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Run After Tax Evaders {RATE} Program

Aika Fore M. Garcia

• Background• Important Terminologies• Organization• Objectives• Activities and Persons Covered• Procedures and Methods• Actual Case• Conclusion• Reference

Important Terminologies

• Run After Tax Evaders (RATE)-program initiated by the DOF and BIR to

investigate and prosecute individuals and/or entities engaged in tax evasion and other criminal violation of the National Internal Revenue Code of 1997

• Tax Evasion or Tax Fraud-is the use by the taxpayer of illegal or

fraudulent means to defeat or lessen the payment of a tax

-tax dodging

Important Terminologies

• Income tax- is a tax on the net income or the entire income

realized in one taxable year-it is levied upon corporate and individual

incomes in excess of specified amounts and less certain deductions and/or specified exemptions in cases permitted by law

• DOF- Department of Finance

• DOJ-Department of Justice

• NBI- National Bureau of Investigation

• CIDG- Criminal Investigation and Detention Group

Organization of the RATE

• BIR’s mission: to raise revenues for the government through effective and efficient collection of taxes, quality service to taxpayers, and impartial and uniform enforcement of our tax laws

• DOF and BIR’s paradigm shift from collection of civil liabilities to prosecution of the criminal aspect of tax evasion

Organization of the RATE

• March 2005, the RATE Program was conceptualized and initiated

• RATE TEAM: revenue officers and lawyers

• Ties with NBI and CIDG• Designed to investigate,

prosecute, and convict tax evaders and violators if the NIRC of 1997

Objectives

1. Generate the maximum deterrent on the taxpaying public by impressing the fact that tax evasion is a crime and violators will be caught and punished

2. Enhance voluntary compliance among taxpayers

3. Promote the confidence of the public in the tax system

Persons or Entities Covered

Any person, association,

partnership, and company found

to have committed a

violation of the provision of the

NIRC of 1997 may be charged

Activities Covered

• Offenses relating to Income-failure to file returns-failure to pay taxes-deliberate underdeclaration of

income by more than 30% of that declared per return

-hiding or transferring assets or income

-non-remittance of withholding taxes

Activities Covered

• Offenses relating to Deductions-deliberate overstatement of

amount of deductions by more than 30% of actual deductions

-claiming personal expenses as business expenses-claiming false deductions

Activities Covered

• Other Violations-using of fake accountable forms such as Certificate Authorizing Registration (CAR), Tax Clearance Certificate

(CTCC)-failure to register with the BIR-keeping more than one (1) set of

books of accounts-making false entries in books and

records

Sources of RATE Cases

• Audit examination of tax returns• Confidential information filed by

informers (Section 282 of the NIRC)• Information obtained by the BIR from

third parties (Section 5(B) of the NIRC)

• Referrals from other governmental agencies

• Newspaper report

Procedures in Developing Tax Evasion (RATE) Cases

Revenue Officers

• Investigation report and sworn affidavit

Commissioner of Internal Revenue

• Refer the case to the Department of Justice (DOJ)

DOJ• Formal Investigation initiated through the issuance of a

Letter of Authority against subject taxpayer• Existence of Fraud is determined, a criminal case for tax

evasion will be filed

Methods of Proving Tax Cases

• Net Worth Method• Expenditure Method• Percentage Method• Unit and Value Method

Informer’s Reward

Sum equal to ten percent (10%) of the surcharges, revenues or fees recovered and/or

fine or penalty imposed and

collectedOr

One Million Pesos (Php 1,000,000)

per case, whichever is lower

Cases in Iloilo

• 2011, Engr. Norberto Fedelicio was charged with willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information in his ITR for 2009 and 2010

• 78th case filed under the RATE program in the Aquino Admin; 1st RATE case in Iloilo/ Revenue Region 11

Cases in Iloilo

• Income of Php 46.43 Million in 2009 and Php 28.73 Million in 2010

• ITR showed that he only declared Php12.89 Million in 2009 and Php10.09 Million in 2010

• Total discrepancy of Php26.41 Million• Substantial under declaration of more

than 30% constitutes prima facie evidence of fraud

Cases in Iloilo

• 2011, Avelino Aw-Yong was charged with two counts of willful attempt to evade or defeat payment of income tax and two counts of willful failre to supply correct and accurate information in his ITR in 2009 and 2010

• In 2009, he earned Php 20.33 Million but only declared Php 5.87 Million

• In 2010, he earned Php 23.43 Million but declared only Php 6.39 Million

• Substantial underdeclartion of more than 30% constitutes prima facie evidence of fraud

Cases in Iloilo

• 2012, Rommel Ynion and Hok Builders for violating NIRC of 1997• attempting to evade taxes

and failing to supply the BIR with correct and accurate information in his ITR in 2006, 2008,2010;

• willful failure to file VAT returns for 2006-2009 and parts of 2010

Cases in Iloilo

• Income of Php 296 Million in 2006 to 2010, but declared only Php 221 Million

• Owes the government Php 84.88 Million including surcharges and interests; Php 57.73 Million deficiency income tax and Php 27.14 Million

Conclusion

• Public Confidence in the Tax System

• Fight against corruption• Strategic Support from different

Agencies of the Government• Public awareness

References• Angelo, F. A. (2011). BIR raps Ynion for Tax Evasion: Businessman-

publisher says case is politically-motivated. Retrieved from The Daily Guardian: http://thedailyguardian.net/index.php/local-news/15814-bir-raps-ynion-for-tax-evasion-businessman-publisher-says-case-is-politically-motivated

• Bureau of Internal Revenue. (n.d.). Momorandum of Agreement with NBI and CIDG. Retrieved from Bureau of Internal Revenue: http://www.bir.gov.ph/images/bir_files/old_files/pdf/moa_nbi-cidg.pdf

• Bureau of Internal Revenue. (n.d.). RATE Program- Frequently Asked Questions. Retrieved from Bureau of Internal Revenue: http://www.bir.gov.ph/images/bir_files/old_files/pdf/rate_frequently_asked_questions.pdf

• Bureau of Internal Revenue. (n.d.). Run Against Tax Evaders (RATE) Program. Retrieved from Bureau of Internal Revenue: http://www.bir.gov.ph/images/bir_files/old_files/pdf/rate_background_and_organization.pdf

• Department of Finance News Correspondent. (2011, October 27). Engineer charged with Tax Evasion for Substantial Under declaration of Income. Retrieved from Department of Finance: http://www.dof.gov.ph/?p=3275

• Sofia, Khariza Joy. (2014, February 22). 2013 Records 15% Growth in Taxation. Retrieved from Iloilo Metropolitan Times: http://www.iloilometropolitantimes.com/2013-records-15-growth-in-tax-collection/

Thank You!