EX-BIR HENARES CHEATED THE PEOPLE OF THE PHILIPPINES BILLIONS IN TAXES

Philippine Daily Inquirer (PDI) chair Marixi Prieto firm “Dunkin’ Donuts” is a bigtime tax cheat. It deliberately under-declared its sales on the tax return to evade payment of rightful taxes. It owes the FILIPINO people P1.56 BILLION unpaid tax deficit; but former Philippines’s internal revenue chief KIM HENARES intentionally failed to either collect it or pursue tax evasion case against the company despite clear existence of actual fraud.

I am a former BIR revenue officer. In 2008, I was tasked to conduct an investigation of the 2007 financial records of GOLDEN DONUTS, INC. (GDI), the Philippines’s exclusive franchise holder of the American food brand “Dunkin’ Donuts”, for internal revenue tax purposes, where I discovered and appropriately documented several irregularities that culminated in the PhP 1.56 Billion deficiency tax assessment against the company.

In 2010, I personally reported GDI’s omissions to former BIR Commissioner Kim Henares and recommended to her the criminal prosecution of the company for tax evasion under the much-vaunted Run After Tax Evaders (RATE) program of the Bureau; but she intentionally failed to pursue tax evasion case against the company or enforce the collection of the said deficiency tax, because GDI’s secretary – Ms. Marixi Rufino-Prieto who also happens to be the Philippine Daily Inquirer’s chairperson – is former President Benigno Simeon C. Aquino 3^rd’s friend.

Initially, she had the case evaluated by the RATE team under former Deputy Commissioner Estela V. Sales to determine existence of fraud which resulted in the AFFIRMATIVE as relayed to me by a BIR official who requested anonymity. My informant said that the RATE team was then already preparing the memorandum to recommend the criminal prosecution of GDI for tax evasion but discontinued upon instruction from a high-ranking official of the BIR whose name my informant did not disclose.

I then conferred with former DCIR Estela Sales about the status of the case but she told me – “assessment na lang daw kasi kaibigan ni PNoy ang taxpayer at nakakadirekta ito kay comm” (referring to former CIR Henares). So, the case was referred to Assistant Commissioner, now Deputy Commissioner NESTOR S. VALEROSO who was then the Regional Director of BIR Regional Office in Quezon City.

I was also informed by my former group supervisor Mr. GREGORIO S. TUMANGUIL that Ms. Prieto met with Mr. Valeroso and informed the latter that she had already talked to CIR Henares about the tax assessment against GDI and expressed that they cannot afford to lose their franchise with Dunkin’ Donuts of America.

Both Henares and Valeroso, who were supposed to execute tax laws fairly and reasonably to protect the interest of the Filipino people, deliberately failed to enforce the collection of the afore-said tax deficiency, at least without fraud charges, giving undue advantage to the tax evader and undue injury to the Philippine Government.

On June 24, 2013, I resigned from the service as a result of my dissatisfaction and disenchantment with Henares over her selective and insincere anti-tax evasion drive that spared the said company for political patronage.

On March 17, 2014, after several reminders sent to her and in order to protect the interest of the FILIPINO people to whom the PhP 1.56 Billion tax deficit of GDI already legally belong, I filed administrative and criminal charges against Henares and Sales before the Office of the Ombudsman; but it dismissed the case without conducting a thorough investigation and without requiring respondents Henares and Sales to submit GDI’s tax case docket and copy of its actual “protest” which are necessary in the investigation.

The Ombudsman, in its dismissal resolution, did not discuss the merits of the case and did not state the facts and law upon which the conclusion given were drawn.

I feel in my layman’s understanding that the Ombudsman gravely erred in dismissing the case; thus, on December 4, 2015, within the period to file an appeal, I filed a PETITION FOR REVIEW before the COURT OF APPEALS which also dismissed the case for lack of jurisdiction and affirmed the Ombudsman’s resolution.

I express my firm stance that both the Ombudsman and CA have gravely erred in dismissing the case without fairly considering the primary and serious issues raised in my complaint. Thus, on July 22, 2016, within the 60-day period granted by law, I filed a PETITION FOR CERTIORARI before the SUPREME COURT.

The PhP 1.56 Billion deficiency tax assessment against GDI that remained undisturbed after review and evaluation conducted by the Assessment Division of the Bureau’s Regional Office in Quezon City, and already covered by Formal Letter of Demand and Assessment Notices (FANs), all bearing Demand No. 41-B072-07 and all dated October 29, 2010, and which attained finality, were my very findings. Such findings were the product of days and nights of toil and hard work for almost two (2) years, not to mention the pressures that I had to endure from the outside and even from some of my superiors in the Bureau.

For doing an out-of-the-box job, I was threatened with disciplinary action by my superiors; and for reporting irregularities, I was threatened with criminal action by no less than former BIR Commissioner Henares herself who was supposed to uphold an examiner’s tax assessment. May GOD help me?

HENARES’S ALIBIS TO CONCEAL THE REAL TRUTH ABOUT DD’s TAX EVASION CASE.

1.    She claimed that my tax assessment against DD allegedly showed inaccuracies;

2.    She claimed that the tax assessment against DD has not attained finality; and that the function to determine finality of an assessment is vested by law upon the Commissioner of Internal Revenue or her duly authorized representatives;

3.    She claimed that she has no knowledge of DD’s irregularities;

4.    She claimed that she did not order “two re-investigations” of DD’s tax case; and

5.    Henares’s and her minions’ other “alibis” in not filing fraud case against DD by claiming that the CD which I presented to the RATE team for evaluation was not compliant with the requirements prescribed under RMO 29-2002.

DISCUSSED BELOW ARE HENARES’S ALIBIS IN REFUSING TO COLLECT DD’S TAX DEFICIT AND IN NOT PURSUING TAX FRAUD CASE AGAINST THE COMPANY:

1.    On her claim that my tax assessment against DD allegedly showed inaccuracies.

On February 28, 2014, Henares told GMA-7 in a newscast that she had DD’s tax case re-investigated for several times (twice), allegedly because my tax assessment against the company showed inaccuracies. She was giving her side after the station interviewed me.

“Pinaimbestigahan natin ng ilang beses, at sa mga imbestigasyon na yan, lumalabas na hindi naman tama yung assessment ni Mr. Othello [Dalanon], Henares said.”

On March 17, 2014, I filed Formal Complaint against Kim Henares and Estela Sales before the Office of the Ombudsman. In the said complaint, I clearly stated my audit findings which include, among other things, the following:

a.   That DD’s duly-registered books of accounts (hardbound computer-generated) reflected a NET INCOME amounting to PhP 135.2-M while its AITR showed a NET LOSS amounting to PhP 44.9-M;

b.   That DD’s sales as reflected in the said books was PhP 1.928-B while the total amount of sales reflected in its AITR was only PhP 1.031-B. This shows a huge discrepancy (substantial under-declaration) amounting to PhP897-M.

[According to the SUPREME COURT in the case of Paper Industries Corporation of the Philippines vs. Court of Appeals, et al., 250 SCRA 434 – the books of accounts prevail over tax return when they reflect higher sales, because they are kept and prepared under control and supervision of the taxpayer; and they embody what must appear to be admission against interest.]

c.    That other independent relevant documents, such as but not limited to: Franchise Agreement, Technical Service Agreement, and Final Withholding Tax Returns, indicate that DD’s sales topped PhP 2.366-B but the amount recorded in its registered books was only PhP 1.928-B. This again shows an unrecorded and undeclared sales amounting to PhP 438-M.

According to Henares, these findings were flawed that is why she had DD’s case re-investigated for several times (twice).

However, she and Estela Sales, in their counter-affidavits, and even the supporting affidavits of ATTY. ROMMEL CURIBA and Mr. WILFREDO REYES, both of the BIR national office, did not give any justifications or explanations to dispute the above-enumerated glaring and crucial issues.

It is just AMAZING that despite respondents’ failure to give rejoinders to the above vital accounts, the Ombudsman dismissed the case. Clearly, it did not conduct a thorough investigation as it did not even require respondents to submit DD’s tax case docket and copy of its actual “protest” which are very essential in the investigation.

The Ombudsman, in its dismissal resolution, did not discuss the merits of the case and did not state the facts and law upon which the conclusion given were drawn.

2.    On her claim that the tax assessment against DD has not attained finality; and that the function to determine finality of an assessment is vested by law upon the Commissioner of Internal Revenue or her duly authorized representatives;

I expressed my firm stance that the PhP 1.56-B tax assessment against DD attained finality based on the following grounds:

a.   That DD failed to file a VALID protest against the FANs.

b.   That DD failed to submit the required documents within the period required by law.

Henares, in her counter-affidavit, states: “Mr. Dalanon, as then Revenue Officer, has no authority – and could not arrogate upon himself – to decide and declare that a certain assessment is already final, executory, and demandable. THIS IS A FUNCTION VESTED BY LAW UPON THE COMMISSIONER OF INTERNAL REVENUE OR HER DULY AUTHORIZED REPRESENTATIVES.” (Emphasis supplied)

Henares’s statement does not find basis in LAW. Her claim is erroneous, because it is the LAW that determines finality of an assessment as clearly provided under Revenue Regulations (RR) No. 12-99 in relation to Section 228 of the 1997 NIRC, as amended.

The PhP 1.56-B deficiency tax assessment against DD attained finality based on the following facts and law, and regulations:

a.   DD failed to file a VALID protest against the Formal Letter of Demand and Assessment Notices (FANs).

DD’s 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.

What DD filed instead was a REQUEST FOR CANCELLATION and WITHDRAWAL of the tax assessment. A request for cancellation or withdrawal is significantly different from a request for reconsideration or reinvestigation which is what the law requires.

The rules on protesting an assessment is found in Section 3 subsection 3.1.5 of 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, 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 NIRC, 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:

1.    The protest must be through a REQUEST FOR RECONSIDERATION or REINVESTIGATIONS;

2.    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

3.    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, “failure 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 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 fila 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.   DD failed to submit the required documents within the period required by law.

That DD failed its invalid protest against the Formal Letter of Demand and 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.

Section 228 of the 1997 NIRC, 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 DD 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.

Either of the above-cited grounds, the assessment against DD attained finality.

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 (now ACIR); 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.

Atty. Ortiz knew so well that the PhP 1.56-B tax assessment against DD has become FINAL, EXECUTORY and DEMANDABLE.

Once the deficiency tax assessment attained finality, it is no longer appealable; and there is now no reason why the BIR cannot continue with the collection of the said tax.

The above-cited grounds, were clearly stated in my Motion for Reconsideration filed with the Ombudsman to justify the reversal of its dismissal resolution, but the same were disregarded.

It is just SURPRISING that the Ombudsman dismissed the case without carefully scrutinizing tax laws, rules and regulations.

3.    On Henares’s claim that she has no knowledge of DD’s irregularities.

Henares, in her counter-affidavit, denied knowledge of DD’s irregularities; but admitted that she received my audit report on 10 September 2010.

As I said, I personally reported DD’s omissions to Henares and recommended to her the criminal prosecution of DD for tax evasion under the much-vaunted Run After Tax Evaders (RATE) program of the BIR.

ATTY. JETHRO M. SABARIAGA who was then her Chief of Staff, knew very well that I personally talked to Henares about the case. In fact, Atty. Sabariaga first read my audit report before it was given to Henares.

“Othello, di ka ba natatakot sa ginagawa mo?”

That’s Atty. Sabariaga asking.

To which I replied – trabaho lang ho sir.

If Henares didn’t know about DD’s tax case as she claimed; then, what did Atty. Sabariaga report to her after reading my audit report? Did Atty. Sabariaga tell Henares about the filmed story of “ASIONG SALONGA”?

It was Henares who introduced me to then Deputy Commissioner Estela Sales to whom the former referred the case for evaluation by the RATE team to determine existence of fraud – “ganito ang gusto kong mga kaso!” – Estela Sales even exclaimed.

The evaluation conducted by the RATE team to determine existence of fraud resulted in the AFFIRMATIVE as relayed to me by a BIR official who requested anonymity. My informant told me that the RATE team was then already preparing the memorandum to recommend the criminal prosecution of DD for tax evasion, but discontinued upon instruction from a high-ranking official of the BIR whose name my informant did not disclose.

There are documents to prove that Henares was properly apprised of DD’s tax case. These were attached to my Formal Complaint filed before the Ombudsman and Petition for Review with the CA.

It is just ASTONISHING that the Ombudsman dismissed the case without fairly conducting an investigation to arrive at a fair and reasonable resolution.

4.    On her claim that she did not order “two re-investigations” of DD’s tax case.

Henares, in her counter-affidavit, denied that she ordered “two re-investigations”. However, on February 28, 2014, she told GMA-7 in a newscast that she had DD’s tax case re-investigated for several times (twice), as the company’s representatives complained to her that my tax assessment allegedly showed inaccuracies.

“Pinaimbestigahan natin ng ilang beses, at sa mga imbestigasyon na yan, lumalabas na hindi naman tama yung assessment ni Mr. Othello [Dalanon], Henares said.”

Clearly the former Commissioner LIED.

Just to reiterate. The PhP 1.56-B deficiency tax assessment against DD attained finality; thus, re-investigations are no longer warranted.

Once the deficiency tax assessment attained finality, the right of the Government to collect the deficiency tax becomes absolute; thus, it 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 several re-investigation of a FINAL, EXECUTORY and DEMANDABLE assessment.

However, notwithstanding the ensuing finality of the afore-said deficiency tax assessment against DD, Henares had it re-investigated for several times (twice).

The HOCUS-POCUS re-investigations ordered by Henares.

a.   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 of the Bureau and already covered by FANs, all bearing Demand No. 41-B072-07 and all dated October 29, 2010, attained finality, was assigned to Revenue Officer STANLEY ONG under Group Supervisor GREGORIO S. TUMANGUIL, then both of RDO No. 41, Mandaluyong City. Mr. Ong was the same revenue officer who conducted the review of GDI tax 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 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 PhP 1.56-B which is already FINAL, EXECUTORY and DEMANDABLE but which was re-investigated by no other than him.

The result of the “first re-investigation” conducted by revenue officers Ong and Tumanguil was a HOCUS-POCUS. – This can be proven, if DD’s tax case docket which is under the custody of the BIR is presented if ever an investigation is conducted.

b.   The “second re-investigation”, which is also no longer necessary because my tax assessment attained finality, was referred to ATTY. GRACE CRUZ of the National Investigation Division, BIR national office. 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 REPORT OF RE-INVESTIGATION WAS SUBMITTED BY ATTY. CRUZ.

So, how can former BIR Commissioner 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 DD was incorrect?

5.    On Henares’s and her minions’ other “alibis” in not filing tax fraud case against DD by claiming that the CD which I presented to the RATE team for evaluation was not compliant with the requirements prescribed under RMO 29-2002.

Henares and her minions used the CD which I submitted to the RATE team as scapegoat in not filing tax fraud case against DD.

The RATE coordinator, members, and Mr. Wilfredo Reyes, the pioneer CAATTs user, failed to consider and evaluate the documents attached to the docket of DD tax case and the findings for deficiency tax assessment which were based on entries per DD’s 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 DD, such as: VAT returns and Final Withholding Tax Remittance returns.

The CD, which was neither mentioned nor objected to by DD in Its INVALID protest, is used by Henares and her minions as scapegoat in not filing tax evasion case against DD 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 DD 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 DD, 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 DD.

I suggested to the RATE team that they may recommend for the issuance of a subpoena duces tecum (SDT) to compel DD produce its duly-registered hardbound computer-generated books of accounts, but the suggestion was just ignored.

What is crystal clear is that, HENARES deliberately DECEIVED the FILIPINO people by making excuses to CONCEAL THE REAL TRUTH about this BIGTIME TAX EVASION CASE.

*** *** ***

THE CHRONOLOGY OF EVENTS AFFECTING MY CASE AGAINST HENARES AND SALES:

March 17, 2014

I filed criminal and administrative charges against Henares and Sales before the Ombudsman for Grave Misconduct, Gross Neglect of Duty, and for violation of Sec. 3(e), (f) of R.A. 3019, and Sec. 269(e), (h) of the NIRC.

August 24, 2015

I received the Ombudsman resolution dated March 24, 2015 dismissing the criminal and administrative charges against the respondents.

September 1, 2015

I filed a Motion for Reconsideration which the Ombudsman denied in an order dated September 10, 2015 which I received on November 19, 2015.

December 4, 2015

I filed a Petition for Review before the Court of Appeals to seek the reversal of the Ombudsman’s decision dismissing the case against the respondents.

December 18, 2015

            The Court of Appeals issued a Resolution dismissing the petition.

January 4, 2016

            I filed a Motion for Reconsideration.

May 27, 2016

I received CA’s resolution dated May 17, 2016 denying my Motion for Reconsideration.

July 12, 2016

My counsel submitted to the Office of CIR Caesar R. Dulay a copy of my 2013 Complaint.

July 18, 2016

            I submitted to the Office of CIR Dulay documents regarding DD tax case.

July 22, 2016

Within the 60-day period granted by law, I filed a Petition for Certiorari before the SUPREME COURT.

The P1.56-B deficiency tax assessment against DD that remained undisturbed after review and evaluation conducted by the Assessment Division of the Bureau’s Regional Office in Quezon City, and already covered by FANs, and which attained finality, were my very findings. Such findings were the product of days and nights of toil and hard work for almost two (2) years, not to mention the pressures that I had to endure from the outside and even from some of my superiors in the Bureau.

And for doing an out-of-the-box job, I was threatened with disciplinary action by my superiors; and for reporting irregularities, I was threatened with criminal action by no less than former BIR Commissioner Henares herself who was supposed to uphold an examiner’s tax assessment. MAY GOD HELP ME?

*** *** ***

I have been posting the issue on social media for more than two (2) years now. Every time I post it on my google account, I always share the same with Henares thru her official email account, and with the Department of Finance and BIR contact center. But until now, Henares failed to give any satisfactory explanations or defense to clarify it. Not even one of her minions and none from DD company has attempted to give any explanations or justifications to refute my postings.

They know very well that my tax assessment against DD is SOLID as the ROCK OF GIBRALTAR!!!

IT’s MORE FUN IN THE PHILIPPINES!

Othello Dalanon