G.R. No. 152532 – 504 Phil. 407- 467 SCRA 137 – Taxation Law – NIRC Rules of Procedure – Abatement Defined
In July 1987, Commissioner of Internal Revenue (CIR) Bienvenido Tan, Jr. issued an assessment against San Miguel Corporation (SMC) demanding payment of P342 million in taxes. SMC filed a request for reinvestigation. Tan granted the request and eventually he reduced the tax liability to P302 million. But in October 1987, without any word from SMC, Tan referred the case to the Legal Service Division of the BIR. Various BIR officials reviewed the case and they recommended that SMC’s tax liability be reduced to P22 million (a significant reduction from the original P342 million). The reduction was justified by the BIR officials on the ground that the tax examiners had made some errors in computing SMC’s tax liability.
So SMC was demanded to pay P22 million but then SMC asked for a compromise of P10 million. Again, the matter was referred to various BIR officials who agreed and recommended to Tan that he should accept the compromise offer. Tan accepted the P10 million compromise offer. This resulted to a criminal case against Tan for violation of the Anti-Graft and Corrupt Practices Act. Allegedly, his act of accepting the P10 million compromise offer caused undue injury to the government and it gave SMC unwarranted benefits due to the significantly reduced tax liability. The Sandiganbayan originally convicted Tan but it reversed its own decision upon motion of Tan.
ISSUE: Whether or not Tan should have been convicted of the crime charged.
HELD: No. It was found by the Sandiganbayan that there was an improper computation in the tax liability of SMC. The error basically imposed tax on top of another tax which if allowed would be unfair to the taxpayer. It was therefore proper to have the tax be reduced from P302 million to P22 million.
But is it proper for Tan to accept the P10 million compromise by SMC?
Tan is well within his power to accept the P10 million compromise offer. This is actually abatement (not compromise as termed by SMC). Tan is actually prudent to accept the P10 million offer so as to avoid a protracted and costly litigation. Abatement is the diminution or decrease in the amount of tax imposed. It refers to the act of eliminating or nullifying; of lessening or moderating. To abate is “to nullify or reduce in value or amount”. The CIR has the power to abate or cancel the whole or any unpaid portion of a tax liability, inclusive of increments, if its assessment is excessive or erroneous, or if the administration costs involved do not justify the collection of the amount due. No mutual concessions need be made, because an excessive or erroneous tax is not compromised; it is abated or canceled. Only correct taxes should be paid. Further, Tan cannot be said to have acted in bad faith. He acted upon concurrence and recommendation of the various BIR officials.
