On BIR-Issued Subpoenas Duces Tecum
By: Xela Leona D. Laqui on December 19,2024
A subpoena is a vital tool used in the administration of justice and tax enforcement in the Philippines. A subpoena ad testificandum requires an individual to appear and testify at a hearing or trial, or for an investigation, while a subpoena duces tecum (SDT) requires a person to bring with him or her any books, documents, or other things under his or her control. (Section 1, Rule 21 of the Rules of Court)
The Commissioner of Internal Revenue (CIR) is authorized to issue an SDT to compel the production of essential documents pursuant to Section 5(c) of the National Internal Revenue Code of 1997 (Tax Code). This provision empowers the CIR to summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other.
The SDT is generally issued after the a Letter of Authority (LOA) shall have been issued, authorizing the Bureau of Internal Revenue (BIR) to examine a taxpayer’s books and records, and after the taxpayer shall have failed to comply with requests for production of documents. Three notices to comply are usually given by the BIR before it issues an SDT.
The refusal or neglect to comply with an SDT has significant legal consequences including potential criminal charges, administrative penalties, and an alternative method of tax assessment.
Under Section 266 of the Tax Code, any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required under the pertinent provisions of the Tax Code, neglects to appear or to produce such books of accounts, records, memoranda or other papers, or to furnish such information, shall, upon conviction, be punished by a fine of not less than PhP5,000.00 but not more than PhP10,000.00 and suffer imprisonment of not less than one (1) year but not more than two (2) years. Section 266 of Tax Code is thus violated if the following elements are present: the offender is duly summoned by the BIR, the offender is required to produce books and records or testify as per the summons, and the offender neglects to comply with the summons.
In Lo v. People, Court of Tax Appeals (CTA)En Banc (EB) Crim. Case No. 049, November 22, 2019, the CTA ruled that failure to comply with an SDT under Section 266 of the Tax Code constitutes a mala prohibita offense. Mala prohibita offenses are criminalized because they are prohibited by law, and intent or moral wrongdoing is immaterial in such cases. Thus, criminal intent or moral culpability is not required for the commission of the offense; the mere act of failing to comply with a summons is sufficient to establish a violation.
In Ang v. People (CTA EB Crim. Case No. 095, August 2, 2023), the CTA ruled that good faith is not a valid defense in mala prohibita offenses, and the taxpayer’s claim of good faith for failing to comply with the SDT was rejected. The court emphasized that the law punishes the act itself, not the motives or intentions behind it. Therefore, non-compliance with an SDT is punishable, irrespective of the taxpayer’s reasons or good faith efforts.
However, in BIR v. Guevarra (CTA EB Case No. 2569, August 3, 2023), the CTA ruled that the BIR failed to present sufficient evidence to warrant the filing of an Information against the taxpayer. In this case, the CTA emphasized that the BIR must clearly inform the taxpayer about the documents that must be produced in response to an SDT. Without clear communication, the BIR’s case for non-compliance is weakened.
It is important to note that if the taxpayer is an association, partnership or corporation, the penalty, including the criminal liability, may be imposed on the partners, president, general manager, branch manager, treasurer, officer-in-charge, or any other employees responsible for the violation. It has been settled that certain individuals may be held criminally liable for non-compliance of corporate taxpayers, depending on their role in the failure to adhere to tax requirements. Thus, officers responsible for the breach can be held accountable.
Lastly, it is also important to note that when a taxpayer fails to provide the necessary records, the BIR may resort to an alternative form of tax assessment. Under Revenue Memorandum Circular 23-00, the BIR is authorized to assess taxes based on the best evidence obtainable when the taxpayer’s records are unavailable or insufficient.
In summary, the issuance of a SDT is a critical tool in tax enforcement. It allows the BIR to compel taxpayers to produce necessary documents for the proper assessment of taxes. The non-compliance with an SDT can lead to significant legal consequences, including criminal charges and administrative penalties. It also empowers BIR to adopt alternative methods of assessment or obtaining information. Taxpayers should thus not take lightly any SDT issued against them.
Xela Leona D. Laqui is an Associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com