The Manila Times : Was BP 135 a phantom law?

26 February 2022

By Antonio Contreras | The Manila Times

FIRST of all, let me apologize for inadvertently referring to the 1977 Tax Code as PD 9158, instead of PD 1158, in my column last Thursday, Feb. 24, 2022.

Normally, I do not pay attention to critical comments to my article. But a comment from an anonymous reader got my attention. It said: "…where the tax withheld from such compensation income is final…

What the 'trained qualitative researcher focusing on narratives and texts' failed to consider was that BOngBOng got other sources of income, so the tax withheld was NOT final. Therefore the exemption to file the ITR did not apply to BOngBOng. Thus the conviction in the CA. 'Yan ba ang propesor na trained daw sa textual analysis? Duh!"

I could have easily ignored a person who would not even have the courage to use his real name before he maligns or attacks a person. But this person raised a critical issue that needs to be answered, lest it continues to mislead people.

Indeed, Section 12 of BP 135 amended Section 73 of the 1977 Tax Code, PD 1158 with the proviso that read: "Provided, however, That an individual with compensation income taxable under Sec. 21 (a) of this Code and where the tax withheld from such compensation income is final shall be exempt from the penalty for failure to pay the tax on such compensation income and to file a return thereon at the designated period."

Indeed, it is stipulated that such exemption from penalty applies when the "tax withheld from such compensation income is final."

The tax cases filed against former senator Ferdinand Marcos Jr. were about his non-payment of taxes and non-filing of tax returns when he was vice governor and governor of Ilocos Norte. It was only his compensation income that was at issue. It should be said that public officials are prohibited by law to have other sources of income other than their official positions. Any income they obtained attached to that position, such as honoraria when they sit in boards in their ex-officio capacities, are reflected in their compensation income and are therefore included in the computations for their withholding taxes.

In addition, under the principle of regularity, it is assumed that withholding taxes are final. Besides, it is established that the burden for computing withholding taxes rests on the employer, which in Marcos Jr.'s case was the government. A close perusal of the decision of the Court of Appeals (CA) on the tax case against Marcos Jr. echoed the principle that the correctness of taxes withheld are construed in favor of the employee, and any deficiency in the taxes withheld should be attributed to the government as his employer. The CA said: "It bears emphasis that the duty to withhold taxes from government employees, including elective officials like the provincial governor, has been reposed by law in the government (Sections 90 (c); 94 of the NIRC of 1977). Consequently, any deficiency in the taxes so withheld is likewise attributable to and/or determinable by the government and not by the employee concerned (Section 91 (f), 1977 NIRC."

Furthermore, if the finality of the taxes withheld is doubted, it is always the burden of those arguing that it is not final to prove otherwise. Also, anyone who argues that Marcos Jr. had other sources of income in 1982, 1983, 1984 and 1985 bears the burden of proving the allegation. In addition, the issue of finality of the taxes withheld on Marcos Jr.'s compensation income as basis for his exemption from penalty for non-payment of taxes and non-filing of returns, as provided for in Section 12, BP 135, would have not been discussed anyway since the law was not cited nor considered by the Quezon City Regional Trial Court (RTC), the CA, or even by Marcos lawyers.

Once again, it behooves us to ask what could have been the reason the relevant courts and parties failed to consider BP 135. In my column last Thursday, February 24, I already insinuated that the law may not have been widely circulated, or even published. In the age where laws are not digitized, and that Google was not yet available, it would have been a plausible explanation.

On Dec. 29, 1986, the Supreme Court promulgated GR L-63915, known as the Tañada v. Tuvera doctrine, that required that all laws "shall immediately upon their approval, or as soon thereafter as possible, be published in full in the Official Gazette, to become effective only after fifteen days from their publication, or on another date specified by the legislature, in accordance with Article 2 of the Civil Code." Considering that when this was promulgated, BP 135 was already in existence since December of 1981, then it begs the question whether BP 135 has technically been nullified, or if the principle of operative fact could be invoked to protect it from being nullified.

It should be noted that BP 135 contained other provisions aside from Section 12 which spelled out the exemption from the penalty which could have prevented Marcos Jr.'s conviction. It behooves us to ask if these other provisions were in fact implemented and observed by the Bureau of Internal Revenue (BIR), considering that from 1982 until 1992, before RA 7497 further amended the Tax Code and removed this exemption, the Tax Code in operation was PD 1158 passed in 1977, as amended by BP 135.

If we assume for the sake of argument that the reason BP 135 was not used was because it was effectively nullified by Tañada v. Tuvera, it is important to ask if the BIR ever issued a circular which ordered a reversal to the 1977 Tax Code, PD 1158, in its original and unamended version.

There are simply too many questions in relation to BP 135 that need to be answered. For all intents and purposes, it has become a phantom law whose seeming discursive disappearance has serious implications on the candidacy of Marcos Jr.