MAP Insights Column in BUSINESSWORLD 21 May 2012

The Taxman Cometh

by Anthony Alden Sy Aguilar

Its summer in Metro Manila, and for the life of me, it seems as if every year is
hotter than the last thank heavens for the rains of the past week! For many a taxpayer
and tax practitioner though, summer means not just baking temperatures and sweltering
days, but the all-important April 15 deadline and the stress of filing and paying annual
income taxes. I remember from my years at the BIR (and yes, Virginia, I was once a
taxman myself ) how our elder statesmen at the Bureau would recall that in their day,
the months and weeks leading up to April 15th seemed to be the most frenetic time of the
year, for everyone on both sides of the tax administration divide.
Times have changed, however, and very dramatically at that, because in this day
and age, every good tax administrator worth his salt knows that the work of taxation is
truly a year-round effort that doesnt conclude or reach its peak on April 15th. Every day,
millions of pesos worth of taxable transactions take place all over the country, and its the
duty of the taxman to make sure that all the parties to these transactions pay the correct
taxes due. Small wonder, then, that one of the most important functions of tax
administration conducting a tax audit continues to be carried out long after April 15th
has come and gone.
Thinking about the ubiquitous presence of the taxman in our daily lives The
Taxman Cometh, to borrow the title of a classic play Im reminded of these lyrics from
a song by the Beatles:
If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold, I'll tax the heat
If you take a walk, I'll tax your feet
Cause I'm the taxman, yeah I'm the taxman
While its a bit of a stretch to say that the BIRs going to tax our feet (and in
which case our basketball players, given their shoe-sizes, would certainly have quite a fair
amount of feet tax to pay, on top of their income taxes), it is nonetheless true that taxes
are a part of our lives, and its always interesting to see peoples reactions to this truth. A
few months ago, I wrote about the whys and wherefores of paying the correct amount of
taxes as a tax practitioner and an accounting professional, its always been fascinating
to me why some taxpayers always try to find ways to reduce the amount of tax they have
to pay. But while I can say that I understand why some taxpayers do try to pay the least
amount of taxes as much as possible, usually by claiming as many deductions as legally
possible, tax evasion which entails deliberate and illegal efforts to elude the payment of
taxes is simply beyond the pale.

Tax avoidance, as most people will agree, is something of a grey area, ethically
speaking. Tax evasion, however, is another matter altogether, and Ill venture to say that
tax evasion, in a sense, is a betrayal of ones country and an exploitation not only of the
nations resources, but also of ones fellow citizens. Just think about it the tax evader is
able to generate wealth from operations that make use of the countrys infrastructure
(roads and bridges, etc.); exploit natural resources, such as water, minerals, flora and
fauna; and employ the services of Filipino citizens, all under the protection of the
governments peace and order agencies, without paying a single centavo in taxes. All that
while others go to the effort of paying their taxes in the case of salaried employees, in
fact, their taxes are automatically deducted from their wages, so theres truly no reducing
the amount of taxes they pay, even if it means giving up a chunk of their hard-earned
money.
Tax evasion is selfishness on a grand scale, where the tax evader thinks only of
himself and what he can keep from the country to spend on himself so he can make more
money. It has no place in a democratic society where equality should be the rule of the
day, and everyone has to do their fair share of work in keeping the national economy
viable, upholding peace and order in society, and preserving the sovereignty of the state
all of which every citizen does through the payment of taxes. The tax evader is the
classic example of someone who wants to have his cake and eat it too or, to put it
bluntly, get rich on a free ride. But as life will eventually teach everyone, theres no
such thing as a free ride, and crime which is what tax evasion definitely is never,
ever pays.
Is it any wonder that the BIR, in recent years, has poured considerable efforts into
pursuing tax evaders? Over the past decade, the BIR has stepped up very significantly
its endeavours to identify and bring tax evaders to justice. Former Internal Revenue
Commissioner Guillermo L. Parayno, Jr. got the ball rolling with the Run After Tax
Evaders (RATE) Program, which was reinvigorated by former Commissioner Joel TanTorres, and is now a flagship project of current Commissioner Kim S. Jacinto-Henares. A
RATE case generally begins with the issuance of a special Letter of Authority (LA) and
the initiation of a tax audit, then proceeds to the filing at the Department of Justice (DOJ)
of a criminal complaint for tax evasion against the errant taxpayer. In most RATE cases,
the BIR already has information on the suspected tax evader that was gleaned from thirdparty sources, and in a few cases, the data was considered strong enough for the BIR to
file a complaint with the DOJ merely two (2) days after the LA was issued to the
taxpayer. The RATE Program has seen the filing of charges against some prominent
taxpayers and enterprises, and Im sure the ripple effect amongst the corporate
community is considerable indeed.
While the RATE Program focuses on legal action against tax evaders, another
BIR project works to bring across the point that if you dont pay your taxes (or in some
cases, if you didnt register your establishment with the BIR), you shouldnt be doing
business at all. Oplan Kandado, which was initiated by former Commissioner Sixto S.
Esquivias IV in 2009, has seen the closure of quite a few large and medium-scale
enterprises that, in most cases, were found, after a required period of surveillance by
revenuers acting under the authority of a Mission Order, to be significantly underdeclaring their sales a practice that could be taken as prima facie evidence of tax
evasion. I remember how a number of businesses closed under the Oplan Kandado
Program were located in some of Metro Manilas biggest shopping malls, and the blow of
being closed by a team of revenuers led by the Revenue District Officer prompted their
owners to pay their back taxes and declare their correct sales. Talk about shock and

awe! I learned later that VAT payments in 2009 rose almost 20% over VAT collections
for 2008, and my friends in the BIR tell me that such an increase was largely due to the
ripple effect of Oplan Kandado.
Whether it be the long-running headache of a court case, or the embarrassing
spectacle of a public closure, its painfully clear that the consequences of tax evasion
arent pretty, and tax evaders truly have only themselves to blame for their woes. When
all is said and done, no one can deny that theres a price to pay literally and figuratively
for doing something illegal, and the Government will surely go tooth and nail after tax
evaders. In a RATE case, as a matter of fact, the filing of criminal complaint with the
DOJ doesnt mean that the tax audit initiated against the suspected tax evader will be
discontinued. Oh no, the tax audit will definitely continue, which means that the accused
tax evader will have to retain two teams of accountants, lawyers and tax experts to defend
him: one team for the DOJ case, and the other for the tax audit. Just think about the
resources that have to be funnelled into paying those retainer fees, resources that could
have been used to improve company operations or ironically enough pay the correct
taxes in the first place!
Tax evaders, however, shouldnt give their dissatisfaction with the Governments
performance as an excuse to not pay their taxes as the old saying goes, you cant correct
a mistake with an even more serious error. More importantly, there is this to think about:
anyone who doesnt contribute to the national effort to generate revenues has no right to
complain about the corruption or inefficiency in government because they didnt invest in
the country through their taxes. As the BIR has long been saying to the Filipino public,
taxes are the peoples investment in the country; thus, the taxes we pay give us the right to
expect services from the government, and above all, to express our grievances when the
government fails to deliver. Anyone who doesnt pay taxes and worse, resorts to
criminal activities to avoid paying them has no right to complain, because they dont
have a stake in the country, and as law-breakers, they shouldnt have any privileges at all.
So, if you want to have a say in urging the government to improve its
performance, then its only fair that you pay your taxes. Anyone who invests in
something has the right to expect a return on his investment, and the taxpayer has the
right to see his money well-spent in services that will make life easier for him. But if
youre bound and determined to be a tax evader, then dont be surprised if one day, the
BIR hails you into court, or padlocks your business as the title of this article says, the
Taxman cometh.
Its one thing to complain about lawlessness, and another to be a law-breaker.
Guess who ends up with a bigger headache?
(The article reflects the personal opinion of the author and does not reflect the official
stand of the Management Association of the Philippines. The author is a Senior Partner
of The Tax Offices of Romero, Aguilar & Associates and member of the MAP National
Issues Committee and MAP Committee on Taxation. Feedback at
map@globelines.com.ph. For previous articles, please visit <map.org.ph>)