to answer the question "xx Is the bank secrecy law in the Philippines violated when the BIR issues a Warrant of Garnishment directed against a domestic bank, requiring it not to allow any withdrawal from any existing bank deposit of he delinquent taxpayer mentioned in the Warrant and to freeze the same until the tax delinquency of said taxpayer is settled with the BIR?", you must be able to reason out that in garnishment, there is actually no inquiry in the said process.
you cite the reasons arrived by the supreme court in deciding the case of pcib vs. ca and CHINA BANKING CORP VS. ORTEGA ( please see the abovementioned cases). you may also cite the house deliberations between mr. marcos and mr. ramos as regards bir garnishment and the secrecy of bank deposits.
but this answer is only applicable to peso deposits.
1. peso deposit: garnishment is not considered an inquiry or examination of the deposit. hence, there is no violation of Bank secrecy law (RA 1405). you cite the case of PCIB vs. Ca and Chinabank vs. Ortega.
2. foreign currency deposit: garnishment of foreign currency deposit is in violation of the bank secrecy laws under RA 6426 (foreign currency deposits act).
Under RA 6426:
Except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private.
Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.) (NOTE: This rule is not absolute. In Salvacion v. Central Bank of the Philippines, the Supreme Court ruled: “In fine, the application of the law depends on the extent of its justice x x x It would be unthinkable, that the questioned law exempting foreign currency deposits from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever would be used as a device by an accused x xx for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent.)
dito sa RA 6426, nakalagay talaga na bawal ang garnishment. to be safe, ilagay na lang ito na answer na ito na for foreign currency deposits, pag me garnishment, me violation sa secrecy of bank deposits.
sa peso deposit, walang violation because wala itong provision na ito about garnishment sa RA 1405. just cite the case of PCIB vs. CA and Chinabank vs. Ortega with regards sa Peso Deposit kasi pag garnishment daw sa peso deposit, wala daw inquiry.
HINDI NA KASALI SA LEGAL BASIS PARA SA SAGOT SA QUESTION C. PERO WORTHY ITO SA ACADEMIC AND CLASSROOM DISCUSSION.
Note: e kung mag tax evasion siya tapos ilagay niya sa foreign currency ang mga deposit niya, does it mean din ba na exempt from garnishment itong foreign currency deposit na ito??????
kasi sa Estrada v. Desierto, G.R. No. 156160, 9 December 2004, 445 SCRA 655, 672., muntik nang magdecide ang Supreme Court dito about constructive distraint ng Foreign currency deposit ni President Estrada kasi daw according to the BIR, me flight risk at tax evader ito si President EStrada, baka magsibat paalis ng pilipinas, kaya dapat i garnish agad ang foreign currency deposit ni President Estrada. rumesbak si President Estrada. Nagfile din sya ng case sa ombudsman office against BIR deputy comm Lilian Hefti. Kaso, hindi nagdecide ang SC according to the merits of the distraint ang SC. nagdecide lang sila sa jurisdiction ng ombudsman sa case na ito.
please refer to the article written by ATty. Katrina Legarda. MIND YOU, that article gave readers a concise but well written and instructive summary of the case of Estrada vs. Desierto (2004), The said article was entitled "KATRINA LEGARDA: what's an FCDU account?.
I will just copy and past her article for the benefit of everybody. According to her article and I quote here:
So, what is an FCDU account? It is a bank account where you deposit your US dollars, basically. Section 8 of R.A. 6426 provides:
Secrecy of foreign currency deposits. – All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)
How has the Supreme Court treated the law that allows the opening of an FCDU? I was referred to the case of Joseph E. Estrada [yup, President Erap] vs. Hon. Aniano A. Desierto [yup, then the Ombudsman]. This case was decided in 2004, en banc, and written by a now retired Justice.
Apparently the BIR in 2001 placed President Erap's foreign currency deposit account at Citibank Greenhills Branch under constructive distraint: which is simply the seizure and holding of property as security for payment of a debt or satisfaction of a claim.
In issuing the distraint, the BIR was apparently moved by the huge disparity of Erap's income as declared by him in his Annual Income Tax Return, and the amount of his income as established in the impeachment trial, which was said to be concealed under fictitious name. In addition, there were various news reports about the plan of Erap to flee the country bringing with him the money he amassed during his presidency.
Erap sued the BIR personnel for anti-graft atbp. In relevant part, Erap complained about the violation of Section 8 of R.A. 6426 as cited earlier.
The BIR argued that, in a 1997 case, the Highest Tribunal adopted the opinion of the Office of the Solicitor General (OSG) that only foreign currency deposits of foreign lenders and investors are given protection and incentives by the law. Thus, foreign currency deposits of Filipino depositors, including Erap's, are not covered by the Foreign Currency Deposits Act, and are not exempt from the processes duly-issued by the BIR, because the protection is apparently only for only non-residents who are not engaged in trade and business.
The Supreme Court did not argue anymore with the BIR stance as this case was actually about the jurisdiction of the Ombudsman. However, the Supreme Court had a final "cautionary word".
The Court said that, assuming the BIR was wrong to rely on the 1997 case and on a "whereas" clause of the law, "this Court, on petition for certiorari, cannot correct the same as the error is not of a degree that would amount to a clear case of abuse of discretion of the grave and malevolent kind. It is axiomatic that not every erroneous conclusion of law or fact is abuse of discretion."
Hmmm... So, does this mean that the PSBank petition upon which the present TRO was issued will be the "proper case" for the Supreme Court to make a definitive ruling on the FCDU law that considers FCDU accounts as absolutely confidential?
Please send in your questions, if any, through email@example.com. I will not answer personally, OK? However, if the question or situation is interesting, I may write about it in this space. Till next time.
[i]TAPOS ME RECENT CASE NAMAN NI PHILIPPINE SAVINGS BANK , PASCUAL GARCIA VS. SENATE IMPEACHMENT COURT na that was decided only last November 2012. ang nakakalungkot dito is hindi nagdecide na naman ang supreme court kasi daw, moot and academic na ang case dahil:
1. nagwithdraw na ng petition ang philippine savings bank.
2. nag execute na ng written permission si CJ Corona.
Kaya, di na naman nadiscuss if me exception ba iyong garnishment ng foreign currency deposits in cases of impeachment at saka BIR related cases (pero i understand, wala yata nagfile ng petition ang BIR dito sa case na ito kaya most likely hindi madiscuss ang alleged tax evasion ni CJ Corona)[u]