To catch a (tax) thief

IT is extremely important that the thief or even thieves are caught and convicted the soonest time possible. The crimes that these persons have committed are of the highest level, resulting in billions of pesos of government funds stolen, loss of trust in the effectiveness of the regulatory and enforcement systems of the authorities, and abuses committed by presumably a syndicate of criminals. 

These thieves that I am referring to are the persons who are involved in this fraudulent practice of printing fake business receipts and invoices and selling these to all-knowing and conniving taxpayers for use in padding their tax deductions and credits.   In the process, these groups are able to effectively steal significant amount of tax money from the government when billions of pesos of income and value-added tax (VAT) liabilities are fraudulently understated resulting in massive tax evasion.  

Recent social media and newspaper accounts disclose the discovery by government authorities of this nefarious sale of fake official receipts by scheming entities. In December 2022, National Bureau of Investigation (NBI) and Bureau of Internal Revenue (BIR) agents raided an establishment in Eastwood City and confiscated several items used in the crime, including computers containing data on the operations, printed fake official receipts, invoices, and other documents. 

With this breakthrough, the NBI and BIR should closely coordinate to investigate and convict the involved criminals. Though the need for collaboration between the two agencies is obvious, sometimes this is not forthcoming. Several reasons may come in the way to delay or prevent this cooperative effort. These include such factors as strict policies on sharing of confidential records, the need for stringent operational procedures to effect coordination, the culture of the “lone wolf” behavior in organizations and persons, the desire to claim sole ownership of work accomplishments, differences in the investigation practices of the two agencies, distrust between the operatives of different government offices, and other sometimes hard to explain reasons. Thus, the heads of the BIR and NBI should immediately agree to have close coordination on the investigation of this crime, and instructions to this effect should be communicated to their personnel.

The investigation should not only be focused on the crime at hand. An all-encompassing approach should be conducted to ferret out similar practices that anecdotally are occurring in various parts of the country. In fact, my Internet search shows that as early as 2007 a taxpayer has been engaging in this practice of padding expenses and VAT credits to evade tax obligations. The BIR filed a tax evasion case against this taxpayer, Gammon Metal Products Inc. in 2011. I am interested to know the status or the outcome of this case. There are also other related Court of Tax Appeals cases filed by the government pertaining to fake receipts. The BIR should be able to inventory these cases and assess the circumstances on these in order to ascertain the modus-operandi and how to counter these.

Since this is a major tax crime that has wide repercussions aside from the tax evasion that has arisen, the BIR must concentrate its resources on completing the investigation, conviction, and remedial action as soon as possible. It may be good for the BIR to form a special task force for this purpose comprised of seasoned tax investigators. They should concentrate full-time on this case and other similar ones, and be rewarded or penalized based on the outcomes.

There are many factors at stake here.  These include the loss of tax revenues and the integrity of the tax system and its institutions. I wait, with bated breath, how this case will proceed.

Joel L. Tan-Torres was the former Dean of the University of the Philippines Virata School of Business. Previously, he was the  Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy, and partner of Reyes Tacandong & Co. and the SyCip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979. He is now back to his tax practice with his firm JL2T Consulting. He can be contacted at joeltantorress@yahoo.com


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