(Article published in the Nov 16,2005 issue of Manila Standard Today)
The non-delinquent taxpayer, already battered by the expansion of
the coverage of the value-added tax and further facing the certain
prospect of the current President exercising her option to raise the
VAT-rate to 12% come next year (unless, of course, her tenure is with or
without ceremony ended before then), will find the case of Bank
of the Philippine Islands v.
Commissioner of Internal Revenue, G.R. No. 139736, October 17, 2005,
comforting reading. Despite
the odds, the taxpayer sometimes wins.
The petitioner, the Bank of the Philippine Islands (BPI), is one of
the oldest Philippine treasures still standing, with current ties that go
way back long to the Roman Catholic and Apostolic Church; the Commissioner
of Internal Revenue at the time material to the case was Liwayway
Vinzons-Chato, herself an acknowledged defender of the Faith.
The amount involved was not far from a mere a mite, a measly sum,
even in those days of 1989, totaling Php28,020.00.
But the real winner is the tax-paying public who render unto Ceasar
what is Ceasar’s. The non-delinquent taxpayer, if Bank
of the Philippine Islands v.
Commissioner of Internal Revenue remains law, can, after the lapse of
the requisite period, look forward to nights of untroubled sleep with no
worries that the tax collector might come knocking with the break of dawn.
The simplicity of the facts belied the far-reaching implications of the controversy. BPI sold in two transactions in the year 1985, some US$1,000,000.00 to the then Central Bank of the Philippines (CB). On 10 October 1989, the Bureau of Internal Revenue (BIR) assessed BPI for documentary taxes amounting to Php28,020.00 for two transactions in 1985. The assessment notice was received by BPI on 20 October 1989.
BPI protested the assessment in a letter dated 16 November 1989 and
filed one day later. The
protest letter, written by BPI’s counsel, the Padilla Law Office, after
presenting purely legal arguments, asked that “the assessment be revoked
and cancelled.” Instead of responding to the protest, BIR issued on 15
October 1992 a Warrant of Distraint and/or Levy which BPI received on 23
October 1992, or eight (8) days later.
Nothing, however, seems to have occurred until almost five years
later, when, on 11 September 1997, BPI’s counsel received a letter dated
13 August 1997 from Commissioner Liwayway Vinzons-Chato, denying BPI’s
“request for reconsideration”. BPI
brought the case to court where the case up the judicial ladder from the
Court of Tax Appeals to the Court of Appeals and eventually to the Supreme
The central issue to be resolved was whether, under the
circumstances, the Commissioner of Internal Revenue had lost the right to
collect the tax of Php28,020.00
from BPI by reason of the lapse of time from assessment of the tax to its
collection. The Court of Tax Appeals and the Court of Appeals said
“no”. The Supreme Court
Under Section 203 of the National Internal Revenue Code (Tax Code),
the BIR, except in cases of fraud, falsity or omission in the filing of a
tax return, has three (3) years from the time the tax return is required
to be filed (or, if filed later, from the date of actual filing of the
return) within which to issue a tax assessment or to begin a court
proceeding to collect without an assessment.
If the BIR issues an assessment within the period, it gains another
three (3) years from assessment within which to collect, administratively,
by distraint and levy, and/or judicially, i.e. going to court.
The period, however, may be extended by valid “waivers”
described in Section 223 which are really written agreements between the
Commissioner and the taxpayer for a longer period.
It may also be interrupted by the several events listed in Section
226, among them is “when the taxpayer requests for a reinvestigation
which is granted by the Commissioner”.
It was accepted by the parties that the BIR assessment dated 10 October
1989 was validly made within the three (3) year period to assess.
It was likewise not debated that the three year (3) period to
collect the amount assessed started to run from 20 October 1989 when the
assessment was received by BPI and, unless extended or suspended, expired
three years later on 19 October 1992. Thus, since the BIR was not deemed
to have commenced collection of the amount assessed until the Warrant of
Distraint and/or Levy that it issued was received by BPI on 23 October
1992, it is clear that, unless the period to collect was extended or
suspended, the BIR was collecting four (4) days late.
case boiled down, consequently, to the question of whether BPI’s protest
amounted to a valid waiver (in which case the period was extended) or, if
not, to a request for reinvestigation (in which case the running of the
period was suspended).
is easy to see why that the BPI protest cannot be seen as a waiver. It was
not executed in compliance with the requirements of Section 223 as well as
BIR own Revenue Memorandum Order No. 20-90.
Furthermore, even an internal memorandum from a senior official to
another in the BIR observed that “the taxpayer fails to execute a Waiver
of the Statute of Limitations extending the period of collection of the
said tax …pending reconsideration of its protest…”
is likewise easy to conclude that the BPI protest was not a request for
reinvestigation if one were to look at the statute alone.
The protest contested the assessment exclusively on a question of
law. No question of fact was raised.
Nor was there an offer to present evidence.
And in a letter to BPI dated 10 September 1992, the BIR described
it as a request for reconsideration. And even if, contrary to all these,
it is conceded to be in substance a request for reinvestigation, still it
cannot have caused a suspension of the running of the period since it was
not, as required by Section 224, granted by the BIR Commissioner.
if the law is that clear, why did both the Court of Tax Appeals and the
Court of Appeals believe the period was suspended?
It was because in the case of Commissioner
of Internal Revenue v. Wyeth Suaco Laboratories, Inc. (202 SCRA 125),
the Supreme Court held that the period of prescription was interrupted
once a taxpayer requests for reinvestigation
or reconsideration of the assessment.
It was time, asserted BPI, to abandon that ruling.
Justice Minita Chico-Nazario, the ponente,
was in no mood to embarrass her seniors.
And how she set things aright without offending them could teach
Toting Bunye a thing or two on how to execute smooth backtracking.
Instead of abandoning the rule enunciated in Wyeth Sauco, she simply set to “clarify and qualify” it.
She pointed out that what Wyeth Suaco did in that case was really
request for reinvestigation which was granted
by the Commissioner and therefore the period of prescription was
clearly suspended. Since the
facts in Wyeth Suaco factually
differed from the BPI case, there was no need to state that including a
request for reconsideration among those that will suspend the running of
the prescriptive period was mere obiter
good justice stressed: “This is a simple case wherein respondent BIR
Commissioner and other BIR officials failed to act promptly in resolving
and denying the request for reconsideration filed by petitioner BPI and in
enforcing collection on the assessment.
They presented no reason or explanation as to why it took them
eight years to address the protest of petitioner BPI.
The statute of limitations imposed by the Tax Code precisely
intends to protect the taxpayer from such prolonged and unreasonable
assessment and investigation by the BIR.”
Of course, that last sentence is the Court’s assurance to the law-abiding taxpayer that it can run to the court for protection. It is not at all a suggestion to the Ombudsman, or any civic minded citizen whether or not desirous of publicity, to take former BIR Commissioner Liwayway Vinzons-Chato to task for the eight years the BIR failed to act.