trustestatelogoa.jpg (8498 bytes)


Lectures &

News $ Views

Law &



Trust Products
& Practice

About the Guru


Email Feedback

Guest Register









Camacho: The beneficiary of couttsie-couttsie

(Article published in the Dec 2, 2002 issue of TODAY, Business Section)

The beneficiary of the battle royale currently being fought in the media by Rep. Mark Jimenez, who at some point in his life before his name became a household word was also known as Mario Crespo, and Secretary of Justice Hernando Perez, presently on leave as presidential alter ego but not as receiver of presidential kisses, is Department of Finance Secretary Jose Isidro Camacho. If he calls his shots right, and Bureau of Internal Revenue Commissioner Guillermo L. Parayno executes the correct moves, he will be able to significantly narrow the government deficit and convince the international raters not to downgrade the Philippines. The lode where he can extract his gold? The wealth of revelations and revelations of wealth by the Honorables, Mark Jimenez and Nani Perez.

From the admissions and denials flying out of the Pandora’s box pried open by Rep. Willie Villarama, certain things can be reasonably considered as facts. For instance, Jimenez admitted (if not boasted) to have made lots of money in South America. In answer to the question of where he got his money, the congressman is said to have claimed that his computer companies in Latin America earned $282 million and were the fastest growing US firms in 1993-95. Presumably, that too was the source of his alleged illegal contribution to the US Democrats and would have been the source of the bribe of about US$14 million that Joseph Ejercito Estrada claims he did not accept. Why he did not have Congressman Jimenez arrested right then and there when he made the bribe offer is a question the former president should answer.

From his bank in Uruguay, he claimed to have taken $2 million which eventually landed in Earnest Escaler’s account in Coutts Bank in Hong Kong, specifically, HO 13706. How it got there should not be relevant to Camacho, but, just to fill out the story, it seems that Congressman Jimenez’s bank in Uruguay, the Trade and Commerce Bank had an office in the Cayman Islands and it was this office that sent the money to Coutts Bank’s account, No. 400-922932 at Chase Manhattan Bank in New York. From there it was a simple matter of crediting the account of Escaler.

Jimenez claims that the amount he remitted was extorted from him by Perez; Sen. Lacson claims it is a bribe. Either case, the two of them seem to be more than willing to say so in public and there should be no difficulty asking them to put what they know in an affidavit.

It seems that Hong Kong police has provided the Presidential Commission on Good government with information, allegedly emanating from a report by Coutts Bank, that the exact remittance, which was received on February 26, 2001, was only $1,999,965 (the difference may be bank service charges) but, lo and behold, another remittance from Jimenez’s bank came in on May 16, 2001 from Golden Profits Ltd in the amount of $1,495,000. It is not clear whether this May remittance was Jimenez’s money nor is it clear whether Golden Profits, Ltd, is one of Jimenez’s corporations. But when it landed in Escaler’s account, he acted like he was owner.

On May 23, 2001, Escaler is supposed to have remitted to his own account at Citibank Manila the amount of UD$200,000, UD$250,000 to Ramon Arceo, and US$700,000 to an account in EFG Private Bank Branch in Singapore, the same account to which Escaler on March 6, 2001 had remitted $1 million. Escaler apparently closed his Coutts Bank account No. HO13706 on July 13, 2001, but no information seems available of where the rest of the money went. But that missing piece of the puzzle should not bother Camacho in the least.

What should be important for him is that, on account of the unfolding of both current events and of past bank transactions, there is no doubt that Jimenez earned a lot of income from 1993 to 1995; and Escaler had control and disposition of about US$ 2 million in 2001. On that basis, he could order the good Commissioner to do his thing.

Begin, of course, with an examination of the income tax returns filed by Jimenez for the years 1993, 1994 and 1995 and by Escaler for the year 2001. The purpose is to see if these gentlemen reported their income correctly for those years. I bet all the money in Nani Perez’s and his brother-in-law’s account, if any, in Coutts Bank Hong Kong that no way will the figures reported, if at all, in those returns be near the sums we are talking about. In due time, an income tax assessment is in order.

For this purpose, Camacho and Parayno may invoke Section 6(B) of the Tax Code which empowers the commissioner, when a report required by law as a basis for the assessment of any internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations or when there is reason to believe that any such report is false, incomplete, or erroneous, to assess the proper tax on the best evidence obtainable.

What better evidence can you get of the flow of income to a taxpayer (a generic term used in law to describe one who is subject to tax and not necessarily one who actually pays tax) than the admissions of Jimenez and Escaler? So fire away those letters of authority and, in due time, the deficiency assessments, gentlemen, you have nothing to lose but the aura of detachment you have so far assumed ever since the Villarama exposed his non-exposé.

Of course, our revenue authorities, when this matter goes to court as it certainly would, should have more, in their arsenal that the say-so of Jimenez and Escaler. After they, themselves are purportedly involved, either as extorter or extortee, and may not be credible sources of information, even of their own tax liabilities. Resort should be made to the authorities of Hong Kong to provide the smoking gun. And for this, the good tax collector and his boss ought may start by invoking an "Agreement between the Government of the Philippines and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income".

Article 26 of this Agreement, which was signed in Beijing on November 18, 1999, contains, like all other anti-double taxation agreements, a commitment on the part of both governments to exchange information necessary for the carrying out of, among other items, the domestic laws of each party concerning taxes. The information that can be derived under this article is not restricted to information on residents. And the information given may be disclosed in public court proceedings or in judicial decisions. Can we expect the government of China to provide the information? I would think so, I am not Chinese, but I was told that the Chinese value "face" tremendously. Wouldn’t the government in Beijing lose face if it cannot order the government in Hong Kong to comply?

But will the government of China, particularly the government of Hong Kong, have the information Camacho and Parayno need? Certainly, in my view. Hong Kong has an anti-money laundering law that shames ours. Section 25A of Hong Kong’s "Organized and Serious Crimes Ordinance" passed as early as 1994, obliges a person who "suspects" that any property in whole or in part represents proceeds of, was used in connection with or is intended to be used in connection with an indictable offense, to disclose such suspicion, together with any matter on which the suspicion is based, to an authorized officer. An indictable offense, under Hong Kong Law, is any offense other than one which is triable only summarily. In short, anything more serious than, say, a traffic violation. It covers offenses which, even if committed abroad, would be indictable in Hong Kong if committed there.

Moreover, and this is where our own anti-money laundering law pales in comparison, among those indictable offenses is tax evasion which is committed in Hong Kong essentially in two ways; first, is by as found in Section 82 of the Inland Revenue Ordinance punishing oH

intentional tax evasion, such as dealing with money derived from a false return; and second, by conspiring to to defraud the tax authorities. Since, by now, Coutts Bank in Hong Kong, even by reading the papers coming out of Manila, regarding Escaler’s Account, HO 13706, has reasonable grounds to suspect that some, if not all, the funds that were there are connected somehow to undeclared income, it must have already made the proper disclosures to the Hong Kong authorities. I know Coutts Bank. It is a good bank and it obeys the law even as it protects the privacy of its clients.

With all that information on hand, there should be no problem for Camacho and Parayno to issue, on the authority of Section 206 of the Tax Code, warrants of constructive distraint on the properties of Jimenez and Escaler. This is issued on taxpayers leaving the country. Hasn’t Escaler left and isn’t Secretary-on leave Perez in a hurry to make Jimenez leave? It does not matter that the UD$2 million has already transferred hands. The income tax is a general liability of the taxpayer and can be collected against any of his properties, not necessarily the income itself or the proceeds of its conversion. With all that property tied up, Camacho and Jimenez can sit back, relax and wait for the taxes to be paid. Not only by Jimenez and Escaler but also by others who will get the message that they are serious in collecting taxes from those who fail to pay what they owe rather than, as they seem to be doing now, increasing the tax bite on those who comply with tax laws.

So why are not Camacho and Parayno jumping into the fray with guns blazing? I do not know. Unlike Rene Bañez, they did not learn what they now do know of tax from me. Unfortunately for Rene, was not my function to teach him the weird rules of interpersonal relationships in the government bureaucracy. That is why IRMA got him. But that’s another story.