Issuing authority, title, and effectivity
- Republic Act No. 7642 is an Act entitled “AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED.”
- The Act is approved on December 28, 1992.
- The Act takes effect upon its approval.
- The Act directs that implementation rules be issued by the Secretary of Finance upon the recommendation of the Commissioner of Internal Revenue (Section 14).
Penalty floor for violations
- Section 1 adds a new paragraph (e) to Section 252 of the National Internal Revenue Code to set a penalty floor for violations of the Code.
- Fines imposed for any violation of the Code shall not be lower than either:
- the fines imposed for the offense under the Code, or
- twice the amount of taxes, interests, and surcharges due from the taxpayer, whichever is higher.
- This rule applies to “any violation” of the National Internal Revenue Code provisions governed by Section 252.
Attempt to evade or defeat tax
- Section 2 amends Section 253 to punish willful attempts to evade or defeat tax.
- Any person who willfully attempts in any manner to evade or defeat any tax imposed under the Code or the payment thereof shall, in addition to other penalties provided by law, be convicted to face:
- a fine of not less than Thirty thousand pesos but not more than One hundred thousand pesos, and
- imprisonment of not less than two years but not more than four years.
- The penalty is imposed upon conviction.
False or withdrawn filed returns/statements
- Section 3 amends the second paragraph of Section 254 to penalize a specific pattern involving returns/statements.
- Any person who attempts to make it appear that he or another has filed a return or statement, or who actually files a return or statement and then withdraws it after obtaining the official receiving seal or stamp of receipt from an internal revenue office where it was filed, shall, upon conviction, be punished by:
- a fine of not less than Ten thousand pesos but not more than Twenty thousand pesos, and
- imprisonment of not less than one year but not more than three years.
- The triggering event is withdrawal of the return or statement after securing the official receiving seal or stamp of receipt.
Corporate criminal exposure
- Section 4 amends Section 255 to impose corporate-level fines alongside officer liability.
- Any corporation, association, or general co-partnership liable for acts or omissions penalized under the Code shall, upon conviction for each act or omission, be fined:
- not less than Fifty thousand pesos but not more than One hundred thousand pesos.
- The corporate fine is imposed in addition to penalties imposed on responsible corporate officers, partners, or employees under the Code.
False entries, records, and reports; CPA liability
- Section 5 amends Section 256 to penalize false examinations, certifications, bookkeeping practices, and recordkeeping violations.
- Under Section 256(a), liability applies to:
- an independent certified public accountant engaged to examine and audit books of accounts of taxpayers under subparagraph (a) of Section 232, and
- any person under the CPA’s direction.
- Under Section 256(a)(1), liability applies for willfully falsifying any report or statement bearing on examination or audit, or rendering a report (including exhibits, statements, schedules, or other forms of accountancy work) that has not been verified personally or under supervision, following sound auditing practices.
- Under Section 256(a)(2), liability applies for certifying financial statements containing an essential misstatement of facts or omission concerning transactions, taxable income, deductions, and exemptions of the client.
- Under Section 256(b), liability applies to “any person” for enumerated acts, including:
- examining and auditing without being an independent CPA,
- offering to sign and certify financial statements without audit,
- offering accounting bookkeeping records for internal revenue purposes not conforming with Code requirements or regulations,
- knowingly making false entries or using false/fictitious names in books and records,
- keeping two or more sets of books/records,
- committing any act or omission violating Section 256.
- Section 256 also penalizes failures involving language and translation requirements for books of accounts/records and material variance between multilingual books.
- Upon conviction for each act or omission under Section 256, punishment is:
- a fine of not less than Thirty thousand pesos but not more than Fifty thousand pesos, and
- imprisonment of not less than two years but not more than six years.
Unlawful pursuit of business
- Section 6 amends Section 257 to penalize carrying on business for which a privilege tax is imposed without paying the tax required by law.
- Any person who carries on such business shall, upon conviction for each act or omission, be punished by:
- a fine of not less than Five thousand pesos but not more than Twenty thousand pesos, and
- imprisonment of not less than six months but not more than two years.
- Section 6 imposes higher penalties when the business involves distilling, rectifying, repacking, compounding, or manufacturing any article subject to excise tax:
- a fine of not less than Thirty thousand pesos but not more than Fifty thousand pesos, and
- imprisonment of not less than two years but not more than four years.
Illegal collection of foreign payments
- Section 7 amends Section 258 to penalize collecting foreign payments without authorization or required compliance.
- Any person who knowingly undertakes the collection of foreign payments under Section 60 of the Code without having obtained a license therefor, or without complying with its implementing regulations, shall, upon conviction for each act or omission, be punished by:
- a fine of not less than Twenty thousand pesos but not more than Fifty thousand pesos, and
- imprisonment of not less than one year but not more than two years.
Unlawful possession/removal of excise-tax articles
- Section 8 amends Section 262 to create detailed penalties for unlawful possession or removal of excise-tax articles.
- For imported articles subject to excise tax with unpaid tax, and for possession of imported tax-exempt articles other than those to whom they are legally issued, punishment is based on appraised value, determined as prescribed in the Tariff and Customs Code, including duties and taxes:
- if appraised value does not exceed One thousand pesos:
- fine of not less than One thousand pesos but not more than Two thousand pesos, and
- imprisonment of not less than sixty days but not more than one hundred days;
- if appraised value exceeds One thousand pesos but does not exceed Fifty thousand pesos:
- fine of not less than Ten thousand pesos but not more than Twenty thousand pesos, and
- imprisonment of not less than two years but not more than four years;
- if appraised value is more than Fifty thousand pesos but does not exceed One hundred fifty thousand pesos:
- fine of not less than Thirty thousand pesos but not more than Sixty thousand pesos, and
- imprisonment of not less than four years but not more than six years;
- if appraised value exceeds One hundred fifty thousand pesos:
- fine of not less than Fifty thousand pesos but not more than One hundred thousand pesos, and
- imprisonment of not less than ten years but not more than twelve years.
- if appraised value does not exceed One thousand pesos:
- For locally manufactured articles subject to excise tax with unpaid tax, and for possession of locally manufactured articles exempt from excise tax other than those to whom they are legally issued, punishment includes:
- a fine of not less than ten times the amount of excise tax due on the articles found but not less than Five hundred pesos, and
- imprisonment of not less than two years but not more than four years.
- For unlawful removal involving articles subject to excise tax (including unlawful removal from the place of production or bonded warehouse when excise tax has not been paid as required), the law imposes penalties on:
- the manufacturer, owner, or person in charge who removes, allows, or causes removal, and
- any person who knowingly aids or abets removal or conceals the articles after illegal removal.
- For the first offense of unlawful removal/causing removal/aiding/abetting/concealment, punishment is:
- a fine of not less than ten times the amount of excise tax due on the articles but not less than One thousand pesos, and
- imprisonment of not less than one year but not more than two years.
- The law provides that mere unexplained possession of articles subject to excise tax with unpaid tax is punishable under Section 262.
Receipt and invoice non-issuance or defects
- Section 9 amends Section 263(a) to penalize failures and defects in issuing receipts or sales or commercial invoices.
- Any person required under Section 238 to issue receipts or sales or commercial invoices who:
- fails or refuses to issue them,
- issues receipts or invoices that do not truly reflect and/or do not contain all required information, or
- uses multiple or double receipts or invoices,
shall, upon conviction for each act or omission, be punished by: - a fine of not less than One thousand pesos but not more than Fifty thousand pesos, and
- imprisonment of not less than two years but not more than four years.
Offenses relating to internal revenue stamps
- Section 10 amends Section 264 to penalize offenses related to stamps, labels, tags, and their cancellation/destruction.
- Any person who commits any listed stamp-related act is punished, upon conviction, by:
- a fine of not less than Twenty thousand pesos but not more than Fifty thousand pesos, and
- imprisonment of not less than four years but not more than eight years.
- The listed offenses include:
- making, importing, selling, using, or possessing without express authority from the Commissioner any die for printing/making stamps, labels, tags, or playing cards,
- erasing cancellation marks or altering written figures/letters/cancellation marks on internal revenue stamps,
- possessing false/counterfeit/restored/altered stamps, labels, or tags, or causing another person’s commission of such offense,
- selling or offering for sale boxes/packages containing excise-tax articles with false/spurious/counterfeit stamps/labels, or selling from fraudulent boxes/packages/containers,
- giving away or accepting from another or selling, buying, or using containers on which the stamps are not completely destroyed.
Failure to obey summons
- Section 11 amends Section 265 to penalize non-compliance with summons in tax matters.
- Any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda, or other papers, or to furnish information as required under the Code, neglects to appear or to produce the required books/records/papers, or fails to furnish the required information, shall, upon conviction, be punished by:
- a fine of not less than Five thousand pesos but not more than Ten thousand pesos, and
- imprisonment of not less than one year but not more than two years.
Violations by BIR/government enforcement officers
- Section 12 amends Section 268 to impose enhanced penalties on government enforcement officers who commit specified offenses.
- Every official, agent, or employee of the Bureau of Internal Revenue or any other government agency charged with enforcing the Code who is guilty of the listed offenses is punished, upon conviction for each act or omission, by:
- a fine of not less than Fifty thousand pesos but not more than One hundred thousand pesos, and
- imprisonment of not less than ten years but not more than fifteen years, plus
- an additional penalty of perpetual disqualification to hold public office, to vote, and to participate in any public election.
- The listed prohibited acts include, among others:
- extortion or willful oppression through use of office,
- knowingly demanding other or greater sums than authorized by law or receiving fees/compensation/reward except as prescribed by law for performance of duty,
- willfully neglecting to give receipts required by law or willfully neglecting other duties enjoined by law,
- conspiring or colluding to defraud revenues or otherwise violate the Code,
- by neglect or design permitting violations by others,
- making or signing false entries, or making/signing false certificates or returns,
- allowing or conspiring to allow unauthorized retrieval/withdrawal/recall of a return/statement/declaration after it has been officially received by the BIR,
- failing to report knowledge/information of violations or fraud on revenues collectible by the BIR as required,
- demanding or accepting, or attempting to collect, without authority of law, any sum of money or other thing of value for compromise/adjustment/settlement of any charge or complaint for Code violations or alleged violations.
Congressional oversight and implementing rules
- Section 13 creates a Congressional Oversight Committee composed of:
- the Chairmen of the Committees on Ways and Means of both Houses of Congress as Co-chairmen, and
- three other members each from the committees.
- The Oversight Committee must convene within two years after the approval of the Act to review implementation and recommend amendments.
- Section 14 requires the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, to promulgate necessary rules and regulations for effective implementation.
Repeal and amendment of inconsistent issuances
- Section 15 repeals or amends all laws, decrees, orders, rules and regulations, and other issuances inconsistent with the Act’s provisions.
Effectivity
- Section 16 provides that the Act takes effect upon approval (December 28, 1992).