March 17th, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) filed House Bill No. 7653, which criminalizes tax racketeering on top of “usual tax evasion,” as a “means of empowering the Bureau of Internal Revenue in prosecuting more systematic cases of tax fraud.” Salceda describes the scheme as “large-scale use” of fraudulent or fictitious tax receipts to pad deductions or input tax credits.
“According to estimates by tax authorities, as much as P100 billion in revenues are being evaded due to the padding of deductions and input tax credits through the systematic and fraudulent use of fake receipts and other records,” Salceda said.
In March 17, 2023 alone, the Bureau of Internal Revenue announced the filing of charges for evasion of taxes worth P25.5 billion against corporations using fictitious receipts, following a December 2022 raid on the corporations Buildforce Trading Inc, Crazykitchen Foodtrade Corp., Decarich Supertrade Inc., Redington Corporation. BIR alleges that these corporations have been operating for more than three years.
“These corporations do not have any legitimate business activity, and were set only to sell fictitious sales invoices or receipts to their buyers for the latter’s claim of false and anomalous purchases. These receipts or invoices are called “ghost receipts,” and economists have called the practice “ghosting the tax authority.””
“According to the BIR, the fraudulent operations of these corporations have resulted in some P17.63 billion in foregone income taxes and total deficiency value added tax amounting to P7.91 billion, for taxable years 2019-2021.”
Salceda cites that while the crime of tax evasion is punished under the Tax Code, it does not define the systematic and coordinated evasion of taxes, “which in every essential manner is economic sabotage, going by the doctrine that taxes are the lifeblood of the State.”
“Schemes such as these should be distinguished from the usual attempt to evade taxes precisely because they constitute a systematic attempt to dismantle the credibility of the entire tax system, and could not be committed without networks of accomplices across the business sector and among tax authorities,” Salceda said.
“Because of the scale of their operations, unlike individual acts of tax evasion, systematic attempts to use fictitious transactions to evade taxes could completely undermine the tax system.”
Salceda’s proposal sseeks to define the offense of tax racketeering as “any coordinated scheme or operation to repeatedly or consistently evade or defeat any tax imposed under this Code through the fraudulent use of receipts, returns, and other records, with a minimum amount of Ten Million Pesos (P10,000,000.00) in taxes avoided or attempted to be avoided.”
The proposal also defines being a principal in such an offense as non-bailable, and subject to 17 to 20 years in prison. Taxpayers who benefit from tax racketeering, including those who purchase fake receipts, shall be punished as accessories. Meanwhile, public officials who facilitate such activities shall be charged as accomplices and punished with perpetual disqualification from public office.
“The stiffer penalties aim to be a deterrent to the commission of such crimes, as well as a tool for tax authorities to be able to prosecute such offenses in a manner distinct from usual tax evasion.”
Lumagui lauded for “big fish” catch on first months in post
Salceda also lauded BIR Commissioner Romeo Lumagui “for cracking down on big fish” on his fist months in the post.
“Commissioner Lumagui’s personal commitment to catching big fish among tax evaders is encouraging. And it’s a departure from the old tone and style of being harsh on small and medium taxpayers but letting the big catch off the hook.”
“I congratulate the BIR for this initial success. We also encourage the DOJ in its efforts to prosecute tax racketeers.”
“This bill is a request from the BIR, which shows you that their commitment to fighting these schemes is sincere. We will take the proposal up as soon as we can, of course, without getting in the way of the BIR’s intelligence and crackdown operations.”