CFI Cooperative sues BIR exec

CEBU, Philippines —  The Cebu CFI Community Cooperative has filed an administrative and criminal complaint before the Office of the Ombudman-Visayas against Bureau of Internal Revenue-13 regional director Eduardo Pagulayan after cancelling the cooperative’s tax exemption.

Gemaila Alvarado, CFI Legal Division chief, filed the complaint on behalf of the cooperative on May 7, 2021 and sought for Pagulayan’s immediate dismissal from the government service because of alleged oppression and grave misconduct.

Alvarado also prayed that a criminal complaint be filed against Pagulayan for violating Section 3(e) under Republic Act 3019 as amended otherwise known as the Anti-Graft and Corrupt Practices Act.

Pagulayan was also accused of violating Section 22 of RA 1102 otherwise known as Ease of Doing Business and Efficient Delivery Act.

Sought for comments, Pagulayan said he has not received yet a copy of the complaint.

“I’m not aware that there is a complaint against me by CFI whose Certificate of Tax Exemption I previously revoked because of non-compliance of the conditions of its tax exemption. I will answer once I will receive a copy of the complaint,” said Pagulayan.

He said that effective today, he will be transferred to the National Capital Region-Revenue Region South. He will be replaced by Director Glen Geraldino who was also the director of the said region.

Pagulayan, however, clarified that his transfer has nothing to do with the filing of the complaint against him as it is just a normal reshuffling.

CFI as a duly accredited cooperative enjoys tax exemption privileges from all taxes and in recognition, BIR granted their first CTE on October 4, 2010 valid for five years.

Alvarado alleged that Pagulayan revoked their second CTE (which is valid from July 2, 2014 up to July 2, 2019) on August 13, 2019 even if this was already expired and already enjoyed by the cooperative.

Due to the revocation, an act that was dubbed by the cooperative as “highhanded and arbitrary”, the revenue chief denied their application for another five-year CTE.

Alvarado said that one of the conditions for the CTE issuance is that the cooperative must submit to the BIR a Certificate of Good Standing issued by the Cooperative Development Authority every year which was overlooked by the latter.

Such failure to submit the CTE was in good faith as “there was no proper mechanism as to when and what particular department or office of the BIR is the said certificate of good standing to be filed”.

However, Alvarado said the CGS from 2010 to 2019 is just at their office ready for inspection and submission to the revenue agency.

On October 11, 2018, Pagulayan issued a Letter of Authority authorizing the BIR to examine the books of accounts of the cooperative for the taxable year 2017.

“Apparently, the action taken by respondent Pagulayan against CFI Coop is manifestly illegal, arbitrary, null and void and done in bad faith with the malevolent intention of causing and due harm and prejudice to the latter,” a portion of the complaint reads.

The complainant said the revocation of their second CTE and the subsequent denial of their supposed third CTE application on the ground of the previous revocation “was a gross violation of the non-retroactive provision under Section 246 of the National Internal Revenue Code”.

The CFI Coop’s tax exemption privilege is granted by law and not subject to the BIR’s discretion, the complainant said adding that their failure to submit the CGS was not done in bad faith nor done to mislead the BIR.

Alvarado said that the cooperative’s request for reconsideration of the revocation was denied by Pagulayan on October 2, 2019 which prompted the latter to file an appeal to the BIR Commissioner on November 7, 2019 but this has remained unanswered.

On February 11, 2021, the cooperative again requested for the issuance of CTE but this was still denied by Pagulayan on the basis of his previous order dated August 13, 2019.

The complainant further said that in view of Section 10 of Republic Act 11032, the cooperative’s application of CTE is deemed approved and it is Pagulayan’s ministerial duty to issue the said request.

Section 10 states that if a government office or agency fails to approve or disapprove an original application or request for issuance of license, clearance, permit, certification or authorization within the prescribed processing time, said application or request shall be deemed approved.

The processing time is a maximum of seven days to act on the application, said the complaint adding that under the BIR Citizen’s Charter of 2020, BIR officers are given 40 days to act on applications for tax exemptions. — GMR (FREEMAN)