Willful blindness to tax compliance

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Wednesday, September 29, 2010


ALTHOUGH the newer RATE cases that the Bureau of Internal Revenue had filed against suspected tax evaders since July 1 of this year as intimated in my previous piece, appear to be all still languishing in the Department of Justice’s hearing offices, at least three of the older ones that were filed soon after RATE was initially instituted had in fact resulted in convictions, at least at the level of the Court of Tax Appeals.

Convicted by the Second Division of the Court of Tax Appeals on 11 August 2010 was Benjamin G. Kintanar in CTA Crim. Case No. 0-030 for willful failure to file his income tax return for the year 1999. His wife, Gloria V. Kintanar, just a couple of weeks more than a year earlier, was found by the same division, in CTA Crim. Cases Nos. 0-033 and 0-034, to have also willfully failed to file hers, this time, for the year 2000 and 2001, respectively. Motion for reconsideration filed by her on 08 September 2009 was denied for lack of merit on 26 November 2009.

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Although none of the three have reached final conclusion, the ponencias, are instructive, not so much on how they apply the law, but on the kind of taxpayer behavior that, I survive attracted the ire of the tax collector.

Both the spouses Kintanar, the court records indicate, were in the relevant years separately “engaged in the business and [were] earning income in the form of commissions as distributors or independent contractors of Forever Living Products Philippines, Inc., a multilevel firm and a duly registered domestic corporation.” They were not employees of Forever Living Products Philippines, Inc. and thus did not receive what is known as compensation income. Their commission income was had to be reported in the tax return required to be filed no later than the 15th day of April following the end of the calendar year during which they were earned. Their common fault was in not filing returns which in turn resulted in the Government not being able to collect the correct amount of income taxes due.

On the basis of the bare facts, there is not much to these convictions. The cases however provide a detailed window into how the accused sought to avoid punishment and thus constitute interesting instruction on the methodology of tax evasion.

To directly rebut the accusation that he did not file his income tax return for the year 1999, Mr. Kintanar, in CTA Criminal Case No. 0-030, presented, together with other pieces of evidence, a photocopy of what purported to be his income tax return, a photocopy only because, as he claimed, he could not locate the original. He claimed that he was not the one who prepared it; it was allegedly prepared and filed for him, on a professional engagement, by a certain Marina C. Mendoza, allegedly an employee of the BIR and a family friend. (Ms. Mendoza, who was called as the defense’s hostile witness, denied Kintanar’s allegation of professional engagement) He said he did not carefully examine the ITR form when it was given to him for signature. He merely “browsed” over it.

That argument occasioned the characterization by the 2nd Division of the CTA of his stance as “willful blindness” manifested by “his deliberate refusal or avoidance to verify the contents of the documents and inquire on the authenticity thereof…” Had Kintanar been more inquisitive on what was allegedly his ITR, he would have noticed, as the court did, several and inaccuracies on the face of the document that should have, at the very least, alerted him to the possibility that something was amiss in the way his tax duties were supposedly complied with.

For example, the alleged ITR did not state his correct place of residence. It also did not correctly indicate the place of registration as a taxpayer. And it further lacked any indication that it was indeed received by the Bank where it was purportedly filed. On the basis of these, and a number of other considerations, the court accorded no probative weight to the purported ITR, which, under the right circumstances, could have been Mr. Kintanar’s strongest rebuttal of the Bureau’s accusation.

Mrs. Kintanar, on the other hand, in both CTA Crim Cases Nos. 0-033 and 0-034 adopted a defense as old as the blame game that played out in Paradise, according to Genesis. She claimed she did not personally file her income tax return for the relevant years; she said it was her husband, Benjamin, who did. Benjamin, for his part, corroborated her testimony on that point, but added, in his own defense, that he had relied on the earlier mentioned Ms. Mendoza to do the same. In fact, he claimed, he “let here do everything relative to tax matters.” Mendoza, for these cases Nos. 0-033 and 0-034 in contrast to what the defense did in Case No. 0-030, was not presented as a witness.

Remarked the court: “Accused reliance on her husband to file the required ITRs without ensuring full compliance thereon is considered as a willful act on her part to delegate the performance of her legal duty to her husband tantamount to ‘deliberate ignorance’ or ‘conscious avoidance’ on her part to determine the facts surrounding the filing of the required income tax returns.”

Such nonchalance or deliberate lack of concern to see to it that their taxes are correctly paid is in stark contrast to Oliver Wendell Holmes’ articulated enthusiasm to pay taxes because taxes are “what we pay to live in a civilized society”. Such indifference was what must have caused the rage of RATE to rain on the Kintanars’ heads.

(For feedback, email thetrustguru@gmail.com)

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