The tax tele-novela continues. Coming into the saga are the other Partners of the Masterminds. These persons may not be as devious as to their intent and extent of defrauding the government of money that could have been collected by the Bureau of Internal Revenue (BIR) in this “Official Receipt (OR) for Sale” scam. They may be just the bit players in this tax tele-novela. The main villains are the Masterminds cum sellers and the buyers of the fake ORs using this scheme to evade payment of billions of pesos of taxes. But still, these persons are connivers in this tax scam syndicate.
These bit players include the Accountants of the buyers of the fake ORs. They are the external auditors and accounting staff hired by these nefarious businessmen to willingly accomplish and perpetuate this tax crime. They are mostly Certified Public Accountants (CPAs) who are governed by their Professional Code of Ethics and the various accounting and auditing rules and standards.
The accounting staff who maintain the accounting records chose to close their eyes to the wrongdoings of their boss. They consented to record documents of fake transactions supported by spurious ORs and invoices. Subsequently, these documents are reflected in the income and value-added tax (VAT) return filings of the company as business deductions and VAT credits together with legitimate claims. Altogether, taxes not paid to the BIR amount to about 37 percent of the face values appearing in the fake ORs. These accounting staff cannot use as an excuse for the irregularities that they participated in by reasoning that the boss ordered them to do these. It is their legal and professional responsibility as CPAs to be true to their ethical and accounting standards and rules.
There is another group of CPAs in this racket. There are some external auditors hired by companies who may be accessories to this OR for sale crime. They may either be cohorts to the tax scam blindly signing off the auditor’s certificate of “clean health” or they may be grossly negligent in the discharge of their mandate as attestors of the financial statements and transactions of the businesses. If these CPA external auditors are not able to detect large-scale fake transactions and tax evasion practices of their clients, they are remiss in their tasks and responsibilities of being guardians of the financial statements that are being relied upon by the various stakeholders, including the BIR.
There is another set of bit players in this tax-tele-novela. They are the BIR personnel who may be in cahoots with the Masterminds and their Partners. It is possible that some BIR staff may be the “consultants” of the Masterminds in crafting this OR-for-sale plot. They may be retired BIR personnel or even still active in the BIR service. Their knowledge of the inner workings of the BIR can be very valuable to the Masterminds, who may have paid them generous sums of consultancy fees for their services. There may also be some BIR examiners and officials who turn a blind eye to these irregularities if and when they come across these in the course of their tax investigations of companies engaged in this tax scam. Of course, these come with a tit-for-tat arrangement with the conniving BIR persons deriving big sums for their job ommissions and cooperation with the Masterminds. However, I immediately add, that if there are nefarious BIR people involved in this crime, they constitute only a very small portion of the BIR community. The rest of the BIR officials and employees are still honest, professional, and focused on their job of collecting taxes for the nation.
Top management of the BIR and the other law enforcement agencies should also focus their attention on investigating these Partners of the Masterminds of the OR for sale syndicate.
To be continued.
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 email@example.com