Enrile, Revilla, Estrada face tax cases too?

MANILA, Philippines – It is a lesson that former president Joseph Estrada learned the hard way: that income from illegal sources, like bribes, is still subject to tax. And now, 3 senators are bound to learn the same lesson.

The indictment of senators Juan Ponce-Enrile, Jinggoy Estrada, and Ramon “Bong” Revilla Jr for plunder by the Ombudsman also exposes them to a possible tax evasion case, courtesy of the Bureau of Internal Revenue. If their assets cannot be frozen, the BIR can go after them via a writ of constructive distraint.

A writ of constructive distraint is a remedy that the BIR can resort to “to prevent a taxpayer from dissipating, disposing, or conveying his properties while he is under investigation for possible tax deficiencies,” according to the BIR.

It was a remedy that the BIR employed to prevent the infamous Jose Velarde account from being emptied ahead of the Sandiganbayan trial and subsequent ruling.

Template for BIR

In its resolution issued last week, the Ombudsman found the 3 senators had separately connived with Janet Lim Napoles to commit plunder through the misuse of their pork barrel allocations. Under the set-up, the senators received kickbacks from Napoles in exchange for their pork barrel.

Based on the Ombudsman’s preliminary findings, Estrada got P172 million, Enrile, P183 million and Revilla, P242 million from 2007-2009 alone. The figures include only the years covered by the special audit conducted by the Commission on Audit on the pork barrel scam. It excludes fiscal years 2004, 2005, 2006, 2010, 2011, and even 2012 – years when Napoles also supposedly transacted with the 3 senators and other lawmakers.

BIR Commissioner Kim Henares earlier said the 3 senators would be put under a tax audit, although she refrained from saying what action would be taken.

But the Estrada plunder trial can provide a template for the BIR in going after the 3 lawmakers.

Since 2008, the former president has been fighting a tax deficiency ruling by the BIR in connection with his alleged ill-gotten wealth that found its way into the Jose Velarde account. This secret account, which was exposed during his impeachment trial in 2000, was key in his conviction for plunder.

Bribe as taxable income

As early as January 2001, or days after he was ousted from office, then BIR Commissioner Lilian Hefti issued a warrant of distraint on the Jose Velarde account, preventing the account owner from spending the money deposited there.

A special team conducted an investigation on the internal tax liabilities of Estrada and found that for the year 1999, he and his wife, former First Lady Luisa “Loi” Ejercito failed to pay taxes amounting to more than a billion pesos.

The BIR concluded that while the Estrada couple paid their income taxes from legal sources, they failed to account for the bribes and commissions that the former president received while he was in office. The BIR based its findings on the amounts credited to the Jose Velarde account from August to December 1999.

In justifying its course of action against the Estradas, the BIR relied on Sections 32 and 34 of the National Internal Revenue Code, which tackles gross income and bribes, kickbacks and other similar payments.

Sec. 32 of the NIRC defines gross income as “all income derived from whatever source.” Sec. 34, on the other hand, implies that bribes and kickbacks shall form part of the gross income of any public official or employee.

The two sections, the BIR said, merely state that “whether income was obtained from legal or illegal means…it will nonetheless still be subject to income taxes.”

The US Internal Revenue Service is actually more explicit in stating that bribes and kickbacks are taxable income. The agency’s rules on income specifically states that “if you receive a bribe, include it in your income.”

As for kickbacks, the individual is supposed to include this “on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040), if from your self-employment activity.”

Already forfeited

In 2008, the BIR issued a formal letter of demand to the Estradas to settle their alleged tax deficiency. By this time, the BIR calculated that the tax liability had amounted to P2.9 billion, to include penalties, surcharges and interests.

Contesting the BIR tax ruling before the Court of Tax Appeals, the Estradas insisted that Jose Dichavez, a businessman-friend of Estrada, is the actual owner of the Jose Velarde account. Dichavez, who went into hiding for almost 10 years, is back in the country and is facing plunder charges before the Sandiganbayan.

Granting that the account was his, Estrada countered that the government can no longer tax what has been forfeited. “The Sandiganbayan has already ordered the forfeiture of the funds deposited in the Jose Velarde account. The same may no longer be taxed as income,” Estrada argued before the CTA. The case is still pending before the CTA.

Impending forfeiture cases

But the 3 senators may also be included in the assets forfeiture cases that the Anti-Money Laundering Council (AMLC) will be filing before courts through the Office of the Solicitor General.

In its build-up of the forfeiture cases, the AMLC has been securing documents from the Department of Justice (DOJ) and the National Bureau of Investigation. The AMLC is the country’s financial intelligence unit.

DOJ Secretary Leila de Lima also said she continues to urge the AMLC to work on the forfeiture of assets of other individuals suspected to have been recipients of kickbacks from the scam.  

She added that the complete delivery of justice in relation to the scam should not “stop at the prosecution aspect” but also include the “recovery of assets.”

“These are public funds… In the end, dapat irecover yan (those [assets] should be recovered). That is really part of the integral process of exacting justice in anti-corruption cases such as this lalo na (especially) plunder,” she said. 

Breathing room 

In the case of Estrada’s son Jinggoy, Revilla and Enrile, the BIR may have to wait for the final ruling on their plunder case before it can run after them. The 3 have consistently denied that they financially benefitted from the pork barrel scam.

The BIR had to wait for the final ruling on Estrada’s plunder case before it issued the formal demand letter for him to settle his tax deficiency. But Henares has been on an aggressive tax campaign. – With a report from Buena Bernal/Rappler.com

 

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