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Monday, June 27, 2005
High Court asked to reject cigar firm's P1B tax refund
AFTER losing the round at the Court of Appeals (CA), the Bureau of Internal Revenue (BIR) has asked the Supreme Court (SC) to overturn a decision of the appellate court granting Fortune Tobacco Corporation's claim for over P1 billion tax refund.
In a petition, the BIR said the appellate court's decision may pose a dangerous precedent to other players in the industry who might use the tax refund case as a precedent to "unduly extract money" from the government.
The revenue bureau said the cigarette company should even be held liable for deficiency excise taxes as it continued paying only the "minimum" even after the end of the transitory period.
Last March 3, the CA issued a decision saying that the Lucio Tan-led company is entitled to a refund of P1.035 billion considering that it had been made to pay a 12-percent excise tax hike from 2000 to 2002 on eight of its cigarette brands.
Tan's company had claimed that the BIR was guilty of unauthorized "administrative legislative" when it imposed the tax measure after a change in the cigarette tax system from ad valorem to specific tax through the 1997 Tax Reform Law.
The BIR argued that the alleged excess tax it collected from Fortune company beginning January 2000 was "in consonance" with the said tax reform law.
Under the 1997 law, existing cigarette brands are given a three-year transitory period, by paying ad valorem taxes as a "minimum" to cushion the impact of a 12-percent increase in excise tax rates by 2000.
"As borne by congressional records, the three-year period is meant to soften the impact of the excise tax rate increase...It was never meant to give respondent (Fortune), or any player for that matter, the tax planning opportunity to lower the excise taxes they had to pay beginning Jan. 1, 2001," the revenue office said.
The BIR said the tobacco company could not claim that its tax obligations are meant to decrease after the end of a three-year period.
"Grave injustice against the government will thus be caused if, in addition to the undue reprieve from the 12-percent increase in tax that the respondent enjoyed...respondent would also be unduly granted a refund for its claim that it overpaid tax required by law," the agency added.
Aside from the tax refund case, the BIR is also pursuing the P25 million tax evasion case slapped against Tan and several officials of Fortune company with the Marikina City court. (ECV)
(June 27, 2005 issue)
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