Ferdinand Marcos Jr.

[ANALYSIS] The estate tax liability of the Marcos Estate

Antonio T. Carpio

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[ANALYSIS] The estate tax liability of the Marcos Estate

Alyssa Arizabal

There is no law that says that the estate tax can be imposed only on legitimately acquired assets. Such a law would place thieves in a better position than honest people since it would exempt the heirs of thieves from paying the estate tax on the bank accounts of the deceased thieves.

We start with the FACTS and the LAW. These are clearly stated in the final, executory and unappealable resolution of the Third Division of the Supreme Court dated January 13, 1999. This resolution is the DENIAL of the second motion for reconsideration of Ferdinand Marcos Jr. and Imelda Marcos involving the P23.3 billion estate tax assessment on the Marcos estate.

The January 13, 1999 Supreme Court Resolution narrated that in a decision dated November 29, 1994, the Court of Appeals dismissed the petition of Marcos Jr. questioning the P23.3-billion estate tax assessment issued by the Bureau of Internal Revenue (BIR). The Court of Appeals ruled that since the tax assessment had become final and unappealable, “the manner and method in which the tax collection is sought to be enforced can no longer be questioned.”  

In short, the Marcoses could no longer question the computation or basis of the P23.3-billion estate tax assessment.

Marcos Jr. appealed the decision of the Court of Appeals to the Supreme Court. On June 5, 1997, the Third Division of the Supreme Court DENIED the appeal and “AFFIRMED in all respects the decision of the Court of Appeals.” The Supreme Court explained: “The subject tax assessments having become final, executory and enforceable, the same can no longer be contested by means of a protest. Certiorari may not be used as a substitute for a lost appeal or remedy.”

Marcos Jr. filed a motion for reconsideration. Imelda Marcos intervened and filed a motion to refer the matter to the Supreme Court en banc. On September 29, 1997, the Third Division DENIED the motion for reconsideration of Marcos Jr. and the motion for intervention of Imelda Marcos for lack of merit.  

Still, Marcos Jr. and Imelda Marcos persisted and filed a second motion for reconsideration, which is a prohibited pleading. On January 13, 1999, the Third Division DENIED the second motion for reconsideration.

The Supreme Court ruled in its January 13, 1999, resolution: “We do not see any cogent or compelling reason to allow the same issues to be opened anew in the instant petition. As a settled rule, once a judgment or an order has become final, issues therein should be laid to rest. xxx the Court hereby denies the second motion for reconsideration of Ferdinand R. Marcos II and Imelda R. Marcos for lack of merit. This denial is final.”

On March 9, 1999, the Supreme Court Third Division issued a resolution declaring the entry of judgment of the final decision, stating: The Marcos estate tax assessment case “has, on March 9, 1999, become final and executory.”  

“Final and executory” means the case is finished and terminated in the judicial department and the decision must be forthwith implemented. In taxes cases, implementation is undertaken by the executive department of the government. 

Taxes are the life-blood of the nation, and the government cannot operate without taxes. That is why under the Tax Code, the BIR is vested with the unique power, without need of court order, to distrain personal property, to levy upon real property, and to sell at public auction these personal and real properties, to collect taxes due the government. The BIR also has the power, without need of court order, to garnish bank accounts to collect taxes.

These are the FACTS and the LAW. The Civil Code provides: “Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines.”  So, the final and executory decision of the Supreme Court affirming the P23.3-billion Marcos estate tax assessment for failure to protest on time the tax assessment as required under the Tax Code is now part of the legal system of the Philippines.

It is clear as day, beyond any shadow of doubt, that the estate tax assessment on the Marcos Estate, in the principal amount of P23.3 billion pesos, had long become final, executory, and unappealable as of December 1991 when the Marcoses failed to protest the assessment within 30 days from receipt of the assessment. That was 29 years ago.  The decision of the Supreme Court affirming this estate tax assessment became final and executory on March 9, 1999, or almost 25 years ago.

There are three separate and distinct important dates. First is the date when the estate tax return should have been filed and the estate tax should have been paid – this date is six months from the death of Marcos Sr.  Second is the date of finality of the estate tax assessment – this date is 30 days after the BIR served the notice of assessment on the Marcos heirs. And third is the date of finality of the Supreme Court decision – this date is stated in the entry of judgment made by the Court.

The interests on the estate tax start to run from the date the estate tax is due, which is six months after the death of the decedent. Ferdinand Marcos Sr. died on September 28, 1989, and so the estate tax return should have been filed, and the estate tax paid, on March 28, 1990. 

The Marcoses did not file the estate tax return on the date prescribed by law and the BIR commissioner had to file the estate tax return based on available public records after an investigation. Since there was deliberate refusal to file the estate tax return and to pay the estate tax on the date prescribed by law, there is a penalty equivalent to 50% of the estate tax due. 

Delinquency interest at 20% per annum is imposed on the total amount due starting from March 28, 1990, the due date of the estate tax return and the estate tax, until December 31, 2017. Also, because the BIR commissioner had to investigate to file the estate tax return, there is also a deficiency interest at 20% per annum imposed on the total tax due starting from the finality of the assessment in December 1991 until December 31, 2017. 

Starting January 1, 2018, under the Train Law, the delinquency interest and deficiency interest have been reduced to a total of double the legal interest, or 12% per annum since the legal interest is 6% per annum. Based on the penalty and interests, the estate tax liability of the Marcos estate has now ballooned to more than P203 billion today.

The estate tax rate at the time of the death of Marcos Sr. on September 28, 1989 was 60% for net estates exceeding P3 million.  Under the present law, RA 10963 or the Train Law, which took effect on January 1, 2018, the estate tax is a flat rate of 6% regardless of the value of the net estate. However, this new estate tax rate has prospective application only and cannot be made to apply retroactively to the Marcos estate. Thus, the Marcos estate is taxable at 60% of its net estate.

Now, Marcos Jr. and Imelda Marcos are the co-administrators of the Estate of Marcos Sr. Section 91(D) of the Tax Code provides: “The estate tax imposed by Section 84 shall be paid by the executor or administrator before delivery to any beneficiary of his distributive share of the estate.” 

Revenue Regulations Nos. 12-2018 and 17-1993 implementing Section 91 (D) of the Tax Code provide: “The estate tax imposed under the NIRC shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or beneficiary. Where there are two or more executors or administrators, all of them are severally liable for the payment of the tax.  Xxx the executor or administrator of an estate has the primary obligation to pay the estate tax, but the heir or beneficiary has subsidiary liability for the payment of that portion of the estate which his distributive share bears to the value of the total net estate.”

Clearly, the Tax Code and its implementing regulations impose upon the administrator of the estate the primary obligation to pay the estate tax. Thus, Marcos Jr. and Imelda Marcos are legally and primarily mandated by law to pay the estate tax before any heir, including themselves, can receive a single centavo from the Marcos Estate.

Section 255 of the Tax Code mandates: “Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax xxx who willfully fails to pay such tax, shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more  than ten (10) years.”

In short, Marcos Jr. and Imelda Marcos can be charged criminally by the BIR and the Department of Justice (DOJ) under Section 255 of the Tax Code for willful refusal to pay the estate tax of the Marcos Estate.  The refusal to pay the estate tax is willful because almost a quarter of a century has passed since the decision on the estate tax case was declared final and executory by the Supreme Court and still Marcos Jr. and Imelda Marcos have refused to pay a single centavo of the estate tax.

The Marcoses cannot avail of the 6% estate tax rate based on the total net estate under the Estate Tax Amnesty Act (RA 11213 approved on February 14, 2019), which has been extended until June 14, 2023. This law expressly states: “The Estate Tax Amnesty under Title II of this Act shall not extend to estate tax cases which shall have become final and executory xxx.” The Marcos estate tax case became final and executory on March 9, 1999.

There are those who claim that since 11 real properties of the Marcos spouses situated in Leyte were levied upon and auctioned off by the BIR in 1993 to satisfy the estate tax due, the government is deemed to have been fully paid already. This is utterly false. 

Section 217 of the Tax Code provides: “The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due, including all expenses, is collected.”  

Clearly, the proceeds of the personal and real properties auctioned off by the BIR must fully satisfy the entire amount of the tax due. The Marcoses never claimed that the proceeds of the 11 real properties that were auctioned  off fully covered the entire P23.3-billion estate tax due. In 1993, the zonal value of those 11 real properties obviously could not have fully paid for the P23.3 billion estate tax due.

Then there are also those who claim that the estate tax is imposed only on legitimate, and not on ill-gotten, assets. In short, they claim that if the government imposes the estate tax on the assets of an estate, then that is an admission or even a warranty by the government that the assets are legitimate and not ill-gotten.

This claim is totally erroneous.  

There is no law that says that the estate tax can be imposed only on legitimately acquired assets. Such a law would place thieves in a better position than honest people since it would exempt the heirs of thieves from paying the estate tax on the bank accounts of the deceased thieves.   

The government never makes an admission or warranty that assets subject to estate tax are legitimately acquired assets. If the government makes such an admission or warranty, then we should be seeing a very long line of people – heirs of all kinds of thieves – paying estate tax on all kinds of stolen assets. 

But what will be the recourse of the legitimate owners of the stolen assets if the theft of their assets has been legitimized by the payment of the estate tax? You cannot have a tax law that favors the heirs of thieves as against the legitimate owners of the stolen assets. – Rappler.com

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