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Dirty Tricks of Tax Evaders

(Article published in the Oct 13, 2010 issue of Manila Standard Today)   

Golden Dragon’s dirty trick, on the other hand, is akin to non-collection of garbage; it was not acting, or was at best acting rather belatedly.  In July, 2006, the BIR issued Golden Dragon a letter of authority. The letter of authority authorized the examination of Golden Dragon’s books of accounts and other accounting records on all internal revenue taxes for taxable year 2005.  Despite receiving the letter of authority, as well as a First Request for the Presentation of Records, a Second Request, and a Final Request, Golden Dragon complied but only partially. 

 Incensed, the BIR escalated the legal tenor of its message by sending Golden Dragon not a mere request but a subpoena duces tecum addressed to its President.  A subpoena is an order that got its name from the two words in latin of what in English, the notice uniformly ends with:  A subpoena, end with “Fail not under penalty of law.” The subpoena issued to Golden Dragon was “duces tecum” which really means, “bring with you.”  Together, a subpoena duces tecum is a solemn order “to bring with you” certain documents.

 Faced with that unsavory prospect of undergoing penalty of law, Golden Dragon complied and sent in the requested documents.  After examining the documents disgorged from Golden Dragon, the BIR invited its President for “an informal conference to discuss the BIR’s findings.”  It is not clear from the affidavit filed by the BIR at the DOJ whether the President did come from the informal conference.


 What is clear, though, is that the BIR later issued what is known as Preliminary Assessment Notice (PAN) which is a notice required by Section 228 of the Tax Code informing the taxpayer of the amount that he ought to be assessed.  This informs the taxpayer in writing of the law and the facts on which the assessment is made.  The deficiency income taxes, value added taxes, and documentary stamp taxes for 2005 amounted to P15,217,891.72. Golden Dragon probably did not seriously take the PAN because a Formal Letter of Demand, with details of the discrepancies found, and a Final Assessment Notice (FAN) were issued on 26 May 2009.

 True to form, Golden Dragon also did not take seriously this worsening situation that it was in.  It did not file within 30 days from receipt, a protest, by way of a request for reconsideration or reinvestigation, as was its right under the law, in order to formally contest the assessment.  Thus, the assessment became final, executory, unappealable, and demandable.  Still Golden Dragon did not pay the deficiency taxes due.

 By ignoring the FAN, Golden Dragon was in fact throwing down the gauntlet.  It was challenging the BIR to a fight.  The BIR, as expected of one challenged, picked up the gauntlet by serving on Golden Dragon on 01 September 2009 a ten-day letter.  A “ten-day letter” is a stern demand to pay the assessed deficiency taxes within ten days from receipt, or else. Still, no payment. 

 Restraining itself, the BIR issued, after the lapse of the ten days, a Final Notice Before Seizure.  But despite personal receipt by its authorized representative, Golden Dragon remained obstinate.  That was apparently the last straw.  The BIR threw the RATE at the Golden Dragon.

 What must have irritated Kim Henares was the hardness of Ren Transport’s and Golden Dragon’s hearts.  “They didn’t think we were serious about our assessment or they tried to go around them.”  Kim went on, “We are sending the message about the BIR being serious in running after them.  We don’t give assessments just for the sake of doing so.  Every sheet of paper costs government money.  There’s a reason for it and if they ignore it, they will face criminal liability.”  The lady at BIR’s helm obviously has had enough of tax evaders’ dirty tricks.