Written by Dennis M. Odra, 24 May 2007
Business is a dog-eat-dog world underlain by stiff competition and increased profitability. Companies consistently feel pressures to keep healthy bottom lines and minimising tax payments is often considered one of the ways to achieve that objective. In their desire to help their clients, tax practitioners could be tempted into biting the apple and taking the easy route to achieve the tax savings.
Recently, the BIR has raised a red flag on the illegal and unscrupulous practices of some financial officers and/or tax practitioners, who are either independent Certified Public Accountants (CPAs) or not, leading to tax evasion and non-payment of proper taxes, with the issuance of Revenue Memorandum Circular (RMC) No. 31-2007 dated 23 April 2007. The said RMC reiterates the strict implementation of Section 257 of the Tax Code and its related implementing Revenue Regulations (RR) No. 11-2006.
Section 257 of the Tax Code provides for the penalties imposed on CPAs and other persons who are not otherwise CPAs committing fraudulent acts such as but not limited to, making false entries, records or reports; or using falsified or fake accountable forms; falsifying any report or statement bearing on any examination or audit; rendering a report, including exhibits, statements, schedules or other forms of accountancy work which has not been verified by him personally or under his supervision or by a member of his firm or by a member of his staff in accordance with sound auditing practices; and certifying financial statements of a business enterprise containing an essential misstatement of facts or omission in respect of the transactions, taxable income, deduction and exemption of his client.
Punishable acts of persons who are not CPAs or a financial officer include examining and auditing of books of accounts of taxpayers; offering to sign and certify financial statements without audit; offering any taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity with the prescribed requirements; and knowingly making any false entry or entering any false or fictitious name in the books of accounts or records.
Punishments include a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000) and imprisonment of not less than two (2) years but not more than six (6) years. In addition, if the offender is a CPA, his certificate as a CPA shall be automatically revoked or cancelled upon conviction. In the case of foreigners, conviction shall result in their immediate deportation after serving sentence, without further proceedings for deportation.
A related issuance to RMC 31-2007 is Revenue Regulations (RR) No. 11-2006 which is the consolidated regulations on the accreditation of tax practitioners/agents to represent taxpayers before the BIR. Similarly under this RR, the commission by tax practitioners/professionals/agents of any of the above-mentioned fraudulent acts under Section 257 of the Tax Code shall result in the cancellation, suspension or revocation of their respective BIR certificate of accreditation. The same consequence applies if tax practitioners/professionals/agents give false or misleading information or participate in any way in the giving of false or misleading information to the BIR or to any officer or employee thereof, in connection with any matter pending before them knowing such information to be false or misleading; or willfully fails to make a tax return in violation of the Tax Code; or evades or attempts to evade or participate in any way in evading or attempting to evade any national internal revenue tax or payment thereof. .
The subject matter of RMC 31-2007 is not new since Section 257 is already an old and existing provision in the Tax Code but was never seriously implemented by the BIR. However, with the issuance of RMC 31-2007, the message is clear, i.e., the BIR will now strictly implement Section 257 and run after unscrupulous tax practitioners/professionals/agents/finance officers/accountants who advise and abet their clients/employers fraudulent tax/accounting practices. With this hard handed approach, the BIR expects to improve its collection and meet its mandated target revenue.
RMC 31-2007 should therefore serve as a warning to tax practitioners to think twice before advising their clients with very aggressive tax planning schemes/structures or risk having the BIR’s proverbial club bearing down on them. On the part of taxpayers, the message of RMC 31-2007 is proper compliance with their tax obligations. Taxpayers should exercise care and caution before they implement any tax planning structure or scheme advised by their tax agents since they could be charged with a tax evasion case and face the same criminal penalties as their tax agents. The various tax evasion cases filed against several movie/television personalities by the BIR clearly indicate that taxpayers who are not properly paying their taxes because of the fraudulent practices or advise of their tax agents or accountants are not presumed to be in good faith. In fact, hiring and retaining the services of a dishonest tax agent/accountant can even create the appearance of consent by the client to the fraudulent acts of the tax agent/accountant, or even worse, a collusion between the tax agent/accountant and the client.
