Who's afraid of the taxman?
AS I WRECK THIS CHAIR By William M. Esposo
The Philippine Star 2011-03-15
Why should some Congressmen be bothered to the point of agitation by the announcement of the Bureau of Internal Revenue (BIR) to mandate starting next year the so-called Annual Income Report (AIR) from every taxpayer with an annual income of over P500,000? Per BIR Commissioner Kim Henares, some 54,000 taxpayers will be affected by the AIR requirement.

Some of the AIR’s most vocal critics in Congress are claiming that it’s unconstitutional because it’s tantamount to an invasion of privacy. Since when and how did a BIR that’s diligently trying to do its job of collecting all taxable revenues from taxpayers ever commit an invasion of privacy? That is as gobbledygook as gobbledygook can be.

Let’s review the mandate of BIR and the BIR Commissioner under relevant Sections 5 and 6 of the National Internal Revenue Code, as follows:

SECTION 5. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take Testimony of Persons. — In ascertaining the correctness of any return, or in making a return when none has been made, or in determining the liability of any person for any internal revenue tax, or in collecting any such liability, or in evaluating tax compliance, the Commissioner is authorized:

(A) To examine any book, paper, record, or other data which may be relevant or material to such inquiry;

(B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and local governments, government agencies and instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned or -controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters of multinational companies, joint accounts, associations, joint ventures of consortia and registered partnerships, and their members;

Section 5 adds: The provisions of the foregoing paragraphs notwithstanding, nothing in this Section shall be construed as granting the Commissioner the authority to inquire into bank deposits other than as provided for in Section 6 (F) of this Code.

From SECTION 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration and Enforcement. –

(B) Failure to Submit Required Returns, Statements, Reports and other Documents. — When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable.

In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise files a false or fraudulent return or other document, the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes.

(C) Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive Gross Sales and Receipts. — The Commissioner may, at any time during the taxable year, order inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities, or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes. The findings may be used as the basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct.

When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Sections 113 and 237 of this Code, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances or after considering other relevant information may prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person.

Letter F, Section 6 of the code authorizes the BIR Commissioner to inquire into bank deposits. Furthermore, Letter H of Section 6 states that: “The Commissioner may prescribe the manner of compliance with any documentary or procedural requirement in connection with the submission or preparation of financial statements accompanying the tax returns.”

With such a BIR legal mandate, how can some Congressmen consider the AIR as an invasion of an individual’s right of privacy? Maybe they’re just protecting some of their big donors who also happen to be big tax evaders.

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