards to
the markings to be inscribed thereon.
RMO
No. 29-2002 clearly provides that in case the taxpayer has no capability to
submit in CD-ROM form, procedures under the MANUAL SYSTEM shall prevail. In other words, if the taxpayer adopts
a computer system of accounting but has no capability to integrate the
different components of accounting system (i.e., books of accounts and other
related accounting records) in a CD-ROM form, it shall still be required to
register a “hardbound computer-generated books of accounts”, as in the case of
GDI.
I
suggested to the RATE team that they may recommend for the issuance of a
Subpoena Duces Tecum (SDT) to compel GDI produce its duly-registered hardbound
computer-generated books of accounts, but the suggestion was just ignored.
BIR
Commissioner Kim Henares, tagged as the “unyielding tax-evader-buster”, lied
when she told GMA-7 in a telecast interview, that my tax assessment against GDI
was faulty, to conceal the real truth. What is crystal clear is that, she
appeared to be lawyering for a tax evader. Her continued intense refusal to
appropriately act on the case (i.e., to either enforce collection of the subject
due and demandable tax deficit or pursue tax evasion case against the subject
taxpayer), notwithstanding her knowledge of the findings of fraudulent acts or
criminal tax violations perpetrated by GDI, is a crystal clear manifestation of
coddling and defending “Dunkin’ Donuts” local seller – a bigtime tax evader.
Atty. Kim
Henares, just tell the whole truth and nothing but the truth.
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