Opening of suspect tax records OK’d

President Benigno Aquino III has authorized Finance Secretary Cesar Purisima to open the tax records of suspected tax cheats upon the request of the countries with whom the Philippines has existing tax-related agreements.

Executive Order No. 56, signed by Mr. Aquino on Sept. 6, delegates the President’s mandate to approve or disapprove requests to open the records to the finance secretary.

The new EO is in connection with Republic Act No. 10021 or the Exchange of Information on Tax Matters Act of 2009, which ensures compliance with the commitments of the Philippine government under existing tax treaties and international conventions.

President’s alter ego

Executive Secretary Paquito Ochoa Jr. said that since RA 10021 does not require the President to personally order the opening of accounts of specific taxpayers that are the subject of a request, such authority may be exercised by his alter ego who, in this case, is the finance secretary.

“Whereas, under the doctrine of qualified political agency, except in cases when the President is required by the Constitution or law to act personally or the exigencies of the situation demand that he act personally… the acts of the secretaries of such departments, performed and promulgated in the regular course of business, are presumptively the acts of the President,” the EO reads.

Ochoa said that aside from being the President’s alter ego, the finance secretary is also in the best position to review and assess requests from foreign tax authorities since his department oversees the Bureau of Internal Revenue, which is tasked to recommend actions on such requests.

Under EO 56, Ochoa said, the President also directed the finance secretary to come up with implementing rules and regulations that will govern the inspection of income tax returns upon the recommendation of the BIR commissioner.

Absolute confidentiality

The EO mandates that any information received by a foreign tax authority as a result of the opening of the accounts shall be treated as absolutely confidential in nature and “shall be disclosed only to persons or authorities, including courts and administrative bodies, involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by such conventions or agreements.”

Addressing tax issues

Ochoa said the directive was issued as part of the country’s commitment to combat international tax avoidance and evasion and to help address tax issues that may affect international trade and investment.

“We recognize that tax information is oftentimes necessary for authorities in other countries to build cases against individuals charged with certain crimes in their jurisdictions. This EO seeks to make it easier to share that information,” Ochoa said.

The EO also authorizes the BIR to exchange information on tax matters with its foreign counterparts to help combat international tax evasion and allow a requesting foreign tax authority to study the income tax returns upon approval by the President.