­­­Willfulness not the same as intent


What constitutes willfulness in making or failing to file an income tax return as one of the requirements for tax evasion charges?

The Supreme Court recently affirmed a Court of Tax Appeals (CTA) ruling promulgated in December 2010 that found multilevel marketer Gloria Kintanar guilty of tax evasion.

The CTA in this case had the occasion to discuss and define what the term “willfulness” means, a definition that could make prosecution by the Bureau of Internal Revenue (BIR) for tax evasion easier to prove.

In this case, Kintanar was charged with violating Sec. 255 of the National Internal Revenue Code (NIRC), for failure to make or file a return.

The elements of the crime of failure to make or file a return are as follows: that the accused is a person required to make or file a return; that the accused failed to make or file the return at the time required by law; and that failure to make or file the return was willful.

This case is considered precedent-setting by the BIR based on the discussion by the CTA of the third element of “willfulness.”

The petitioner in this case claimed that she did not actively participate in the filing of her joint ITRs with her husband in the years 2000 and 2001 and entrusted the fulfillment of such duty to her husband, who in turn hired an accountant who was tasked to handle the filing and payment of their tax obligations. Thus, the petitioner alleged that there was no voluntary, intentional, deliberate, or malicious failure to file a return on her part.

The CTA noted that the natural presumption is that the petitioner knows what are her tax obligations under the law and that as a businesswoman, she should have take ordinary care of her tax duties and obligations and she should know that their ITRs should have seen filed, and she should have made sure that their returns were filed.

The court pointed out that she cannot just leave entirely to her husband the filing of her ITRs. As to the wife’s claim that she does not even know how much was her tax obligation, nor did she bother to inquire or determine the facts surrounding the filing of her ITRs, the CTA said such neglect or omission, is tantamount to “deliberate ignorance” or “conscious avoidance.”

But the prosecution was able to establish that the petitioner was duly informed that no ITRs were filed, nor recorded under her name, and that despite several notices sent to her by the BIR to comply with her tax obligations, she opted not to comply.

Citing American jurisprudence, the CTA noted that an “act is ‘willful’ if it is voluntary, conscious and intentional; no bad motive or intent to defraud the United States need to be shown, and a ‘reasonable cause’ or justifiable excuse’ element has no part in definition.”

It added that “willfulness” is a state of mind that may be inferred from the circumstances of the case and thus, proof of willfulness may be, and usually is, shown by circumstantial evidence alone.

Therefore, to convict accused for willful failure to file income tax returns, it must be shown that such failure or omission by accused, was done knowingly, intentionally and with the specific intent not to file said returns. In other words, it must be shown that accused was aware of her obligation to file annual income tax returns, but she nevertheless, voluntarily, knowingly and intentionally failed to file the required returns. Bad motive or intent to defraud the government need not be shown, the court said.

The CTA pointed out that even considering that the alleged agent was the person tasked by accused’s husband to file their required ITRs, this agreement is merely internal between them, and is not a valid defense that can be raised by accused in these cases arising from the supposed agent’s noncompliance with the obligation to file the required returns for and on behalf of accused.

It said that accused’s reliance on her husband to filed the required ITRs without ensuring full compliance thereon, is considered as a willful act on her part to delegate the performance of her legal duty to her husband tantamount to “deliberate ignorance” or “conscious avoidance” on her part to determine the facts surrounding the filing of the required income tax returns.

The Court notes that even the accused’s husband, who allegedly caused the hiring of an agent for the preparation and filing of their ITRs for the said taxable years, admitted that he merely browsed over the contents of their subject ITRs. The evident lack of concern on the part of the Kintanar spouses appear to be voluntary and considered as intentional disregard of their tax responsibilities to the government, it added.

Violation of a special law like the NIRC of 1997 is considered mala prohibita. Being so, except for the requirement in Section 255 that the omission be wilful, proof of criminal intent to commit such violation is unnecessary. In acts mala prohibita, the only inquiry is, “has the law been violated?”

The CTA cited the Supreme Court ruling in the case of US vs. Go Chico which said that “it is not necessary that the appellant should have acted with criminal intent. In many crimes, made such by statutory enactment, the intention, of the person who commits the crime is entirely immaterial. This is necessarily so. If it were not, the statute as a deterrent influence would be substantially worthless. It would be impossible of execution. In many cases, the act complained of is itself that which produces pernicious effect the statute seeks to avoid. In those cases, the pernicious effect is produced with precisely the same force and result whether the intention of the person performing the act is good or bad.”

Thus, the non-filing of an income tax return being a statutory offense or malum prohibitum, the lack of intent to commit the crime is unavailing as a defense. In crimes that are mala prohibita, the criminal acts are not inherently immoral but become punishable only because the law says they are forbidden. With these crimes, the sole issue is whether the law has been violated. Criminal intent is not necessary where the acts are prohibited for reasons of public policy.

The CTA said that because of this, the material element of “wilfulness” in the crime charged in these cases should not be equated with criminal intent. Knowledge of a taxpayer’s obligation to file the required return and the voluntary failure to comply therewith in the manner required by law will suffice.

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