BIR loses another tax case - now with Lucio Co's Pure Gold.

THE Bureau of Internal Revenue (BIR) lost its P2.7 billion tax case against Lucio Co’s Puregold Duty Free Inc. after the Supreme Court dismissed its appeal and affirmed the Court of Tax Appeals’ decision clearing the company of tax liabilities for importation of alcohol and tobacco products from January 1998 to May 2004. 

In a 17-page decision, the high court’s third division through Associate Justice Presbitero Velasco 

said the Tax Court dismissed the argument raised by BIR Commissioner Kim Henares that under Section 131 (a) of the 1997 National Internal Revenue Code, only importations of distilled spirits, wines and cigarettes to the freeports in Subic, Cagayan and Zamboanga, as well as importations by government-owned duty free shops, are exempt from payment of value added tax (VAT) and excise taxes.

“It is significant to note that there is nothing in Section 1 of Republic Act 9399 (Act Declaring a One time Amnesty on Certain Tax and Duty Liabilities, Inclusive of Fees, Fines, Penalties, Interest and Other Additions, Incurred by Certain Business Enterprises Operating Within the Special Economic Zones and Freeports) that excludes Section 131 (A) of the 1997 NIRC from the amnesty. In fact, there is no mention at all of any tax or duty imposed by the 1997 NIRC as being specifically excluded from the coverage of the tax amnesty,” the high court said.

“If Congress intended Section 131 of the 1997 NIRC to be an exception to the general grant of amnesty given under RA 9399, it could have easily so provided in either the law itself or even the implementing rules. In implementing tax amnesty laws, the CIR cannot now insert an exception where there is none under the law. And this court cannot sanction such action,” the high court added.

The BIR went to the Supreme Court after the Tax Court en banc upheld the decision of its 2nd division which states that Puregold is entitled to, and properly availed of, the tax amnesty under RA 9399, Puregold is engaged in the sale of various consumer goods within the Clark Special Economic Zone (CSEZ) and operates in-store under the authority and jurisdiction of Clark Development Corporation (CDC) and CSEZ. BIR, in its appeal also argued that Puregold is not entitled to the benefits under RA 9399 because its principal place of business is in Metro Manila as shown in its articles of incorporation.

But the high court pointed out that the BIR failed to challenge Puregold’s eligibility to avail of the tax  amnesty under R.A. 9399 while the case is with the Tax Court. Still, the high court cited documents showing that Puregold is also doing business inside the special economic zone. 

“Clearly, the location of Puregold’s principal office is not, standing alone, an argument against its availment of the tax amnesty under RA 9399,” the high court said. Also, the high court noted that the Tax Court has ruled that the amnesty provision of R.A. 93999 covers the deficiency taxes assessed on Puregold and rejected the arguments raised by the BIR. Such findings of the Tax Court, according to the high court, “merits utmost respect” since its function are by nature dedicated exclusively to the consideration of tax problems. 

“We cannot sanction the CIR’s (Commissioner of Internal Revenue) position as it would amount to nothing less than an emasculation of an otherwise clear and valid law – R.A. 9399. Clearly, if the Court would uphold the CIR’s argument that even before the rulings in John Hay and Coconut Oil, respondent’s duty-free privileges were already withdrawn by the 1997 NIRC, this Court would in effect be negating the remedial measure contemplated in R.A. 9399 against these rulings,” the high court said. 

BIR loses P197-M tax collection case vs a mining company

BIR has lost its P197-million tax collection case against Atlas Consolidated Mining and Development Corporation for failing to include the company itself in the filing of criminal complaint against its former president.

In a 17-page resolution, the court en banc affirmed the decision of one of its division that the company should have also been included in the tax collection case for the imposition of fines. The CTA said a corporation or juridical entity, citing a verdict of the Supreme Court on similar case, should also be included in the criminal complaint though it cannot be arrested and penalized with imprisonment.

It said the corporation may be charged and prosecuted for a crime of non-payment of taxes which penalty is a fine.

It added the non-inclusion of the mining firm violated its right to due process of answering the charges.

“It is therefore indispensable to implead the corporation as a party in a criminal case for violation of the provision of the Tax Code for the government to enforce collection of the tax against such entity by way of criminal action pursuant to Section 205 of the Tax Code,” it said.

Likewise, the court noted that the BIR can no longer collect the tax debts because the five-year prescriptive period had elapsed from the filing of the tax return.

Records showed that the Masbate revenue district office issued the assessment notice on March 24, 2000 to expire after May 24, 2005 for the payment of deficiency excise tax incurred in 1991, 1992 and 1993.

The court also said the issuance by the revenue district office of the seizure warrant on August 19,2010 was also invalid  as it was way beyond the prescriptive period for the collection of the deficiency tax.

The resolution issued last week was penned by Justice Esperanza Fabon-Victorino and concurred by the other tax justices.

How should UBER drivers comply with BIR?

Short answer: UBER drivers should, unfortunately, go through the same tax requirements under the tax code - i.e. Register, File, Pay.

Kim Henares said the BIR might soon come out with a regulation covering drivers of Uber vehicles and other TNCs, “if needed.” The feisty BIR chief reminded Uber and TNCs that all business enterprises have tax dues that must be paid correctly.

“Like any business, they are covered by the laws of taxation of entities engaged in business—from registration to issuance of receipts, to filing and payment of taxes,” she pointed out. “They are engaged in the provision of services and are covered by all the provisions of the Tax Code for business engaged in the provision of services,” Henares added.