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22 April 2010
Concerns About New Philippines Revenue Memorandum Order
By Johann Espiritu, AFP Group Director - Business Development
On March 15, 2010, The Philippines’ Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (“RMO”) No. 26-2010 (“RMO 26-2010”) for the “Preparation of the List of Assets to be Prepared by the Revenue Officer for Cases Under Investigation/Verification and its Incorporation in the Data Warehouse”.
The purpose, as stated, was to “Institute a system for the development of a Data Warehouse that shall contain information on the assets of taxpayers subject to an investigation/verification that may be utilized in the collection enforcement proceedings that may be instituted against taxpayers in the future.”
Among the types of information that can be obtained by the BIR include information about: (1) real property; (2) cash on hand and in the bank; (3) receivables; (4) investments in stocks, bonds and other certificates; (5) motor vehicles; and (5) other assets, such as jewellery or furniture. This is both for items used personally and also for items used in relation to the business of the taxpayer.
It is proposed that this information, once collected, will be stored in the “Data Warehouse”, which will include “a facility to allow the viewing of information on assets of taxpayers for use in the collection enforcement proceedings, if warranted”.
In other words, the BIR would like to collect any information on taxpayers, not only for current collection proceedings, but also for possible use against them in the future as well, and would also allow access to this information by the Philippine government.
This raises some questions about the validity and constitutionality of the RMO:
- Under the RMO, a Revenue Officer is allowed to determine the assets of a taxpayer who is being investigated. Under Philippine tax law, a taxpayer may be compelled by the BIR to give information in order to determine their tax liability. In this sense, a Revenue Officer can validly ask for the information as required under the RMO, except for information as regards bank deposits (unless the taxpayer is a decedent or has filed an application for compromise by reason of financial incapacity to pay his/her tax liability).
The RMO, however, does not make any qualification when the Revenue Officer is allowed to demand information regarding the bank accounts of the taxpayer, thus allowing the Revenue Officer to seek information about the bank accounts of any taxpayer under investigation. - It is also unclear how the Revenue Officer will obtain the information, as Revenue Officers are generally not allowed to seize records without a warrant issued by a court.
- Arguably, the RMO violates the taxpayer’s right to be secure against unreasonable searches under Article III, Section 2 of the 1987 Constitution, again relating to bank deposits, because it doesn’t allow for any limitations as to when inquiry is allowed, violating the taxpayer’s constitutional right.
In the past, the Philippine Supreme Court held that an order is unconstitutional if it does not show “in clear and categorical terms how this information gathered shall be handled”, and if it does not outline “who shall control and access the data, under what circumstances and for what purpose”. The RMO merely provides that the Revenue Officer shall encode such list of assets following the procedures to be prescribed by the Deputy Commissioner-Information Systems Group. - It would seem that the RMO allows the Revenue Officer, without qualification, to receive information regarding a taxpayer’s bank deposits, which under law are considered as confidential in nature and may not be examined, inquired or looked into by any person, government official, bureau or office. The power granted to the Revenue Officer under the RMO is not one of the exceptions provided for by law.