The Department of Finance (DOF) has ordered the Bureau of Internal Revenue (BIR) to explore the possibility of amicably settling pending and future tax disputes with government-owned and -controlled corporations (GOCCs) to avoid costly and protracted legal battles.
According to Finance Secretary Carlos G. Dominguez III, it would be pointless for both the BIR and GOCCs to argue their respective cases before the courts and spend taxpayers’ money on legal fees, given that their common goal is either to save or collect funds to fill the state coffers.
“Can we avoid going to court against wholly owned [state] companies? I want that as a rule. If there is a government-to-government problem, don’t go to court, just settle it among yourselves,” Dominguez told BIR Deputy Commissioner Celia C. King during a recent DOF Executive Committee meeting.
King had informed Dominguez that the bureau’s Large Taxpayers Service has several big-ticket items that would help it achieve its collection goal in the fourth quarter, including possible settlement with some private firms and GOCCs.
She cited the case involving a debt-ridden GOCC, which filed a complaint against the BIR before the Court of Tax Appeals, although the bureau would have opened talks with the firm on a possible compromise settlement or abatement of penalties.
Dominguez said that resorting to legal action would benefit neither the BIR nor the company, and thus instructed King to discuss with officials of GOCCs the possibility of settling tax issues out of court.
The finance chief added that settling tax matters with GOCCs out of court would save the BIR’s Litigation Division, the Office of the Solicitor General and the Office of the Government Corporate Counsel, which are all paid for with taxpayers’ money, from additional work and legal fees.
In September this year, the BIR lost a P3.81-billion tax case against the Power Sector Assets and Liabilities Management Corp. (PSALM) involving the sale of the Pantabangan-Masiway Plant and Magat Hydroelectric Power Plant.
The Supreme Court had voted 12-2 and granted PSALM’s petition seeking the reversal of the Court of Appeals’s decision issued on September 27, 2010 declaring null and void a resolution issued by the Department of Justice directing the BIR to refund the PSALM the amount of P3.81 billion, representing the valued-added tax deficiency that it paid to the tax agency under protest for the sale of the power plants.