DOJ issues legal opinion on rewards for informers of tax violations

MANILA, Philippines –  An informer who has provided information on violation of tax laws that leads to the discovery and seizure of smuggled goods will be rewarded 10 percent of the amount collected from the seized goods, fine, penalty, or P1 million, whichever is lower, Justice Secretary Leila de Lima said in a legal opinion on the issue.

Bureau of Internal Revenue Commissioner Kim Jacinto-Henares earlier sought De Lima’s legal opinion with regards to the interpretation of the provisions of Section 282 of Republic Act No. 8424, also known as National Internal Revenue Code (NIRC) of 1997.

Henares sought clarification because the legal opinion rendered by then Justice Secretary Raul Gonzalez had declared that 25 percent monetary reward, as provided for under Section 1 of RA No. 2338, shall be the legal basis of the government in computing the payment of the informer’s reward.

In his earlier legal opinion, Gonzalez said that Section 1 of Republic Act No. 2338, which provides 25 percent monetary reward to tax informers, still prevails over Section 282 (A) of the NIRC of 1997, which only gives 10 percent monetary reward or P1 million, whichever is lower.

Henares argued that the informer’s reward ceiling provided for under the NIRC of the 1997, being the later expression of the legislative will, must necessarily prevail and override RA No. 2338, the earlier law.

De Lima stressed that contrary to the pronouncement contained in the opinion of Gonzalez, the Internal Revenue Code is not a general law but, like RA No. 2338, a special law.

“Thus, and as rightfully held by the Court of Tax Appeals in the case involving (tax informant) Danilo A. Lihaylihay, RA No. 2338, a special law, being irreconcilable and inconsistent with P.D. No. 1158 (NIRC of 1977), another special law, may be deemed to have been nullified by the later law,” she said in her four-page legal opinion.

For the same reason, she said, and as explicitly stated by the Supreme Court, an erroneous construction of law cannot give rise to a vested right that can be invoked by a taxpayer.

De Lima said the reason is obvious, that a vested right cannot spring from a wrong interpretation.

“Undeniably, RA 2338 had been totally and expressly repealed by the 1977 NIRC, as amended by P.D. No. 1773.

RA No 2338 (that provides 25 percent monetary reward to informers) ceased to exist as part of the law of the land,” De Lima said.

Considering this, she said that absent any subsequent law amending Section 282 of the NIRC of 1997, the informer’s reward shall amount to 10 percent of the revenues, surcharges or fees recovered and/or fine or penalty imposed and collected or P1 million per case, whichever is lower.