Tax Evasion Charges To Be Filed Against Former Chief Justice Renato Corona

02 May 2013

In a 65-page Resolution dated 26 April 2013, and released today, May 2, the Panel of Prosecutors from the National Prosecution Service (NPS) found probable cause to charge former Supreme Court Chief Justice RENATO C. CORONA for violation of Sections 254' and 255² of the National Internal Revenue Code (NIRC).

The case arose from a complaint filed by the Bureau of Internal Revenue (BIR), charging the former Chief Magistrate of committing the crime of tax evasion and willful failure to file his income tax returns for six (6) taxable years, namely, 2003, 2004, 2005, 2007, 2008 and 2010, which criminal acts, according to the BIR, also make him civilly liable to the State in the total amount of P120,498,219.52, inclusive of surcharges and interest.

The BIR's investigation into the correctness of the taxes filed by Atty. Corona could be traced back to the revelations made during his impeachment trial before the Philippine Senate last year, particularly about the state of his finances.

It may be remembered that, during the course of said trial, the former Chief Justice's Statements of Assets, Liabilities and Networth ("SALNs") for various years were brought into evidence and closely scrutinized in connection with one of the Articles of impeachment signed by members of the House of Representatives. An examination of said SALNs led the BIR to note that there appeared to be substantial increases in his networth from taxable years 2002 to 2010 that did not appear consistent with his earnings as a public servant.

This led the BIR to further investigate his financial holdings, the otherwise confidential information relating to the same were obtained by the BIR by virtue of the unconditional waiver respondent Corona himself signed, executed and submitted to the Philippine Senate, acting as an Impeachment Court. The information thus obtained showed respondent Corona had cash assets deposited in various banks and undeclared real properties. These all point to the respondent's underdeclaration of his taxable income by more than thirty (30%), which is sufficient to constitute prima facie evidence of a fraudulent return.³

Using the Net Worth Method of tax investigation, the BIR concluded that respondent Corona earned income from other sources aside from his compensation as a public official, which is contrary to his registration with the BIR as a "pure compensation income earner," who, instead of filing the otherwise mandatory annual Income Tax Return (ITR), are allowed to avail of the "substitute filing system" since taxes due from them were supposedly withheld at source by their employers. It, therefore, claims Corona: (1) failed to file his annual ITRs for the -subject taxable years; and (2) failed to pay-the corresponding taxes due thereon, despite the receipt of substantial amounts in income, as shown by the significant increase in his networth, his acquisition of numerous properties, and possession of bank accounts containing large sums of money.

Respondent Corona put forth the following defenses: (1) alleged of violation of his right to due process; (2) prescription of the period for the filing of criminal case relative to taxable years  2002 to 2007; (3) inadmissibility of evidence presented by the BIR, particularly relating to his bank ac-counts because the waiver he had executed had become functus officio upon his impeachment; (4) objections to the propriety of the use of the Net Worth Method of tax investigation, or to the BIR's authority to resort to the same; (5) that there had been no underdeclaration of real properties or any substantial increase in his cash assets, mainly because other people's funds were commingled with his own, and the BIR failed to account that he came from a "family with means and resources" and had been "gainfully employed from the private and private sectors," which account for his financial status; and  (6) that the BIR failed to prove that the discrepancy came from the sources of income that are taxable.

On the issue of violation of his right to due process, the Panel of Prosecutors, which was created pursuant to Department of Justice (DOJ) Office Order No. 656 dated 31 August 2012, found that the BIR indeed conducted preliminary and formal investigation before the filing of the complaint. However, the participation of the subject of the investigation is not required during said stages. Instead, it is only when a letter of authority has been issued, requiring a taxpayer to submit his books of accounts and other documents, are taxpayers' participation required, if at all. In any case, respondent had been given "more than enough opportunity to present his case and/or to be heard" during the conduct of the preliminary investigation by the DOJ.

As to the claim of prescription, the Panel called attention to the language of the 2nd paragraph of Section 281 and to jurisprudence ruling on the same, which state that the prescriptive period does not begin to run until the commission of the violation of the law is discovered and judicial proceedings for its investigation and punishment have been instituted. Since the discrepancy in his declared income and apparent substantial increase in his net worth was only discovered by the BIR during the course of the impeachment trial, the filing of the case by BIR was well within the prescriptive period.

As to his claim that the evidence obtained by the BIR in relation to bank deposits in his name are inadmissible, the Panel pointed out that the waiver he executed, which authorized appropriate authorities to inspect his bank accounts, was unconditional, and that it could not have become functus officio upon his impeachment because no law supports such claim and, more importantly, he signed the same in his capacity as a depositor, not by virtue of his public office. As succinctly pointed out by the lawyers of the depositary banks, "Atty. Corona's General Authority did not state that the waiver ... was only for purposes of the impeachment proceedings."Hence, the waiver remained depositary banks. Also, by the time respondent signified his intention to withdraw the waiver through his 11 June  2012 letter to Banco de Oro and his 10 October 2012 cease-and-desist letters to other depositary banks, the banks had already complied with the BIR's access letters.

As to the propriety of the use of the Net Worth Method, the Panel found that the Commissioner of Internal Revenue is empowered or authorized under Section 43 of the NIRC to resort to the same if there is no method that is regularly employed by the taxpayer in the keeping of his books of accounts, or "if the method employed does not clearly reflect the income." Furthermore, nothing in the NIRC prohibits its use in tax evasion cases. The Panel also found that the requirements for its valid application have been complied with.

As to respondent's claim that the BIR failed to take into account his family’s and his personal wealth in computing his opening networth, the Panel of Prosecutors pointed out that it was respondent himself(who has full access and knowledge of his assets, liabilities and networth) that armed the BIR with the opening networth it employed, when he filled up and submitted his SALNs. The submission of the SALN being a mandatory requirement under Republic Act No. 6713, respondent is expected to state all his assets, liabilities and networth at the time of its execution. Hence, the BIR could not be faulted for relying on the SALN that respondent had sworn under oath contained true and correct statements of his assets, liabilities, networth and business interests.

As to his claim that the money in his bank accounts belonged to other persons, the Panel of Prosecutors found that he failed to produce evidence to support such -claim, as--he did not-even adduce the affidavits of the family members he is referring to. On the other hand, the BIR sufficiently proved that there is probable cause to belieye that the increase in his networth came from sources which are taxable. As a member of the Supreme Court at the time, he is prohibited from obtaining compensation from other sources, yet his bank accounts alone are grossly disproportionate to his earnings as a Justice of the High Court.

Hence, pursuant to the basic tenet that "mere allegation is not evidence and is not equivalent to proof," the Panel found that there exists probable cause that the crime complained of by the BIR has been committed, and that the respondent is probably guilty thereof, i.e., that of the failure of the taxpayer to include all of their income in their books and records, such as in the instant case, is indicative of his willfulness to violate Sections 254 and 255 of the NJRC."

Pursuant to said findings, an information for the appropriate charges shall thereafter be filed before the Court of Tax Appeals.


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