How not to run after tax evaders
TOP OF MIND (The Philippine Star) - September 21, 2015 - 10:00am

Tax evasion is a criminal offense under Philippine laws. In fact, a convicted taxpayer is set to face jail time in addition to the following legal consequences: (1) payment of basic tax due; (2) surcharge equivalent to 50 percent of the tax or of the deficiency tax; (3) interest of 20 percent per annum; and (4) fine.

So far, however, tax evasion remains to be a major problem in the Philippines. Hence, intensified programs of the Bureau of Internal Revenue (BIR) to reduce, if not totally eliminate, tax cheats have been on-going for some time like the run after tax evaders (RATE) and the name-and-shame campaign.

As of this writing, BIR records show that under the administration of President Aquino, there are around 391 cases in varying stages against tax evaders. Yet, not a single tax evader has been put in jail.

Tax evasion is a scheme to eliminate or reduce the payment of taxes through illegal or fraudulent means. The Supreme Court in Commissioner v. Estate of Toda, Jr., G.R. No. 147188, Sept. 14,  2004 held that tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e. the payment of less than that known by the taxpayer to be legally due, or non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being “evil,” in “bad faith,” “willful”, or “deliberate and not accidental”; and (3) a course of action or failure of action which is unlawful. In the absence of any of the said factors, the acquittal of the accused is warranted.

To illustrate, in the recent case of People v. Santos, CTA Crim. Case No. 0-171, Jan. 10,  2015, the accused was indicted under Section 255 of the National Internal Revenue Code of 1997 (Tax Code) for non-filing of Income Tax Return (ITR) and non-payment of the corresponding tax due for the income received from the services rendered by his construction firm.

During the trial, the prosecution presented in evidence the certifications secured from different Revenue District Offices (RDO) where the accused allegedly conducted business (i.e. Makati City and Quezon City) to prove accused’ non-filing of Annual ITR.

For his defense, accused argued that while he was registered with RDO Makati since the office of his construction firm is in Makati City, it has been customary for him to file his ITRs and all other tax returns in his place of residence in Mandaluyong City which also became his working office. This, according to him, explains why no returns were filed or payments made with RDO Makati where he registered his firm. In support thereof, accused submitted in evidence a certification (stating that he had filed his ITR) issued by RDO Mandaluyong City, the Annual ITR itself and Certificates of Creditable Tax Withheld at Source issued by his clients.

In resolving the instant case, the Court of Tax Appeals (CTA) stressed that under Section 51 (B) and (C) (1) of the Tax Code, tax return shall be filed with the RDO of the city in which such person has his legal residence OR principal place of business. The CTA said that accused’ filing of his Annual ITR at RDO Mandaluyong City is deemed sufficient compliance with law that also negates the element of “willful” intent to evade taxes. Thus, the accused was acquitted based on the failure of the prosecution to prove each element of the crime beyond reasonable doubt.

The Rules on Evidence clearly provides that the prosecution bears the onus probandi to prove each and every element of the crime charged beyond reasonable doubt. Given its resources and capabilities, one may well ask--how come the prosecution could not have discovered that piece of evidence that acquitted the accused?

This should leave one in awe since the evidence submitted by the accused are documents which are readily available from the BIR office itself. How else can one explain the apparent oversight given all the channels of news utilized by the BIR to name and shame tax cheats?  Perhaps, had there been a careful investigation that the instant case could stand judicial trial, both the government and the taxpayer could have been saved from protracted litigation and expenses. Indeed, to quote the CTA, “suspicion no matter how strong must never sway judgment.”

While the instant case shows failed effort to secure conviction, the heightened and aggressive labors of the BIR to raise revenue collection and curb tax evasion are commendable.  After all, we do not want tax cheats to run unpunished at the expense of all the taxpayers who are paying their share.

Ma. Veronica S. Guangco is a Supervisor from the Tax Group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email or

For more information on KPMG in the Philippines, you may visit


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