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Any available answers? 2012 Taxation Essay question VII

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ulandi


Arresto Menor
a) May the bank deposits – peso and foreign currency of the an individual taxpayer be disclosed by a commercial bank to the Commissioner of Internal Revenue, in connection with a tax investigation being conducted by revenue officials, without violating the relevant bank secrecy laws? Explain your answer. (5%)
b) In 2011, the Commissioner of the U.S. Internal Revenue Service (IRS) requested in writing the Commissioner of Internal Reveneu to get the informatrion from a bank in the Philippines, regarding the deposits of a U.S. Citizen residing in the Philippines, who is under examiniation by the officials of the US IRS, pursuant to the US-Philippine Tax Treaty and othert existing laws. Should the BIR Commissioner agree to obtain such informarion from the bank and provide the same to the IRS? Explain your answer. (5%)
c) 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? Explain your answer. (5%)

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bearangel


Arresto Menor
They said the answers can be found in the 2012 San Beda Red Notes (Taxation Law)

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taxconsultantdavao


Reclusion Perpetua


bro. actual cases iyan bro. tingnan mo ang salvacion vs. central bank at estrada at desierto na cases.

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taxconsultantdavao


Reclusion Perpetua
iyong sa tax treaty, meron din niyan.

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taxconsultantdavao


Reclusion Perpetua
XXX

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taxconsultantdavao


Reclusion Perpetua
b) In 2011, the Commissioner of the U.S. Internal Revenue Service (IRS) requested in writing the Commissioner of Internal Reveneu to get the informatrion from a bank in the Philippines, regarding the deposits of a U.S. Citizen residing in the Philippines, who is under examiniation by the officials of the US IRS, pursuant to the US-Philippine Tax Treaty and othert existing laws. Should the BIR Commissioner agree to obtain such informarion from the bank and provide the same to the IRS? Explain your answer. (5%)[u]

http://www.lawphil.net/statutes/repacts/ra2010/ra_10021_2010.html

http://www.punongbayan-araullo.com/pnawebsite/pnahome.nsf/section_docs/JE711N_23-11-10

http://lexforiphilippines.files.wordpress.com/2010/02/ra-10021-exchange-of-information-on-tax-matters.pdf

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taxconsultantdavao


Reclusion Perpetua
FROM the article of senen quizon:

"Moreover, while the law allows foreign tax authorities to inspect the income tax returns of specific taxpayers, examination may not proceed without the order of the President of the Philippines, upon recommendation of the CIR. The law also gives the taxpayer, whose return is the subject of request for inspection by the foreign tax authority, the right to receive notification within 60 days from receipt of the request. "


Under Section 3 of RA 10021, as implemented by RR 10-2010, all requests must also meet certain requirements that include the following:
1. the identity of the person under examination or investigation must be clearly stated in the request;
2. the grounds for believing that the information requested is in the Philippines must be proven to avoid fishing expedition;
3. and the evidence that the requesting country has exhausted all means available in its own territory to obtain the information must be stated in the request. [u]

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taxconsultantdavao


Reclusion Perpetua
Is there a penalty for bank officers or owners who refuse to supply the information
required by the Commissioner under RA 10021?

Yes. Any officer, owner, agent, manager, director or officer-in -charge of any bank or financial
institution who, upon being required in writing by the Commissioner, willfully, refuses to supply
the required information will be punished by a fine of not less P50,000 but not more than
P100,000, or imprisonment of not less than 2 years but not more than 5 years, or both.[u]

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taxconsultantdavao


Reclusion Perpetua
b) In 2011, the Commissioner of the U.S. Internal Revenue Service (IRS) requested in writing the Commissioner of Internal Reveneu to get the informatrion from a bank in the Philippines, regarding the deposits of a U.S. Citizen residing in the Philippines, who is under examiniation by the officials of the US IRS, pursuant to the US-Philippine Tax Treaty and othert existing laws. Should the BIR Commissioner agree to obtain such informarion from the bank and provide the same to the IRS? Explain your answer. (5%)[u]


please take note of section 6 f (powers of the commissioner) of the NIRC as amended (RA 10021)and Section 270 (Unlawful Divulgence of Trade Secrets) of NIRC, as amended.

Section 6 f is the appropriate legal basis to cite because it talks of the powers of the commissioner.


but section 270 of NIRC , as amended, is also relevant because it provides a another exception to the rule when it would be lawful to divulge tax information. That additional exception is provided by RA 10021. SEction 270 is now in harmony with SEction 6F. Otherwise , it would have been inconsistent if the Commissioner has the powers to obtain info from the banks in compliance with the foreign tax treaty, but the same act is prohibited by the same NIRC to be divulged to any and all persons.

Section 270 of NIRC, as amended, provided the following:

xxxx
Any officer or employee of the BIR who divulges or makes known in any other manner to any person OTHER THAN THE REQUESTING FOREIGN TAX AUTHORITY information obtained from banks and financial institutions pursuant to SEction 6(F), knowledge or info acquired by him in the discharge of his official duties shall, upon conviction, be punished by a fine
[u]

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taxconsultantdavao


Reclusion Perpetua
SECTION 6 F OF NIRC (AS AMENDED) NOW READS:
(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and
Other Related Information Held by Financial Institutions. - Notwithstanding any contraryprovision of Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) A decedent to determine his gross estate.

"(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay his tax liability.

"In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer.

"(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.

"In case of request from a foreign tax authority for tax information held by banks and financial institutions, the exchange of information shall be done in a secure manner to ensure confidentiality thereof under such rules and regulations as may be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

"The Commissioner shall provide the tax information obtained from banks and financial institutions pursuant to a convention or agreement upon request of the foreign tax authority when such requesting foreign tax authority has provided the following information to demonstrate the foreseeable relevance of the information to the request:

"(a) The identity of the person under examination or investigation;

"(b) A statement of the information being sought including its nature and the form in which the said foreign tax authority prefers to receive the information from the Commissioner;

"(c) The tax purpose for which the information is being sought;

"(d) Grounds for believing that the information requested is held in the Philippines or is in the possession or control of a person within the jurisdiction of the Philippines;

"(e) To the extent known, the name and address of any person believed to be in possession of the requested information;

"(f) A Statement that the request is in conformity with the law and administrative practices of the said foreign tax authority, such that if the requested information was within the jurisdiction of the said foreign tax authority then it would be able to obtain the information under its law or in the normal course of administrative practice and that it is conformity with a convention or international agreement; and

"(g) A statement that the requesting foreign tax authority has exhausted all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

"The Commissioner shall forward the information as promptly as possible to the requesting foreign tax authority. To ensure a prompt response, the Commissioner shall confirm receipt of a request in writing to the requesting tax authority and shall notify the latter of deficiencies in the request, if any, within sixty (60) days from the receipt of the request.

"If the Commissioner is unable to obtain and provide the information within ninety (90) days from the receipt of the request, due to obstacles encountered in furnishing the information or when the bank or financial institution refuses to furnish the information, he shall immediately inform the requesting tax authority of the same, explaining the nature of the obstacles encountered or the reasons of refusal."

"The term 'foreign tax authority', as used herein, shall refer to the tax authority or tax administration of the requesting State under the tax treaty or convention to which the Philippines is a signatory or a party of.[u]

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taxconsultantdavao


Reclusion Perpetua
c) 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? Explain your answer. (5%)[u]

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taxconsultantdavao


Reclusion Perpetua
THIS bar question is actually similar to the case of
pcib vs. ca with G.R. No. 84526, decided by the supreme court on January 28, 1991

the only difference between this case and question b is that in the former, the warrant was issued by NLRC for the garnishment of deposits to satisfy a judgement for backwages while in the latter, the warrant is issued by the BIR to satisfy a tax liability.


NOte:
a warrant of garnishment issued by the BIR is intentionally designed to secure the taxpayer's payment of their DELINQUENT tax liability in case the taxpayer would refuse to do so. the said warrant is effectively ordering a bank not to allow any withdrawal from any existing bank deposit of the delinquent taxpayer mentioned in the Warrant and to freeze the same until the tax delinquency of said taxpayer is settled with the BIR. If the taxpayer is insistent on the non-payment of their tax liability despite the garnishment of their deposits, then the deposit as garnished will eventually be used to pay the government.


IN THE CASE OF PCIB VS. CA, THE ISSUE THERE WAS:
The petitioners raise two issues, 11 to wit:


2. Whether or not petitioners violated Republic Act No. 1405, otherwise known as the Secrecy of Bank Deposits Act, when they allowed the sheriff to garnish the deposit of private respondent.

PLEASE TAKE NOTE: PESO DEPOSIT (ra 1405 ) LANG ITONG pcib CASE at Chinabank vs. Ortega



NAGDISCUSS ANG SUPREME COURT DITO KUNG ANO BA DAAW ANG GARNISHMENT:

In the second place, the mere garnishment of funds belonging to a party upon order of the court does not have the effect of delivering the money garnished to the sheriff or to the party in whose favor the attachment is issued. The fund is retained by the garnishee or the person holding the money for the defendant.
The garnishee, or one in whose hands property is attached or garnished, is universally regarded as charged with its legal custody pending outcome of the attachment or garnishment unless, by local statute and practice, he is permitted to surrender or pay the garnished property or funds into court, to the attaching officer, or to a receiver or trustee appointed to receive them. (5 Am. Jur. 14)
The effect of the garnishment, therefore, was to require the Philippine Trust Company, holder of the funds of the Luzon Surety Co., to set aside said amount from the funds of the Luzon Surety Co., and keep the same subject to the final orders of the Court. In the case at bar there was never an order to deliver the full amount garnished to the plaintiff-appellee; all that was ordered to be delivered after the judgment had become final was the amount found by the Court of Appeals to be due. The balance of the amount garnished, therefore, remained all the time in the possession of the bank as part of the funds of the Luzon Surety Co. although the same could not be disposed of by the owner. (De la Rama vs. Villarosa, et al., L-17927, June 29, 1963, 8 SCRA 413, 418-419; Emphasis supplied). 12



With regard to the second issue, we find no violation whatsoever by the petitioners of Republic Act No. 1405, otherwise known as the Secrecy of Bank Deposits Act. The Court in China Banking Corporation vs. Ortega 18 had the occasion to dispose of this issue when it stated, thus:
It is clear from the discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act 1405, that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a case, and if existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank.
Since there is no evidence that the petitioners themselves divulged the information that the private respondent had an account with the petitioner bank and it is undisputed that the said account was properly the object of the notice of garnishment and writ of execution carried out by the deputy sheriff, a duly authorized officer of the court, we can not therefore hold the petitioners liable under R.A. 1405.


PLEASE SEE THE CASE OF CHINA BANKING CORPORATION VS. ORTEGA ( G.R. No. L-34964 January 31, 1973)

CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,
vs.
HON. WENCESLAO ORTEGA

It will be noted from the discussion of the conference committee report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act 1405, that it was not the intention of the lawmakers to place bank deposits beyond the reach of execution to satisfy a final judgment. Thus:

Mr. MARCOS. Now, for purposes of the record, I should like the Chairman of the Committee on Ways and Means to clarify this further. [b]Suppose an individual has a tax case. He is being held liable by the Bureau of Internal Revenue for, say, P1,000.00 worth of tax liability, and because of this the deposit of this individual is attached by the Bureau of Internal Revenue.


Mr. RAMOS. The attachment will only apply after the court has pronounced sentence declaring the liability of such person. But where the primary aim is to determine whether he has a bank deposit in order to bring about a proper assessment by the Bureau of Internal Revenue, such inquiry is not authorized by this proposed law.

Mr. MARCOS. But under our rules of procedure and under the Civil Code, the attachment or garnishment of money deposited is allowed. Let us assume, for instance, that there is a preliminary attachment which is for garnishment or for holding liable all moneys deposited belonging to a certain individual, but such attachment or garnishment will bring out into the open the value of such deposit. Is that prohibited by this amendment or by this law?

Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or rather, the inquiry is made only for the purpose of satisfying a tax liability already declared for the protection of the right in favor of the government; but when the object is merely to inquire whether he has a deposit or not for purposes of taxation, then this is fully covered by the law.

Mr. MARCOS. And it protects the depositor, does it not?

Mr. RAMOS. Yes, it protects the depositor.

Mr. MARCOS. The law prohibits a mere investigation into the existence and the amount of the deposit.

Mr. RAMOS. Into the very nature of such deposit.

Mr. MARCOS. So I come to my original question. Therefore, preliminary garnishment(constructive garnishment-supplied by me) or attachment of the deposit is not allowed?

Mr. RAMOS. No, without judicial authorization.

Mr. MARCOS. I am glad that is clarified. So that the established rule of procedure as well as the substantive law on the matter is amended?

Mr. RAMOS. Yes. That is the effect.

Mr. MARCOS. I see. Suppose there has been a decision, definitely establishing the liability of an individual for taxation purposes and this judgment is sought to be executed ... in the execution of that judgment, does this bill, or this proposed law, if approved, allow the investigation or scrutiny of the bank deposit in order to execute the judgment?

Mr. RAMOS. To satisfy a judgment which has become executory.

Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is P1,000,000 and the deposit is half a million, will this bill allow scrutiny into the deposit in order that the judgment may be executed?

Mr. RAMOS. Merely to determine the amount of such money to satisfy that obligation to the Government, but not to determine whether a deposit has been made in evasion of taxes.

xxx xxx xxx

Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the recovery of a sum of money the plaintiff wishes to attach the properties of the defendant to insure the satisfaction of the judgment. Once the judgment is rendered, does the gentleman mean that the plaintiff cannot attach the bank deposit of the defendant?

Mr. RAMOS. That was the question raised by the gentleman from Pangasinan to which I replied that outside the very purpose of this law it could be reached by attachment.

Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be attached?

Mr. RAMOS. That is so.

(Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839-3840, July 27, 1955).

It is sufficiently clear from the foregoing discussion of the conference committee report of the two houses of Congress that the prohibition against examination of or inquiry into a bank deposit under Republic Act 1405 does not preclude its being garnished to insure satisfaction of a judgment. Indeed there is no real inquiry in such a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it was ever within the intention of Congress to enable debtors to evade payment of their just debts, even if ordered by the Court, through the expedient of converting their assets into cash and depositing the same in a bank.


[u][u][u]
[u][u][u]



Last edited by taxconsultantdavao on Sun Dec 09, 2012 5:01 pm; edited 14 times in total

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taxconsultantdavao


Reclusion Perpetua
xx
aside from the cases of pcib vs. ca and china banking corp vs. ortega, RMO 39-2007 is also applicable in this case. this rmo is an implementing rule of section 206,207,208 of NIRC. pero you dont cite this rmo sa answer mo. pinakita ko lang ang implementing rules sa warrant of garnishment.

Thus,Upon issuance of the bureau of its final decision on the disputed assessment against the taxpayer or upon filing of a Petition for Review before the CTA in Division or En Banc of its decision, upholding the assessment, Warrants of Distraint and Garnishment or Levy shall be issued and served as per RMO No. 39-2007 of the BIR when applicable.[u]

PLEASE TAKE NOTE: PESO DEPOSIT (ra 1405 ) LANG ITONG pcib CASE at Chinabank vs. Ortega[u]



Last edited by taxconsultantdavao on Sun Dec 09, 2012 5:03 pm; edited 5 times in total

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taxconsultantdavao


Reclusion Perpetua
another source of commentary about bank secrecy law is the article of franz david ong lim entitled "BANK SECRECY LAW:
A HISTORICAL AND ECONOMIC ANALYSIS."


just take note of his comments and it reads:

As regards cases involving garnishments, the Supreme Court, basing its decision on the House deliberations, in China Banking Corporation v. Ortegtfl& ruled that
the Bank Secrecy Law does not preclude the bank deposits from being garnished to
satisfy a judgment
. The court reiterated this ruling in the later case of Philippine
Commercial and Industrial Bank v. Court of Appeals. 27[u]



Last edited by taxconsultantdavao on Mon Dec 03, 2012 8:08 pm; edited 4 times in total

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taxconsultantdavao


Reclusion Perpetua
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.



summary:
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?.

http://www.interaksyon.com/article/24571/katrina-legarda-whats-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 katlegarda@yahoo.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.
[b][u]




[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]



Last edited by taxconsultantdavao on Sun Dec 09, 2012 5:04 pm; edited 5 times in total

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taxconsultantdavao


Reclusion Perpetua
a) May the bank deposits – peso and foreign currency of the an individual taxpayer be disclosed by a commercial bank to the Commissioner of Internal Revenue, in connection with a tax investigation being conducted by revenue officials, without violating the relevant bank secrecy laws? Explain your answer. (5%)[u]

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taxconsultantdavao


Reclusion Perpetua
in order to answer question VII subsection a, you must distinguish your answer on the peso deposit as against your answer on the foreign currency deposit.

PESO DEPOSIT
the Commissioner of Internal Revenue is only authorized to inquire into the bank deposits of:

first: decedent to determine his gross estate;
second: any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. [Sec. 5 (F), NIRC of 1997]

"In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer.

third: A taxpayer who authorizes the Commissioner to inquire into his bank deposits.

fourth: request from a foreign tax authority


see sECTION 6 F NIRC as amended by RA 10021 (approved last march 8, 2010 and took effect 15 days after its publication in the official gazette or in at least two (2) newspapers of general circulation.

"xxx

"(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and

Other Related Information Held by Financial Institutions. - Notwithstanding any contrary provision of Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) XX

"(2) XXA
"(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.





FOREIGN CURRENCY DEPOSIT:
PLEASE HELP ME ON THIS ASPECT AS REGARDS FOREIGN CURRENCY DEPOSIT:

the instance/S allowed by law where A bir commissioner can inquire into the foreign currency deposit of a taxpayer was discussed in various cases. there seems to be only one exception (WRITTEN PERMISSION FROM THE DEPOSITOR)(but take note of the case of SAlvacion vs. Central Bank- another exception) if you read a long line of supreme court decided cases , even the recent decision of Philippine SAvings Bank and Pascual Garcia Vs. CA (impeachment of SC justice Corona). However, you must also read RA 10021 and correlate these cases with the 2010 law (RA 10021).

SUPREME COURT DECIDED CASES WHERE THERE IS ONLY ONE EXCEPTION TO THE RULE ON ABSOLUTE CONFIDENTIALITY OF FOREIGN CURRENCY DEPOSITS:

1.GSIS VS. CA G.R. No. 189206 2011 CASE
Applying Section 8 of Republic Act No. 6426, absent the written permission from Domsat, Westmont Bank cannot be legally compelled to disclose the bank deposits of Domsat, otherwise, it might expose itself to criminal liability under the same act.[27]

2.INTEGAN VS. CA [G.R. No. 128996. February 15, 2002]
Thus, under R.A. No. 6426 there is only a single exception to the secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor. Incidentally, the acts of private respondents complained of happened before the enactment on September 29, 2001 of R.A. No. 9160 otherwise known as the Anti-Money Laundering Act of 2001. (please see the amended law on AMLC- i haven't checked on that one)

3. http://sc.judiciary.gov.ph/jurisprudence/2012/february2012/200238-TRO.pdf

PHILIPPINE SAVINGS BANK AND PASCUAL GARCIA VS. CA , EN BANC DECISION FEB 2012

Under R.A. No. 6426 there is only a single exception to the
secrecy of foreign currency deposits, that is, disclosure is allowed only upon the written permission of the depositor.2
In Intengan v. Court of Appeals,3 the Court ruled that where the accounts in question are U.S. dollar deposits, the applicable law is not Republic Act No. 1405 but RA 6426. Similarly, in the recent case of Government Service Insurance System v. 15th Division of
the Court of Appeals,4 the Court also held that RA 6426 is the applicable law for foreign currency deposits and not Republic Act No. 1405. In ruling that Westmont Bank cannot be compelled to disclose the dollar deposits of Domsat Holdings, Inc, the Court
ruled:
These two laws both support the
confidentiality of bank deposits. There is no conflict
between them. Republic Act No. 1405 was enacted
for the purpose of giving encouragement to the
people to deposit their money in banking
institutions and to discourage private hoarding so
that the same may be properly utilized by banks in
authorized loans to assist in the economic
development of the country. It covers all bank
deposits in the Philippines and no distinction was
made between domestic and foreign deposits. Thus,
Republic Act No. 1405 is considered a law of
general application. On the other hand, Republic
Act No. 6426 was intended to encourage deposits
from foreign lenders and investors. It is a special
law designed especially for foreign currency
deposits in the Philippines. A general law does
not nullify a specific or special law. Generalia
specialibus non derogant. Therefore, it is beyond
cavil that Republic Act No. 6426 applies in this
case.5
The written consent under RA 6426 constitutes a waiver of
the depositor’s right to privacy in relation to such deposit.6 In the present case, neither the prosecution nor the Impeachment Court has presented any such written waiver by the alleged depositor,
Chief Justice Renato C. Corona. Also, while impeachment may be an exception to the secrecy of bank deposits under RA 1405, it is not an exemption to the absolute confidentiality of foreign
currency deposits under RA 6426.





FOR



In GSIS vs. CA (2011) and PSBank Vs. CA (2012), the Supreme Court must have forgotten RA 10021 (AN ACT TO ALLOW THE EXCHANGE OF INFORMATION BY THE BUREAU OF INTERNAL REVENUE OF TAX MATTERS PURSUANT TO INTERNATIONALLY-AGREED TAX STANDARDS, AMENDING SECTIONS 6(F), 71 AND 270 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES).

Apparently, RA 10021 might be another exception to the general rule on absolute confidentiality of foreign currency deposits.

SEe the exact textual provisions of RA 10021. It reads:

"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe

Additional Requirements for Tax Administration and Enforcement. -

"xxx

"(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and

Other Related Information Held by Financial Institutions. - Notwithstanding any contrary provision of Republic Act No. 1405, Republic Act No. 6426 (, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) A decedent to determine his gross estate.

"(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay his tax liability.

"In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer.

"(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.

"In case of request from a foreign tax authority for tax information held by banks and financial institutions, the exchange of information shall be done in a secure manner to ensure confidentiality thereof under such rules and regulations as may be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

"The Commissioner shall provide the tax information obtained from banks and financial institutions pursuant to a convention or agreement upon request of the foreign tax authority when such requesting foreign tax authority has provided the following information to demonstrate the foreseeable relevance of the information to the request:


please help me on this one regarding the foreign currency deposit. has RA 10021 effectively amended RA 6426 (foreign currency)as regards the power of the
Bir commissioner to inquire on foreign currency deposits? ?
if na amend ang RA 6426 ng RA 10021, it means na puwede natin isali ito sa answer natin sa bar quesetion na ito.

kasi if RA 10021 had the intention to only cover peso deposits, it would not have stated this very important clause in Section 3 that provides " that notwithstanding any contrary provision to xxxx , RA 6426 (foreign currency deposit act)". [u]

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taxconsultantdavao


Reclusion Perpetua
My suggested answer:
Yes. the Peso and foreign currency deposits maybe disclosed by the commercial bank to the BIR commissionER.

Under RA 1405, otherwise known as "SEcrecy Of Bank Deposit ACt", all deposits of whatever nature with banks or banking institutions, including investment in bonds issued by the Govt and its political subdivisions and instrumentalities are absolutely confidential in nature and may not be examined, inquired or looked into by any person, government official , bureau or office, except:
1. upon the debtor's written permission
2. in cases of impeachment
3. upon a competent court's order in cases of bribery of, or dereliction of duty by, public officials
4. in cases where money deposited or invested is the subject matter of litigation
5.SEction 8, RA 3019, in cases of unexplained wealth
6. Section 6 F of the National Internal Revenue Code of 1997, as amended by RA 10021, which authorizes the Commissioner of internal Revenue to inquire into bank deposit accounts of:
a. A decedent to determine his gross estate;
b. Any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. [Sec. 5 (F), NIRC of 1997]
c. A taxpayer who authorizes the Commissioner to inquire into his bank deposits.

d. A TAXPAYER WITH A WRITTEN request from a foreign tax authority in accordance with RA 10021


For foreign currency deposits, all foreign currency deposits authorized are considered of an
absolutely confidential nature except:
1. upon the written permission of the depositor as provided under RA 6426.
2. upon request by a foreign tax authority to the CIR as provided under RA 10021 (2010 law)

kayo na bahala ano format ng answer niyo.
[u]



Last edited by taxconsultantdavao on Sun Dec 09, 2012 12:51 pm; edited 2 times in total

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taxconsultantdavao


Reclusion Perpetua
THIS IS A DIFFERENT ISSUE. BUT NOT TOTALLY UNRELATED BECAUSE IT MIGHT BE AN ALTERNATIVE ANSWER

My suggested answer:
Yes. Peso and foreign currency deposits maybe disclosed to the BIR commissionER in the following cases:

For foreign currency deposit:

1. upon written permission from the depositor (legal Basis: RA 6426)
2. if there is a request from a foreign tax authority etc etc etc. see RA 10021.
3. where the tax investigation involves a decedent to determine his gross estate;
4. where the tax investigation involves Any taxpayer who has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability. [Sec. 5 (F), NIRC of 1997]

legal basis for number 3 and number 4

See the exact textual provisions of RA 10021. It reads:

Section 3. Authority of the Commissioner of Internal Revenue to Inquire into Bank Deposit Accounts and Related Information Held by Financial Institutions. - Section 6(F) of Republic Act No. 8424, as amended, otherwise known as the National Revenue Code of 1997, as amended, is hereby further amended to read as follows:"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe

Additional Requirements for Tax Administration and Enforcement. -

"xxx

"(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and

Other Related Information Held by Financial Institutions. - Notwithstanding any contrary provision of Republic Act No. 1405, Republic Act No. 6426 (, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) A decedent to determine his gross estate.

"(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay his tax liability.

"In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer.

"(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.
[/u]


tama po ba na isali ang instances 3 and 4 kasi na amend na ang RA 6426 ng RA 10021? sinali na sa exception ang "(1) A decedent to determine his gross estate.

"(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay his tax liability sa exception sa confidentiality of foreign currency deposits????

kasi parang me typhographical error. if intention ng legislator na isali ito sa exception ng foreign currency deposit, bakit sa declaration of policy at sa ibang provisions ng RA 10021, hindi nadiscuss ang decedent at compromise??? pero as i read RA 10021, nasali man sya sa amendment to RA 6426.

if hindi kasali ang decedent (1st exception) at iyong ng apply ng compromise (2nd exception), ganito sana pagka craft ng RA 10021


Section 3. Authority of the Commissioner of Internal Revenue to Inquire into Bank Deposit Accounts and Related Information Held by Financial Institutions. - Section 6(F) of Republic Act No. 8424, as amended, otherwise known as the National Revenue Code of 1997, as amended, is hereby further amended to read as follows:"SEC. 6. Power of the Commissioner to Make Assessments and Prescribe

Additional Requirements for Tax Administration and Enforcement. -

"xxx

"(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and

Other Related Information Held by Financial Institutions. - Notwithstanding any contrary provision of Republic Act No. 1405, Republic Act No. 6426 (, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) xxxx.

"(2) xxxx


"(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.
[u]

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taxconsultantdavao


Reclusion Perpetua


tingin ko, 4 na ang exception sa foreign currency deposit act (5 if kasali ang salvacion case).

bakit kaya di nasali ito sa discussion ng 2011 at 2012 cases ng Supreme Court?

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ulandi


Arresto Menor
thanks alot guys!

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