The Manila Times : Tax experts clear BBM

4 April 2022

By Jomar Canlas | The Manila Times

TAX and legal experts are convinced that presidential candidate Ferdinand "Bongbong" Marcos Jr. cannot be faulted for his family's failure to settle its estate tax liabilities.

In a phone interview with The Manila Times over the weekend, former Senate President Juan Ponce Enrile said cases involving the Marcoses' tax debt are still pending in the Supreme Court and the Court of Appeals.

Enrile taught taxation in college and was finance minister during the term of President Ferdinand Marcos. He earned his Masters of Laws degree at the Harvard School of Law with specialized training in international tax law.

Enrile said the cases have to be settled first before the Bureau of Internal Revenue (BIR) can demand that Marcos Jr. and former first lady Imelda Marcos, the administrators of the family estate, settle the tax debts.

The Department of Finance has reportedly been pressing the BIR to collect the unpaid taxes from the heirs of the late president, which have reportedly ballooned to around P203 billion from P23 billion.

Last December, the BIR sent a letter to the Marcos heirs demanding that they pay the tax dues.

But Enrile said the job of an estate administrator "is to gather the assets, gather the liabilities, and then establish the plan of partition, sell the assets to pay liabilities." If the administrators are not able to sell the assets to liquidate the liabilities, and if they indicate this in their tax returns, no violation exists, Enrile said.

Marcos Jr. needs to "gather all the assets and all the liabilities…and then liquidate it. Then after paying the liabilities…after paying all the taxes they will submit to the court…partition of estates…he has to file an estate return," he said, a process that takes time because some of the assets are considered to be ill-gotten wealth.

Despite the Supreme Court ruling of June 5, 1997 on the Marcoses' estate tax liability, there are still pending criminal and civil cases against the family and its cronies before the high tribunal and the Sandiganbayan.

Former Internal Revenue Deputy Commissioner Edwin Abella told The Times the estate and the executor and administrator of an estate have separate and distinct personalities.

"That is why the estate has a separate TIN [tax identification number]," Abella, a tax law professor and bar reviewer, said. "It means that the government or the BIR in particular just needs to go after the estate itself." Abella said the power to tax involves the power to destroy, citing the case of McCulloch v. Maryland 17 US 316 (1819) —Chief Justice John Marshall, "Hence, it must be used judiciously and not treacherously." "Lady justice is blind, let us not use our tax laws like Damocles' sword; taxation is not a weapon but rather our equitable contribution to a just and civilized society. Justice must always be tempered with compassion and mercy," he said.

Abella said President Rodrigo Duterte "cannot reverse the decision nor preempt and make the decision himself. The tax code is clear on this." The Marcoses "have been subjected to harassment since they left office, in fact, their properties have been subjected to auction, and have been sequestered," he said.

Abella said the government can only get a fraction of the estate to be taxed and cannot be more than the whole property which is considered "unconscionable." Several jurists who talked to The Times on condition of anonymity said that the tax claim could be covered by prescription.

One jurist faulted the government for going after the Marcos estate. He said the government cannot execute the claim because the properties to be covered have yet to be determined due to the pending cases before the high court and the Sandiganbayan.

Another source said that under Sections 203 and 222 of the National Internal Revenue Code, the government must execute a tax claim within five years in good faith and 10 years if there is fraud committed.

"Likewise, an internal revenue tax which has been assessed within the prescribed period may be collected by distraint or levy or by a proceeding in court within five years following the assessment of tax," The Times source said.

It cited the Supreme Court case of Clara Diluangco vs Commissioner of Internal Revenue on the reckoning period for the collection of taxes. "In case of self-assessed taxes like income tax, the date of the actual filing of the return is considered as the date when the tax is said to have been assessed. For collection by judicial action, the action is deemed instituted upon filing of the corresponding complaint in the court of competent jurisdiction. In case of summary remedies, the period is reckoned from the service of the distraint and levy on the persons or entity authorized to receive the same," the source said.

Sen. Aquilino "Koko" Pimentel 3rd wants the BIR investigated for failing to collect the tax due on the Marcos estate.

In filing Senate Resolution 998 on March 28, Pimentel raised the need to identify the BIR officials, past and present, responsible for the noncollection of the estate tax since 1997.

He said the BIR has the power to assess and collect national internal revenue taxes, fees, charges, and to enforce the necessary forfeitures, penalties and fines.

He said that on June 5, 1997, the Supreme Court affirmed "in toto" the Court of Appeals decision that the deficiency income tax assessments on the Marcos estate were final and unappealable.

"The case has long become final and executory and thus by the legal principle of res judicata, can no longer be questioned and hence should be fully implemented and executed," Pimentel said.

Pimentel said the Filipino people "are suffering from the effects of recession due to the Covid-19 pandemic as well as the ongoing effects of the Russian-Ukraine war which have led to gargantuan fuel price increases almost overnight and, in turn, to great increases in the prices of basic commodities, transportation, and services." Finance Secretary Carlos Dominguez 3rd said the monthly cash aid of P200 to the poorest of the poor is not enough, and there would be funding problems if it is increased to P500.

The Department of Labor and Employment has proposed a wage subsidy of P24 billion for about one million minimum wage workers.

"There is no clear funding source for these proposed subsidies and it is immediately obvious that the government would be hard-pressed to source the much needed funds in order to support these social alleviation measures," Pimentel said.

He said the P203 billion that could be collected from the Marcoses "would be more than enough to fund these proposed subsidies."

WITH BERNADETTE E. TAMAYO