BIR won’t let Filipino ADB staffers off easily

Internal Revenue Commissioner Kim Henares. INQUIRER FILE PHOTO

MANILA, Philippines–The Bureau of Internal Revenue (BIR) will seek a reversal of a Mandaluyong court decision upholding the exemption from having to pay income taxes of Filipino employees of multilateral lender Asian Development Bank (ADB), this time in a higher court.

“[W]e will be appealing the case to a higher court,” Revenue Commissioner Kim Henares said in a text message on Saturday night.

In an order dated Jan. 9, Judge Carlos A. Valenzuela of Mandaluyong City Regional Trial Court Branch 213 denied the motion for reconsideration filed by the BIR with regard to the court’s decision last September that a section of a circular it issued in 2013, which the agency used as its basis for running after ADB employees, was “void for being issued with no legal basis, in excess of authority, and/or without due process of law.”

No substantial reason

The motion submitted by the BIR last Nov. 11 “has not raised any new or substantial ground or reason that would call for the upturning of this court’s decision,” Valenzuela said in the order.

The Mandaluyong court’s Sept. 30, 2014, decision declared as void Section 2(d)(1) of Revenue Memorandum Circular (RMC) No. 31-2013.

ADB employees Erwin Salaveria and Portia Gonzales had questioned the circular in the Mandaluyong court after they were slapped with tax evasion cases by the BIR in the Department of Justice.

Section 2(d)(1) of RMC 31-2013 states that “only officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax,” citing the agreement signed in 1966 by the Philippine government and the ADB when the lender’s headquarters was established in the country.

Under Article XII, Section 45 of the agreement, the bank’s officers and staff, as well as experts and consultants, shall enjoy “exemption from taxation on or in respect of the salaries and emoluments paid by the bank subject to the power of the government to tax its nationals,” among other perks.

Valenzuela had ruled that Section 2(d)(1) was “void in absence of legislation and/or regulation to the contrary.”

But in its motion for reconsideration, the BIR said that “after the creation of the ADB Charter in 1965, the Philippines twice declared its clear retention of its right to tax its nationals when it made known its reservation about the Philippine declaration, and when it reiterated such reservation in the ADB headquarters agreement.”

“These declarations far more accentuate the Philippines’ conclusive assertion of its inherent power to tax its own citizens,” the BIR said.