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BIR: Arrest Forever Living MLM distributor

Rappler.com
This is a landmark case for the Aquino government's name-and-shame campaign against alleged tax evaders

MANILA, Philippines [UPDATED] – The tax agency is pursuing a landmark case against an allegedly erring self-employed professional whose arrest could make her the first in the country to be jailed for tax evasion.

“The Bureau of Internal Revenue (BIR) has sought the arrest of Gloria V. Kintanar, a distributor of Forever Living Products,” the agency said in a statement on Tuesday, March 20.

Aside from Kintanar’s arrest, the BIR is also collecting from her “at least P6.3 million in back taxes” as well as the issuance of a hold departure order to bar her from escaping the country.

Forever Living Products Philippines Inc. (FLPPI) is the local unit of the multinational firm engaged in a multi-level marketing (MLM), a distribution approach almost similar to direct selling.

Kintanar is one of its top independent distributors whose success story of earning millions from a home-based business has been a staple in recruitment efforts.

The tax case against her started in 2005, when the BIR filed the case against Kintanar for failing to file her income tax return for 2000 and 2001.

The agency noted that Kintanar earned millions of pesos as an independent contractor of Forever Living. BIR said it had asked her several times from 2003 to 2005 to pay her taxes.

Based on BIR investigation, Forever Living paid Kintanar commissions for selling its products from 1999 to 2001.  

Kintanar claimed she had entrusted the task of filing her income tax returns to her husband who had, in turn, entrusted the duty to an accountant they hired.

Violations

The BIR said that its requests for Kintanar’s arrest, a hold departure order, and the collection of P6.3 million via an Omnibus Motion filed with the Court of Tax Appeals.

The agency said this legal move against Kintanar followed the Supreme Court’s third division decision that affirmed the tax court’s ruling that Kintanar is guilty of violating 2 counts of section 255 of the National Internal Revenue Code.

This decision means:

  • she is sentenced to 2 to 4 years imprisonment
  • she is subject to a fine of P20,000 and the payment of the back taxes in late January


The Court of Tax Appeals was supposed to conduct a hearing on March 16 for the BIR’s Omnibus Motion. Instead, the hearing was cancelled and the appeals court ordered Kintanar to comment on the BIR’s motion within 10 days of receipt of the resolution.

‘Willful blindness’

“The Kintanar tax evasion case is a landmark case because the SC upheld the CTA’s doctrine on ‘willful blindness,” the BIR stressed.

Kintanar has filed a motion for reconsideration at the Supreme Court, but this was denied with finality.

This high court decision made the Court of Tax Appeals’ doctrine on “willful blindness part of the country’s jurisprudence that sets the precedent for future cases,” the BIR said.

This doctrine means an individual or corporation can no longer say that the errors on their tax returns are not their responsibility or that it is the fault of the accountant they hired.”

The doctrine on “willful blindness” was penned by the the tax appeals court’s 2nd division composed of Associate Justices Juanito C. Castaneda Jr., Olga Palanca-Enriquez and Erlinda P. Uy.

According to the CTA, an act is willful if it is “voluntary, conscious and intentional” and that bad motive or intent to defraud need not be shown. The only thing that needs to be shown is that she is aware of her obligation to file annual income tax returns but “she nevertheless, voluntarily, knowingly and intentionally failed to file the required returns.”

“It is a settled principle in agency that a principal is liable for the acts/omissions of his/her agent within his/her express authority because the act/omission of such agent is the act/omission of the principal,” the CTA second division said.

“Under this rule, the principal is bound by the acts of her agent because of the apparent authority which she knowingly permitted the agent to assume,” it added.

“The affirmation of the ‘willful blindness’ doctrine will now make it easier for the BIR to prosecute tax evasion cases as tax payers can no longer pass on the blame to their accountants or the people they hire to prepare their returns,” the BIR stressed. – Rappler.com