ADB employees face tax charges

By Julito G. Rada | Sep. 12, 2014 at 12:01am

THE Bureau of Internal Revenue has filed separate criminal charges before the Justice Department
against five Filipino employees of the Asian Development Bank for alleged tax evasion.
Charged for violating Section 255 of the Tax Code were Donalita Balagtas, Jose Frasier Gomez, Rhodora
Concepcion, Anna Marie Siquian, and Noel Gamo.
The five respondents are registered taxpayers and employed at the Asian Development Bank located
in Mandaluyong City.
The five filed their income tax returns for taxable year 2013 declaring gross compensation income
amounting to P2.73 million, P1.87 million, P5.10 million, P2.28 million, and P2.03 million, respectively.
The agreement between ADB and the Government of the Republic of the Philippines states that only
officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income
tax, the BIR said.
Thus, respondents, being ordinary employees of ADB and Philippine nationals, are subject to income
tax. However, they all refused to pay any income tax due on their respective ITRs, the agency said.
A BIR kiosk was even established at the lobby of the General Headquarters of ADB to serve as a onestop window where local ADB personnel can transact business and accommodate registration, transfer
of registration and updating of records, filing of ITRs and payment of taxes.
The payment of taxes by Filipino ADB employees was extended by the BIR from April 15, 2013 up to
July 15, 2013.
The income tax liabilities of respondents Balagtas, Gomez, Concepcion, Siquian and Gamo for taxable
year 2013 amounting to P1.06 million, P0.72 million, P2.20 million, P0.89 million, and P0.78 million,
respectively, remained unpaid despite the collection letters sent by the BIR requesting for payment
thereof, the agency said.

Filipino employees of ADB score court victory against BIR

By: InterAksyon.com
October 1, 2014 5:55 PM

MANILA - A local court has ruled in favor of Filipino employees of the Asian Development Bank (ADB) in
a legal tussle with Philippine tax authorities.
In a decision dated September 30, 2014, the Regional Trial Court of Mandaluyong said a Bureau of
Internal Revenue (BIR) order requiring Filipino employees of the ADB to pay taxes on their income was
"void for being issued without legal basis, in excess of authority and/or without due process of law."
The local court further said the BIR order, Revenue Memorandum Circular (RMC) No. 31-2013, was void
since it was not backed by legislation.
The petitioners insist that their incomes are exempt from Philippine tax laws as provided by an
agreement between the government and the ADB.
The court's decision comes on the heels of a string of tax evasion cases the BIR filed against
several Filipino employees of the ADB because of their alleged failure to file their income tax
returns and pay the corresponding taxes.
In a statement, the ADB said its management "is informed of the decision by the Regional Trial Court of
Mandaluyong regarding the tax obligations of ADB Filipino staff."
"Our legal department is closely studying the decision," the Manila-based lender said, adding that it
has "provided appropriate support to its Filipino staff regarding tax matters and will continue to do so."
"ADB respects the tax laws and policies of all of its 67 member countries, including our host country,
the Philippines. Taxes have a significant impact on staff, and must be administered clearly and
consistently," the lender said.
"ADB management cares about the welfare of staff and expects that the relevant authorities in the
Philippines will provide fair treatment to ADB Filipino staff and resolve this issue expeditiously," it
added.
The tax dispute can be embarrassing for the ADB since the lender has been critical of the Philippines'
tax leakage, which is believed responsible for the government's inability to fully fund the country's
infrastructure requirements.
Failure of the BIR, which accounts for at least two-thirds of state revenues, to hit tax collection targets
has led to budget deficits, forcing the government to take on debt. In the first eight months of the
year, the deficit reached P25.871 billion.
Is entire Philippine-ADB agreement void?
Sought for comment, BIR chief Kim Jacinto-Henares said the court decision would make it appear that
the treaty between the Philippines and the ADB -- which, according to her, provides tax exemption only
for non-Filipino nationals -- was void.
"A treaty ratified by the Senate forms part of the law of the land. What we quoted in the [RMC] was
lifted verbatim from the agreement between ADB and the Philippines. So how can there be no basis in
law?" Henares told InterAksyon.com.
"So is the court saying the agreement between ADB and the Philippine government is void? Then what
is ADB doing here? That is the implication of the decision," she said.
"We will be filing a motion for reconsideration of course," she added.

Court upholds Filipino ADB employees tax exemption

By: Ben O. de Vera
Philippine Daily Inquirer04:06 AM January 25th, 2015
MANILA, PhilippinesA Mandaluyong court has upheld its earlier ruling exempting Filipino employees
of multilateral lender Asian Development Bank (ADB) from having to pay income tax.
In an order dated Jan. 9, Judge Carlos A. Valenzuela of Mandaluyong City Regional Trial Court Branch
213 denied the motion for reconsideration filed by Revenue Commissioner Kim Henares of the courts
Sept. 30 decision voiding a section of Revenue Memorandum Circular (RMC) No. 31-2013 for being
issued with no legal basis, in excess of authority and without due process of law.
Section 2 of the RMC provides that only officers and staff of the ADB who are not Philippine nationals
shall be exempt from Philippine income tax, citing the agreement between the ADB and the Philippine
government on the establishment of the lenders headquarters in the country.
But Article XII, Section 45 of the government agreement with the ADB states that Officers and staff of
the bank, including for the purposes of this article experts and consultants performing missions for the
bank, shall enjoy the following privileges and immunities: Exemption from taxation on or in respect of
the salaries and emoluments paid by the bank subject to the power of the government to tax its
nationals.
Valenzuela had ruled that Section 2(d)1 of the RMC was void in absence of legislation and/or
regulation to the contrary.
Following the ruling, the Bureau of Internal Revenue on Nov. 11 filed a motion for reconsideration,
which was heard on Nov. 14.
In denying the BIRs motion for reconsideration, Valenzuela said: Assessing anew the basis of this
courts questioned decision, which granted the instant petition, and in the light of the arguments
raised and discussed in the motion for reconsideration so with its comment/opposition, this court finds
no cogent reason to reconsider the assailed decision rendered of Sept. 30. 2014.
Further, the present motion for reconsideration has not raised any new or substantial ground or
reason that would call for the upturning of this courts decision, Valenzuela said.

The BIR had filed tax evasion cases against Filipino ADB employees in the Department of Justice using
the RMC as the basis for the charges.
Liwayway Vinzons-Chato, ADB legal counsel and a former BIR commissioner herself, had explained that
with the governments ratification of the ADB charter, the subject to reservation from tax exemption
must be declared for the government to retain its claim over Filipino employees income taxes.
But since there was no declaration through an enabling law, the Philippine government was therefore
unable to retain such claim, she said in an earlier interview.