INTRODUCTION

 

Large-scale BIR corruption involving commissioner Caesar R. Dulay.

Despite President Rodrigo Roa Duterte's stern directive to stop corruption, the same is still rampant in the Bureau of Internal Revenue and worse, it even emanates in the Office of the Commissioner itself involving commissioner Caesar Rivera Dulay himself.

The significantly controversial ones are -

1️⃣the extremely anomalous settlement of Cosmos Bottling Corporation's ("Cosmos") P3.76 billion deficiency tax liabilities for only a little over P51 million; and

2️⃣the Del Monte Philippines's ("Del Monte") P8.7 billion deficiency tax liabilities which was grossly reduced to only a little over P65 million.

These irregularities were promptly reported to President Duterte thru the then BIR Director Othello Dalanon’s official letter-report submitted on 13 February 2018 thru the then Special Assistant to the President, now senator, Christopher Lawrence "Bong" Tesoro Go; and on 08 February 2019. But sadly, the President has seemingly ignored it.

Also, despite social media postings for more than 2 years now, publications in mainstream print and online media, and mass actions for 27 days that started on 21 October 2019 - at BIR national office in Quezon City for 9 days; Philippine Senate in Pasay City for 2 days; National Press Club in Intramuros, Manila for 1 day; and in front of Malacanang Gate in Mendiola, Manila for 15 days, held by RDRG (Rebolusyong Duterte for a Revolutionary Government), a civic organization supportive of President Duterte’s war against corruption, led by its Founding National Chairman and Lead Convenor Bishop Nilo Tayag, still the President remains mum about the controversy.

1️⃣The Cosmos tax anomaly

The Cosmos case already has a Final Decision from the Court of Tax Appeals (CTA Case No. 9405 dated 25May17).

The CTA, in the said Final Decision, enunciated that  -

✅Cosmos’s P3.76 billion deficiency tax assessment has become Final, Executory and Demandable;

✅BIR's settlement for only P51 million, during the pendency of Cosmos’s Petition for Review with the CTA, was invalid; and

✅BIR's Amended FDDA (Final Decision on Disputed Assessment) bearing on the grossly reduced tax deficit of Cosmos for only P51 million, was without the approval of the Bureau’s Evaluation Board.

Basic is the rule that once the deficiency tax assessment has become final, executory and demandable, it is no longer appealable. The right of the government to collect the deficiency tax becomes absolute. Thus, there is now no reason why the BIR cannot continue with the collection of the said deficiency tax.

It may also be noted that the BIR settled or amended the FDDA while Cosmos’s Petition for Review was pending in the CTA. - There is no law or rules and regulations or jurisprudence that authorizes the BIR to settle or amend any tax assessment while a case is pending in Court. Once a case is already filed in Court, the Bureau loses jurisdiction over it.

And while Sec. 204(A) of the 1997 National Internal Revenue Code (NIRC), as amended, empowers the CIR to abate and compromise taxes, it, at the same time, limits the CIR's authority to compromise by categorically stating that - "where the basic tax involved exceeds One million pesos (P1,000.000) xxx, the compromise shall be subject to the approval of the Evaluation Board xxx".

❇️Particulars

▪️On 04 September 2015, Cosmos was served a Final Decision on Disputed Assessment (FDDA) dated 01 September 2015 signed by the then Assistant Commissioner Nestor S. Valeroso, bearing on the company’s deficiency taxes amounting to P3.76 billion for taxable year 2008.

▪️On 02 October 2015, Cosmos filed its Request for Reconsideration addressed to the then BIR Commissioner Kim Henares praying that the deficiency tax per the aforesaid FDDA be reconsidered and modified.

▪️On 01 July 2016, Cosmos was served a Letter (Final Decision) dated 29 June 2016 of the then BIR commissioner Henares denying Cosmos’s Request for Reconsideration on the ground that Cosmos’s arguments were mere rehash of its previous arguments in its protest letter against the Formal Letter of Demand (FLD).

▪️On 11 July 2016, Cosmos filed a letter addressed to BIR commissioner Caesar Rivera Dulay questioning the Letter (Final Decision) of the then BIR commissioner Henares for allegedly hastily denying Cosmos’s Request for Reconsideration and for being unjust and unreasonable.

▪️On 29 July 2016, Cosmos filed before the COURT OF TAX APPEALS a Petition for Review praying for the cancellation and withdrawal of the FDDA.

▪️On 29 September 2016, the BIR issued an Amended FDDA for taxable year 2008 signed by the then OIC-Deputy Commissioner for Operations Group Nestor S. Valeroso, bearing on the grossly reduced tax liabilities of Cosmos for only P51 million which Cosmos paid on the following day, 30 September 2016.

▪️On 13 October 2016, Cosmos filed before the CTA a Motion to Withdraw Petition for Review which the CTA granted in its Resolution (CTA Case No. 9405) dated 25 May 2017.

The CTA Resolution states, among other things, that -

"xxx

Deputy Commissioner Valeroso had no authority to issue an Amended FDDA after the then Commissioner of Internal Revenue had rendered her Final Decision. Besides, even if the Amended FDDA may be considered as an administrative compromise between petitioner and the BIR, still Deputy Commissioner Valeroso, acting in his capacity as Officer-in-Charge of the Bureau, may not - solely by himself - enter into a compromise agreement. As categorically provided in Section 204, supra, compromise of basic tax involving more than P1,000,000. 00 shall be subject to the approval of the Evaluation Board. Since the compromise was without the approval of the Evaluation Board, the same is invalid. Surely, the CIR cannot arrogate to himself the power vested in the Evaluation Board.

In sum, the Letter (Final Decision) dated June 29, 2016 of the then Commissioner of Internal Revenue Kim S. Jacinto-Henares sustaining the FDDA, as far as Petitioner is concerned, is the Commissioner of Internal Revenue's final decision which may be elevated to the CTA for its review within the thirty (30) day period. While the timely appeal to the CTA of the Commissioner of Internal Revenue's Final Decision prevented the FDDA and Letter (Final Decision) dated June 29, 2016 from becoming final, executory and demandable, the withdrawal of the Petition for Review shall render the FDDA as well as the Letter (Final Decision) dated June 29, 2016 final, executory and demandable.

For clarification, the Court declares that in allowing the withdrawal of the Petition for Review, the Court does not in any way confirm the validity of the Amended FDDA dated September 29, 2016 issued by Deputy Commissioner of Internal Revenue, Operations Group, Officer-in-Charge Nestor S. Valeroso.

xxx"

♉BIR Dulay plays Pontius Pilate -

Dulay, in his immense desire to avoid accountability, denied involvement in the said intensely incongruous settlement by claiming that he was out of the country on medical leave when the transaction occurred.

A shallow reason because as head of the agency, even on leave, he will certainly be informed by his subordinate official of any occurrences in the office most importantly on issues concerning large tax assessment cases that need his approval; and also especially that Cosmos’s Letter-Request for Reconsideration was addressed to him that no subordinate official will ever attempt to decide on the matter without the knowledge of the Commissioner. Or if it would not be possible to inform him while on leave, the subordinate official has to wait until the commissioner returns to office as the case is not a matter of life and death, after all, the case was already in the CTA and beyond the Bureau’s jurisdiction. Thus, there was no need to rush.

While it was his subordinate official - the then OIC Deputy Commissioner Nestor S. Valeroso - who signed the Amended FDDA bearing on the grossly reduced tax deficit of Cosmos, Dulay as the Commissioner is not free of accountability.

If Dulay was not involved in this irregularity, why did he not enforce the collection of the remaining uncollected amount still due and demandable from Cosmos upon learning of the CTA Resolution invalidating the Amended FDDA and declaring Cosmos’s P3.76 billion deficiency tax assessment final, executory and demandable?

If he was not a party to the irregularity, why did he not initiate legal action against those involved?

Dulay, as the Commissioner of Internal Revenue, is the Government's agent who is mandated by law to protect the interest of the Republic of the Philippines - the Filipino people. In allowing such an extremely anomalous settlement that is gravely disadvantageous to the government, he deprived the Filipino people of the supposed benefits due them.

♉OIC-Deputy Commissioner Nestor S. Valeroso -

Mr. Valeroso had been with the BIR for 37 years and he knew that as then merely an OIC Deputy Commissioner, he had no authority to amend the FDDA because such power is exclusively vested by law upon the Commissioner of Internal Revenue as clearly provided under the Tax Code. He cannot arrogate upon himself the power vested by law upon the Commissioner of Internal Revenue and in the Evaluation Board.

Clearly, Valeroso could have succumbed to extreme pressures from higher authorities that he signed the Amended FDDA bearing on the grossly reduced tax deficit of Cosmos amounting to only P51 million.

✅Note: CTA Final Decision may be viewed in the official website of the Court of Tax Appeals or simply google search - CTA Case No. 9405.

2️⃣The Del Monte tax issue -

The Del Monte case was already investigated by the House of Representatives in July 2017 but no final resolution was promulgated in connection with the case.

Del Monte’s correct deficiency tax liabilities was P8.7 billion as affirmed by BIR Deputy Commissioner for Legal Group Marissa O. Cabreros during the investigation conducted by the House. How was the amount grossly reduced to only P65 million?

In the said inquiry, BIR commissioner Dulay obviously failed to satisfactorily explain when asked on how Del Monte’s P8.7 billion deficiency tax liabilities was enormously reduced to only a little over P65 million.

He claimed that he was not aware of the issue allegedly because disputed large tax assessment cases, like Del Monte’s, need not go through his office. He alleged that the responsibility to decide and approve protested tax assessments rests upon his subordinate official.

Clearly, Dulay pathologically lied. He again played Pontius Pilate. His statement does not find bases in law because the power to decide and approve disputed large tax assessment cases is exclusively vested by law upon the Commissioner of Internal Revenue which cannot be delegated as clearly provided in the 1997 NIRC, as amended.

If Dulay had no hand in the huge reduction of Del Monte’s tax liabilities, why did he neither question nor initiate administrative and criminal actions against those involved in the irregularity?

Former BIR Director Othello Dalanon was relayed the information that commissioner Dulay's subordinate official admitted that the settlement of Del Monte tax case was under Dulay’s direct supervision.

✅Note: Transcript of hearing conducted by the House of Representatives is available at the House's Library.

Othello Dalanon
Former BIR Director

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