In the Philippines, tax evasion is a serious crime that undermines the government's ability to fund essential public services. The Bureau of Internal Revenue (BIR) relies on the vigilance of the public to identify and prosecute those who deliberately avoid their tax obligations. This guide outlines the legal framework, procedures, and protections involved in reporting tax evasion.
Understanding Tax Evasion vs. Tax Avoidance
Before reporting, it is crucial to distinguish between legal and illegal practices:
- Tax Avoidance: This is the legal use of the tax regime to one's advantage to reduce the amount of tax that is payable by means that are within the law (e.g., claiming legitimate deductions, tax-exempt investments).
- Tax Evasion: This is the illegal non-payment or underpayment of taxes. It involves deliberate misrepresentation or concealment of taxable income, such as under-declaring sales, overstating expenses, or failing to issue official receipts.
Legal Basis for Reporting
The primary law governing tax crimes is the National Internal Revenue Code (NIRC) of 1997, as amended. Key sections include:
- Section 254 (Attempt to Evade or Defeat Tax): Penalizes any person who willfully attempts to evade or defeat any tax imposed by the NIRC.
- Section 255 (Failure to File Return, Supply Information, Pay Tax, Withhold and Remit Tax): Penalizes the failure to perform mandatory tax duties.
- Republic Act No. 2338: Provides for the reward to informers who provide information leading to the discovery of fraud and recovery of revenues.
How to File a Complaint
The BIR has established formal channels for "Denunciation" or complaints against tax evaders.
1. Gather Evidence
A report is only as strong as its supporting documents. Helpful evidence includes:
- Unissued or fake Official Receipts (ORs) or Sales Invoices.
- "Double" sets of bookkeeping records.
- Publicly available financial statements that contradict actual lifestyles.
- Proof of undeclared properties or luxury assets.
2. Choose a Reporting Channel
- BIR eComplaint System: The most efficient way is through the BIR website's "eComplaint" portal (e.g., No Official Receipt or "No-OR" complaints).
- Run After Tax Evaders (RATE) Program: For high-profile cases involving significant amounts (usually ₱1 Million and above), the complaint is handled by the Legal Group of the BIR under the RATE program.
- Walk-in/Physical Filing: You may submit a formal letter-complaint to the Revenue District Office (RDO) having jurisdiction over the taxpayer, or directly to the Intelligence Division at the BIR National Office in Quezon City.
3. Contents of the Complaint
A formal complaint should be in the form of a Sworn Affidavit and should include:
- Name and address of the person/entity being reported.
- Specific nature of the tax evasion (e.g., non-issuance of receipts, under-declaration of income).
- Approximate period when the violation occurred.
- Detailed narration of facts and supporting documents.
The Informer’s Reward (RA 2338)
Under Philippine law, an informer may be entitled to a statutory reward for providing information that leads to the recovery of surcharges, and penalties.
| Aspect | Details |
|---|---|
| Eligibility | Any person (except BIR/DOF employees and their relatives up to the 6th degree) who provides new and definite information. |
| Amount of Reward | 10% of the revenues, surcharges, or fees actually recovered, or ₱1,000,000, whichever is lower. |
| Conditions | The information must not have been already in the possession of the BIR and must lead to the actual collection of the tax. |
Confidentiality and Protection
The identity of the informer is generally kept confidential. The BIR is prohibited from disclosing the names of informers to the public or the person being investigated, except when the informer's testimony is required as evidence in court.
Stages of the Investigation
- Evaluation: The BIR Intelligence or Legal division evaluates if the complaint has "probable cause."
- Letter of Authority (LOA): If the complaint is valid, the BIR issues an LOA to audit the taxpayer's books.
- Assessment: The BIR determines the deficiency tax.
- Collection/Prosecution: If the taxpayer fails to pay or if the fraud is egregious, the BIR files a criminal case through the Department of Justice (DOJ) and the Court of Tax Appeals (CTA).
Important Considerations
- Malicious Reporting: Filing a report with the sole intent to harass a competitor or enemy without basis can lead to counter-charges for perjury or libel.
- Anonymity: While you can report anonymously, you forfeit the right to the Informer's Reward, as the reward process requires the filing of a Confidential Information Form (BIR Form 211).