Non-filing of tax returns became punishable only in 1992 –DOF chief

Finance Secretary Carlos Dominguez III said the provision exempting the failure to file income tax returns from penalties was removed only in 1992, thus it is now punishable under existing tax regulations.

The Finance chief made the clarification after a portion of the Commission on Elections’ First Division ruling dismissing the disqualification cases against Ferdinand Marcos Jr. circulated on social media.

The said portion of the ruling penned by Commissioner Aimee Ferolino states that “the failure to file tax returns is not inherently wrong in the absence of a law punishing it.”

To shed light on the matter, Dominguez cited Batas Pambansa 135, amending Section 73 of the 1977 National Internal Revenue Code. The said section provided a fine of P2,000 and imprisonment of not more than six months for taxpayers who failed to file a tax return or pay taxes.

The amendment in the said law added a provision stating “that an individual with compensation income taxable under Section 21 (a) of this Code and where the tax withheld from such compensation income is final shall be exempt from the penalty for failure to pay the tax on such compensation income and to file a return thereon at the designated period.”

“This is the law applicable during the 1983-85 taxable years,” Dominguez said.

The petition to disqualify Marcos Jr. stemmed from the conviction of a Quezon City court against Marcos for not filing his income tax returns from 1982 to 1985.

The conviction was upheld by the Court of Appeals but removed the imprisonment sentence.

Dominguez said the provision making the non-filing of ITR not punishable “was removed only in 1992.”

With this, the Finance chief appealed to the media to “please help educate the public,” when asked about the confusion that the lifted Comelec ruling’s portion might cause about tax compliance.

Current rules

In a statement, the Tax Management Association of the Philippines (TMAP) addressed “a statement circulating in various media quoting an excerpt of the Resolution of the First Division of the Comelec on the disqualification cases against a presidential candidate, stating that ‘the failure to file a tax return is not inherently wrong in the absence of a law punishing it.”

“In line with its purpose to promote taxpayer education, the TMAP would like to clarify that, under current rules, the applicable provision is Section 255 of the National Internal Revenue Code of 1997, as amended.”

The tax experts group said that based on the above-mentioned provision, any person required to file tax returns but willfully fails to do so, shall, upon conviction, be punished by a fine of not less than P10,000 and imprisonment of not less than one year but not more than ten years, in addition to other penalties provided by law.

“Thus, all taxpayers, except those exempted by law from filing tax returns such as those earning purely compensation income qualified for substituted filing, are enjoined to faithfully comply with their tax filing obligations,” TMAP said.

Similarly, tax expert Mon Abrea told GMA News Online that while the petitioners against Marcos’ candidacy can still appeal the decision before the Comelec en banc and to the Supreme Court, “I just hope Chapter 2 - CRIMES, OTHER OFFENSES AND FORFEITURE of the tax code will not be disregarded as it may serve as a bad precedent.”

“Failure to file tax return/s is a grave offense and not just punishable by fine, but also by imprisonment and disqualification upon conviction as provided in Sections 252-254 of 1977 NIRC,” Abrea said.

The tax expert cited Section 252 of the 1977 tax code which stated that “any person convicted of a crime penalized by this Code shall, in addition to being liable for the payment of the tax, be subject to the penalties imposed herein: Provided, That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Code or in any action for the forfeiture of untaxed articles.”

Section 253, meanwhile, states that “any person who willfully attempts in any manner to evade or defeat any tax imposed under this code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be fined not more than ten thousand pesos or imprisoned for not more than two years, or both.”

Section 254 of the 1977 NIRC, likewise, states that “any person required under this Code or by regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or regulations shall, in addition to other penalties provided by law, upon conviction thereof, be fined not less than P10,000 and imprisonment of not less than one year but not more than 10 years. (As amended by R.A. 7497).” — DVM, GMA News