Some of the important lessons in life we
learn from unpleasant experiences. Learning from the mistakes of our
past keeps us from repeating them. Wisdom comes from accepting errors
and exercising better judgment in the future.
The above statements hold true even in tax collection. In the
past, the Bureau of Internal Revenue (BIR) lost assessment cases due to
the issue of waivers on the statute of limitations for the assessment of
deficiency taxes. It may have learned its lesson the hard way, but the
Bureau has implemented improved measures stemming from its experience.
In a 2004 case (G.R. 162852 dated Dec. 16,
2004), the Supreme Court ruled that a waiver must strictly conform to
the requirements set forth under the rules; otherwise, the waiver is
invalid. At that time, the prevailing rule on the proper execution of a
waiver of the statute of limitations was Revenue Memorandum Order (RMO)
No. 20-1990 and Revenue Delegation Authority Order No. 5-2001.
In a subsequent case (G.R. No. 212825 dated Dec. 7, 2015), the Supreme
Court provided an exception to the general rule on validity of waivers.
The crux of the issue pertained to the issuance of defective waivers,
arising from the fault of both the taxpayer and the BIR. The waivers
were said to be executed by the taxpayer’s accountant without a
notarized board authority to sign in behalf of the company. On the other
hand, the BIR was considered to be careless in performing its functions
when it did not ensure that the waiver was duly accomplished and signed
by an authorized representative, among others.
In that case, the Supreme Court tolerated the BIR’s slip-ups for
equitable reasons. The validity of the waiver in favor of the state was
then upheld on the strength of the time-honored principle that taxes are
the lifeblood of the government. In its decision, the Court said the
BIR’s right to collect taxes should not be jeopardized merely because of
the mistakes and lapses of its officers, especially in cases where the
taxpayer was obviously in bad faith when it voluntarily executed the
waivers and subsequently insisted on their invalidity by raising the
very same defects it caused. Thus, the taxpayer was estopped from
questioning the validity of the waivers.
As for the erring BIR officials, the Court suggested enforcing
administrative liabilities for their failure to properly comply with the
procedures.
In a more recent decision (G.R. No. 213943 dated March 22, 2017), the
Supreme Court ruled that the three-year period to assess was not
extended because all the waivers executed by the taxpayer were
considered defective. What is significant to note is that the waivers
were considered defective because the BIR failed to provide the third
copies to the office accepting the waivers and these copies were merely
attached to the docket of the case. Also, the revenue official who
accepted the third waiver was not authorized to do so. In this case, the
defects were solely due to the fault of the BIR.
While the BIR argued that the taxpayer was estopped from questioning the
validity of the waivers, the Courts clarified that the BIR cannot shift
the blame to the taxpayer for the defective waivers. The BIR cannot
easily invoke the doctrine of estoppel to cover its failure to comply
with the requirements for valid issuance of waivers. Having caused the
defects, the BIR must bear the consequences. Considering that the
waivers are defective, the assessment was considered issued beyond the
three-year prescriptive period, and thus, void. Contrary to the 2015
case, the Court ruled in favor of the taxpayer here because it played no
part in the waivers’ defects.
With the issuance of a new RMO last year, the question is -- Can
taxpayers apply the above decisions of the Supreme Court for issues on
waivers today?
On April 18, 2016, the BIR issued RMO No. 14-2016 which laid down new
guidelines on the execution of waivers. According to the new RMO,
compliance with the prescribed form is not mandatory. A taxpayer’s
failure to follow the forms would not invalidate the executed waiver,
for as long as (1) it is executed before the expiration period, and the
date of execution is specifically provided in the waiver; (2) the waiver
is signed by the taxpayer or duly appointed representative/responsible
official; and (3) the expiry date of the period agreed upon to
assess/collect the tax after the three-year period is indicated.
In addition, the new RMO provides that the taxpayer is charged with the
burden of ensuring that the waivers are validly executed. The taxpayer
must submit the duly executed waiver to the Commissioner of Internal
Revenue or to the authorized revenue official (e.g., concerned revenue
district officer or group supervisor as designated in the Letter of
Authority or Memorandum of Assignment) who shall then indicate
acceptance by signing the waiver. Moreover, the taxpayer must retain a
copy of the accepted waivers.
Under the new RMO which seems to favor the BIR, it appears that upon
execution of the waiver, taxpayers can no longer challenge its validity.
Thus, while there is a level of comfort in the decision of the Court
that taxpayers should not be made to suffer for lapses of the BIR, this
will only apply to waivers that have been executed prior to the
effectivity of the new RMO. The BIR has learned from past mistakes.
Here’s to hoping that taxpayers have learned from their own.
The views or opinions expressed in this article are solely those of
the author and do not necessarily represent those of Isla Lipana &
Co. The content is for general information purposes only, and should not
be used as a substitute for specific advice.
Maria Jonas Yap is a Manager at the Tax Services Department of Isla
Lipana & Co., the Philippine member firm of the PwC network.
+63 (2) 845-2728
maria.jonas.s.yap@ph.pwc.com
source: Businessworld
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