Members:Ali, Quraish S.Antiquera, Reigner JirehBanares, Paul Christian T.De Vera, Ramon Carlito T.

PROPOSED TOPICS1. Implementation of Tax Laws to Online Selling

Reason:

The evolution of social media brought significant innovations in our lives especially in businesses and other transactions. The internet has become a tool or a medium not only between both resident but also between non-resident and resident buyer and seller over certain transactions on goods or services. In this regard, Bureau of Internal Revenue Commissioner Kim S. Jacinto-Henares issued Revenue Memorandum Circular No. 55- 2013 dated August 5, 2013 with a subject Reiterating Taxpayers Obligations in Relation to Online Business Transactions. Said RMC obligated online businessmen to register with their respective Revenue District Offices and to secure Authority to Print (ATP) invoices/receipts and register books of accounts for business use. Further, RMC No. 55- 2013 treated online selling of goods or services as a self-assessing tax as it imposed upon the taxpayers the duty to file applicable tax returns.

The above issuance is plausible. However, it will be more operative if the subject taxpayers are classified accordingly whether they are an individual taxpayer, or a corporation, registered with the Department of Trade and Industry and/or Securities and Exchange Commission. How about if the seller is a non-resident alien or a foreign entity?

Moreover, a definite particularity to the kind of tax to be self- assessed by the taxpayer is needed before he/she can file the applicable tax returns. Does the term applicable tax returns merely include income tax returns? Or does it also include VAT returns and/or percentage tax return? Sec. 105 of R.A. No. 8424 or the National Internal Revenue Code provides:

Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.

Furthermore, Sec. 116 of the NIRC as amended by R.A. No. 9337 provides for percentage taxes in this wise:

Any person whose sales or receipts are exempt under Section 109 (V) of this Code from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided, That cooperatives shall be exempt from the three percent (3%) gross receipts tax herein imposed.

2. Validity of shotgun warrant of garnishment, or distraint as an Administrative Remedy for Tax Collection in relation to Bank Secrecy Law

Reason:

The National Internal Revenue Code of the Philippines, specifically Sec. 6 (F) thereof provides the authority of the Commissioner of Internal Revenue to inquire into bank deposit accounts of taxpayers. The same provision of law likewise provides the limitation into what circumstances the Commissioner is permitted to inquire into bank deposits. Thus, the Commissioner can inquire into the bank deposits of:

(1) a decedent to determine his gross estate; and

(2) any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A) (2) of the NIRC by reason of financial incapacity to pay his tax liability. R. A. No. 10021 further adds another circumstance:(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes.

The power of the Commissioner to look into taxpayers bank deposits is limited to the abovementioned circumstances. However, Sec. 205 of the NIRC provides that the collection of internal revenue taxes, fees or charges, and any increment thereto resulting from delinquency shall be:

(a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts and interest in and rights to personal property, and by levy upon real property and interest in rights to real propertyLikewise, last paragraph of Sec. 208 of the NIRC provides:Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the bank. Upon receipt of the warrant of garnishment, the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the Government.Sec.2 of R.A. No. 1405 or The Bank Secrecy Law provides that as a rule, all deposits of whatever nature with banks or banking institutions in the Philippines are considered as an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office. There is no doubt as to the power of the Commissioner to inquire into the bank deposits of taxpayers as mentioned in the first three circumstances above. However, the administrative remedies provided for the collection of taxes are questionable. Can the Bureau of Internal Revenue validly serve and thereby collect through a warrant of distraint or garnishment to taxpayers bank accounts without the latters consent?

3. Issue of whether or not Trade Secrets are Privileged information.Reason:Under the Philippine law, Trade Secrets are not governed by a specific provision of the Rules of Evidence. But their protection is sought and their enforcement pursued before our courts.However; Trade secrets are recognized as confidential under many laws, which provide penalties for the breach of confidentiality.Protection of trade secretsThe Revised Penal Code provides a penalty the revelation of industrial or trade secrets of an employer by an employee.Also, the Securities Regulation Code prohibits the Securities and Exchange Commission from requiring the revelation of trade secrets or processes in any application, report or documentation filed before it.In cases of corporate rehabilitation proceedings, the Rules of Procedure on Corporate Rehabilitation allow the court to issue an order to protect trade secrets or other confidential research or information of debtors.The National Internal Revenue Code of 1997 also prohibits and punishes any employee of the Bureau of Internal Revenue who shall divulge any confidential information or trade secrets concerning the business income or inheritance of any taxpayer.And lastly, the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990 limits the right of the public to information through the access of records, reports or information on chemical substance and mixtures if those are confidential and would ultimately result in divulgence of trade secrets.From the above mentioned laws it is clear that trade secrets are considered confidential information.But there is a difference between confidential information and privileged information.In the case of Banco Filipino vs Monetary Board (142 SCRA 523 [1986]), the Supreme Court ruled that the mere fact that a law declares information confidential does not mean that it is privileged in nature.It simply means that, when a matter is considered privileged, not even a court of law can require it to be presented in evidence.Privileged matters are always given special treatmenta cloak of secrecyin the interest of a higher policy. A good example is communication between husband and wife.The Rules of Court protect the communication from being presented as evidence even if it is necessary to decide a pending case in the higher interest of protecting the sanctity of the marriage.So the question is: Are trade secrets privileged information?