Tax racketeering proposed as non-bailable offense
The head of the House Committte on Ways and Means wants tax racketeering to be a non-bailable offense, saying the government is losing as much as P100 billion to tax evaders.
Committee chair and Albay Rep. Joey Salceda has filed House Bill 7653 which seeks the criminalization of tax racketeering on top of “usual tax evasion,” as a “means of empowering the Bureau of Internal Revenue (BIR) in prosecuting more systematic cases of tax fraud.”
The bill describes the scheme as “large-scale use” of fraudulent or fictitious tax receipts to pad deductions or input tax credits.
“According to estimates by tax authorities, as much as P100 billion in revenues are being evaded due to the padding of deductions and input tax credits through the systematic and fraudulent use of fake receipts and other records,” its explanatory note indicated.
The measure stated that in March 17, 2023 alone, the BIR had filed tax evasion charges amounting to P25.5 billion against corporations using fictitious receipts, following a December 2022 raid on Buildforce Trading Inc., Crazykitchen Foodtrade Corp., Decarich Supertrade Inc., and Redington Corp.
BIR charged that these corporations have been operating for more than three years.
“These corporations do not have any legitimate business activity, and were set only to sell fictitious sales invoices or receipts to their buyers for the latter’s claim of false and anomalous purchases,” the bill said.
Salceda said these receipts or invoices are called “ghost receipts,” and economists have called the practice “ghosting the tax authority.””
He pointed out that the fraudulent operations of these corporations have resulted in some P17.63 billion in foregone income taxes and total deficiency value added tax amounting to P7.91 billion, for taxable years 20192021, citing BIR pronouncements.
The lawmaker added that while the crime of tax evasion is punishable under the Tax Code, it does not define the systematic and coordinated evasion of taxes, “which in every essential manner is economic sabotage, going by the doctrine that taxes are the lifeblood of the State.”
“Schemes such as these should be distinguished from the usual attempt to evade taxes precisely because they constitute a systematic attempt to dismantle the credibility of the entire tax system, and could not be committed without networks of accomplices across the business sector and among tax authorities,” he said.
Salceda added unlike individual acts of tax evasion, systematic attempts to use fictitious transactions to evade taxes could completely undermine the tax system.
Under the bill, offense of tax racketeering shall be defined as “any coordinated scheme or operation to repeatedly or consistently evade or defeat any tax imposed under this Code through the fraudulent use of receipts, returns, and other records, with a minimum amount of P10 million in taxes avoided or attempted to be avoided.”
It also defines being a principal in such an offense as non-bailable, and subject to 17 to 20 years in prison.
Taxpayers who benefit from tax racketeering, including those who purchase fake receipts, shall be punished as accessories.
On the other hand, public officials who facilitate such activities shall be charged as accomplices and punished with perpetual disqualification from public office.