President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad

To FINEX members and friends,

November 2017 Issue

We are now on the final stretch of 2017. This year has been one of the busiest and exciting for both FINEX and the country.

Earlier this month, our country was once again placed in the limelight as we hosted this year’s ASEAN Summit. The summit provided us to showcase what our country can share to the world and the creativity of the Filipino people. Indeed, the recent hosting of the ASEAN summit placed our country

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Rules on tax compromises
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Atty. Benedicta Du-Baladad Atty. Benedicta Du-Baladada
March 17, 2017

Rules on tax compromises

FINEX Folio is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Friday in BusinessWorld, opinion section.

Can the President compromise taxes? NO. The Tax Code vests in the Commissioner of Internal Revenue (the Bureau of Internal Revenue Commissioner) the power and the authority to compromise tax liabilities. He alone can compromise taxes. Not the President. Not the Secretary of Finance.

In acts resulting in violations of the Tax Code, there are two aspects of liability involved -- the criminal aspect, and the civil aspect. These are two separate liabilities. One is not dependent on the other. A conviction of one does not imply a conviction of the other, neither is the acquittal of one a bar to the filing of a case on the other.

Thus, when we talk of tax compromise, we talk of two separate liabilities to compromise. And these are governed by separate and different rules.


All criminal violations of the Tax Code may be compromised by the Commissioner, with the exception of two instances: (a) those already filed in Court, and (b) those involving fraudulent acts. (Section 204, Tax Code)

Fraud is a willful intent to evade taxes. It consists of deception, intentional wrongdoing, willfully and deliberately done or resorted to in order to evade the payment of taxes. Fraud is a serious charge and therefore it must be actual, proven by clear and convincing evidence and never presumed.

Using fake stamps to evade the payment of excise taxes, if proven, is a fraudulent act that is beyond the authority of the BIR Commissioner to compromise. A mere signal to compromise a criminal liability for tax evasion will destroy order and discipline in the payment of taxes.


Civil liability, on the other hand, may be compromised but only on two instances -- when the assessment is of doubtful validity or when the taxpayer is financially incapable to pay the liability. Civil liability pertains to the amount of unpaid taxes plus surcharges and penalty interest that runs from 20% to 40% annually, in case of delinquency.

While the Tax Code allows civil compromises, there is a limitation as to how much the Commissioner can compromise. If due to doubtful validity, the minimum compromise rate is 40% of the basic tax assessed. If due to financial incapacity of the taxpayer, it is 10%.

Examples of doubtful validity are jeopardy (or harassment) assessments issued without the benefit of audit, or arbitrary assessments issued without any factual and legal basis. Examples of financial incapacity, on the other hand, are bankruptcy or the business has ceased to operate, or when there is impairment of capital by at least 50%, or when the taxpayer has no other source of income.

Civil cases may be compromised lower than the above rates but the approval of a collegial Board called the National Evaluation Board composed of the four deputy commissioners and the Commissioner is required. The same is true for all compromises where the basic tax involved exceeds P1 million.

Because compromises effectively condones, waives the collection of taxes, or gives away revenues belonging to the government, any tax compromise granted not in accordance with these rules is a ground for graft and corruption or even plunder.

In practice, notwithstanding the authority to compromise granted to the Commissioner, applications for compromises undergo a very strict and rigid process involving many layers of technical evaluation and approval. It is a long and tedious process, understandably, because it involves giving away government funds.

Thus, when an act constitutes a clear case of tax evasion, done willfully with intent to evade the payment of taxes, and the liability is clearly established, there is no room for tax compromise, both on the criminal aspect and the civil aspect. The taxpayer must be prosecuted and brought to court, and the amount due the government must be collected in full inclusive of penalties.

In the case of corporations, the penalty shall be imposed on the president, general manager, branch manager, treasurer, officer-in-charge, and the employees responsible for the violation. Likewise, any person who wilfully aids or abets in the commission of tax evasion shall be liable in the same manner.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX.

Atty. Benedicta Du-Baladad is the managing partner and CEO of Du-Baladad and Associates (BDB Law) and president of FINEX.
Forecast and prediction

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My crystal ball tells me that the letter T will loom large in 2018, actually 4 of them, Taxes, Trans portation, Telecommunications, and Tourism. With the recent signing into law of the first phase of the tax reform package, we can see a mixed bag of results that will benefit certain sectors and be disadvantageous to others. Low income earners with an annual income of not more than R250,000 will no longer have to pay any taxes. That is certainly good news for them,

Ethics in media
By Mercedes B. SuleikBy Mercedes B. Suleik

MANILA BULETTIN (Business Option)
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Ethics in media

The use that people make of the media of social communications can bring about great good or great evil. Today we move in an “information age” wherein all sorts of images, messages, perceptions, and ideas assault our senses every day. Not only is media able to influence society, but they can actually propose ideas and models of behavior that impinge on the whole world.

A Christmas Message
By Dr. Conchita L. ManabatBy Dr. Conchita L. Manabat

December 22, 2017

A Christmas Message

Christmas is one day in a year where most Filipinos take the time and effort to prepare. To some, the preparation commences once the “ber” months start. And of course, there is the usual last minute rush to gear up for it.