Written by Catherine T. Manahan, 20 December 2007
The cramming to close the huge shortfall in tax collection is high up in the air.
Contrary to the traditional practice of prior years under previous BIR administrations, the incumbent Commissioner of Internal Revenue (CIR) has decided not to issue the traditional order grounding tax investigations during the Christmas season and instead directed all revenue officers to continue with their on-going tax investigation and COLLECTION of all taxes until their final termination. (Revenue Memorandum Circular No. 78-2007 dated Dec. 3).
Accompanying this call to go full blast in their tax collection and side by side with the unstoppable promotion of the Tax Amnesty Program, the BIR has also issued revenue issuances urging its people to resort to summary remedies in the collection of taxes, the most recent of which is Revenue Memorandum Order No. 39-2007 (RMO) dated Dec. 12 which pertains to the "Issuance of Warrants of Distraint and Garnishment, and/or Levy on Disputed Assessments Finally Decided by the Bureau Against the Taxpayer on Assessments Upheld by the Court of Tax Appeals."
The term, "summary remedies," is denoted as such because the collection of taxes is not coursed through the judicial process, e.g. filing of civil action or criminal action, but through the administrative route which proves to be less time-consuming as compared to the court procedures. The more effective and popular administrative remedies for the collection of delinquent taxes are: tax lien; distraint of personal property, or levy of real property, or garnishment of bank deposits; sale of property of a delinquent taxpayer; forfeiture; compromise and abatement; penalties and fines; and suspension of business operations. (Victorino C. Mamalateo, Tax Rights and Remedies, page 649.) The exercise of summary remedies is supported by Sec. 218 of the Tax Code under which courts are prohibited from granting injunctions to restrain the collection of taxes. This is further reiterated in and supplemented by Sec. 11 of the Court of Tax Appeals (CTA) Charter, namely: Republic Act (RA) No. 1125 as amended.
Thus, under both laws, generally, no court (except the CTA and subject to some exceptions) can issue an injunction to restrain the collection of any national internal revenue tax, fee or charge and that upon the issuance of any CTA decision or order favorable to the national government, the courts are already required to issue an order authorizing the BIR to seize and distraint any goods, chattels or effects and personal property of the erring taxpayer.
What is scary about this recent RMO is the directive that even if the taxpayer goes to the CTA on appeal when its protest is dismissed or decided unfavorably by the BIR, the CIR or even the Regional Director can immediately issue and serve the warrants of distraint and garnishment and/or levy upon the issuance of the final decision on the disputed assessment.
In addition, the coverage of said RMO likewise extends to assessments upheld by the Division of the CTA, whether or not appealed to the CTA En Banc, and those upheld by the CTA En Banc, whether or not appealed to the Supreme Court. Given such stern order, one may just suddenly wake up one morning with your personal assets or appliances inside the house seized, your bank deposits garnished and frozen, and your real properties levied upon.
Given this dismal scenario, what are the possible lines of defense available to the taxpayers?
First of all, only when the amount of delinquent tax to be collected exceeds one hundred pesos can this resort to summary remedies be authorized by law.
Furthermore, it is important to check the signatories to the warrants if they fall under the following limits of authority: for taxes amounting to P1 million and above, the CIR shall sign all warrants including the lifting of the Notice of Tax Lien and Cancellation of the Writ of Garnishment; for taxes amounting to Five Hundred Thousand Pesos or more but not over P1 Million, the Deputy Commissioner for Operations; for taxes amounting to P300,000 but not over P500,000, the Assistant Commissioner for Collection Service; for taxes amounting to P100,000 but not over P300,000, the Regional Director; and for taxes less than P100,000, the Revenue District Officer. (RMO No. 76-98 as amended by RMO Nos. 8-94, 68-98 and Revenue Administrative Order No. 65-95.)
Moreover, if the BIR has already served the warrants to the taxpayer, the taxpayer may file simultaneously with its Petition for Review with the CTA, a Motion to Enjoin citing as support, the provisions of Sec. 11 of RA No. 1125 as amended, the relevant portion of which, state: "xxx Provided however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer, the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court."
In other words, in cases of questionable summary executions by the BIR, the taxpayer may request the court to issue an order of injunction citing the reasons for the request and must be supported by the required surety bond issued by duly-accredited bonding companies.
Given the relentless efforts of the BIR to raise the bar of tax collection, the taxpayers who are now under fire or facing a barrage of LNs, LOAs, TVNs, MOs and other forms of tax investigations from the BIR must be extraordinarily vigilant in knowing and defending their rights under the law to avert any more unfavorable impact of said summary executions. Such a scenario is definitely an anathema to the spirit of the Christmas season.
