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Concerning compliance complacency

(Article published in the Oct 6, 2010 issue of Manila Standard Today)   

It was a misfortune worse than being struck by lightning twice.  This hapless taxpayer was struck by conviction for tax evasion three times, and all three within a short period of less than two months. 

On 11 August 2010, the Second Division of the Court of Tax Appeals (CTA) in Criminal Case No. 0-030, convicted Benjamin G. Kintanar of willful failure to file his income tax return for the taxable year 1999.  Forty-seven days later, on 27 September, Kintanar was again convicted by the CTA, not once but twice, for failure to file his income tax return for the taxable year 2000 and for the same failure with respect to taxable year 2001.

Kintanar’s misfortunes he could easily have avoided.  Simply by making sure that his tax responsibilities were all fulfilled.  Instead, however, he was apathetic and indifferent to his duty to pay his taxes.  In the end, the mills of the gods, though grinding slowly, ground him fine.  For the year 1999, he was sentenced to pay a fine of Php 10,000 and to imprisonment of one (1) year as minimum and two (2) years as maximum.  For each of 2000 and 2001, he had to undergo the same penalties of Php 10,000 and imprisonment of one to two years in jail.

 Moreover, since the civil aspect of his tax evasion is, under the new law expanding the jurisdiction of the CTA, deemed instituted with the criminal cases, he was ordered to pay Php 6,205,331.99 for 1999, Php 8,251,602.72 for 2000 and Php 10,730, 391.18, plus additional interest and surcharges.

         But noteworthy though may be the criminal and civil penalties that Kintanar brought upon himself, it is more interesting to examine the factors that brought about his unenviable predicament. 


For example, Section 51 of the Tax Code requires a taxpayer to file his income tax return with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which he has his legal residence or principal place of business in the Philippines.  Kintanar confirmed on cross-examination that he had been a resident of Pasig from 1972 to 1997, then he transferred to Parañaque in 1997 and stayed there up to 2003 or 2004 and from then on went back to Pasig.  He thus should have thus filed his ITRs Parañaque or Pasig.  Instead, what he presented as documents purporting to be his income tax returns for 2000 and 2001 which reflected an address in Lagro Subdivision, Novaliches, Quezon City, where he never, repeat, never lived.  His purported ITRs for the relevant years, in fact, bore the stamp of the RDO No. 40 of Cubao, Quezon City.

Even those so-called ITRs were of “doubtful authenticity.”  Kintanar failed to properly prove their existence in the records of RDO No. 40.  He did not present, as he should have, the original record of RDO No. 40, or a copy thereof duly attested by the appropriate officer of that office, with the appropriate certificate that said officer had custody of said original. 

To be sure, mere failure to file an income tax return is not a crime.  What is additionally required is for the prosecution to prove that such failure was “willfull”. And the prosecution measured up to the task.

In the first place, the prosecution proved that Kintanar spurned the Government’s efforts to examine his records to verify his tax situation.  The BIR sent at least three notices to Kintanar to submit for the examination of his books of account and other accounting records.  In none of these instances did Kintanar comply.  Because of such failure, the BIR decided to escalate its demand for records.  It sent Kintanar a subpoena duces tecum, commanding him to appear before the chief of the prosecution division and to present his books of accounts and other accounting records.  True to form, Kintanar did not respond.

Only when he received a Formal Letter of Demand including Assessment Notices, did Kintanar, in the words of the CTA, manifest “a hint of concern or interest.”  He protested the assessment and, as was his right, undertook to submit additional documents within 60 days from date of his protest.  But Kintanar apparently could not change his stripes.  He failed to honor his undertaking, despite a kind reminder to do so from the BIR.  As a result, a Final Decision on his disputed assessment was eventually issued.

Secondly, in open court and without any visible compunction, Kintanar admitted that he simply signed what purported to be his income tax returns; he attested that he did not read their contents and did not personally file them.  He did not even try to verify from the BIR whether his ITRs had in fact been duly filed. 

His exhibited indifference towards his tax responsibilities to the government, his obvious lack of concern and, in fact, blatant disregard of the notices and procedures set up to ensure that the BIR collects the proper taxes, and his failure to exercise the ordinary prudence to check and verify what he claims he was told about the fact of filing of his return, clearly showed, in the mind of the CTA, that Kintanar willfully failed to filed his income tax returns. 

What tilted the balance against Kintanar was obviously “his capacity to brush aside or ignore the issue concerning his income taxes by not responding to the several notices and procedure and by his failure to make good his undertaking to submit the documents within 60 days from his protest.” 

Remarked the CTA: “If the accused had the capacity to display this kind of indifference at the time when he was being bombarded with notices by the BIR, how much more apathy could he have displayed at the time required by law for filing his income tax return, where there was still no pressure from BIR for any government agency.”

Three strikes in a row.  Kintanar, who undoubtedly at this stage of his problems still has his remedies, obviously needs to wake up from his tax compliance complacency.