Amicus Curiae

An unwaivering position?

Adrian Joseph B. Tan

July 26, 2017

With the Supreme Court’s recent pronouncement in Philippine Daily Inquirer, Inc. (PDI), there is a need to reexamine the earlier case of Next Mobile, Inc. (Next Mobile) which laid down the exception to the rule on the execution of waivers of the reglementary period when the Bureau of Internal Revenue (BIR) may still issue an assessment.

Earlier this year, the Supreme Court decided the invalidity of the assessment against Philippine Daily Inquirer (PDI). It ruled that the BIR had no more authority to issue the subject assessment considering that the three (3) waivers PDI earlier executed, purportedly extending the period for the BIR to issue an assessment, were defective. The Court did not rule on the merits of the case, rather it focused on the BIR’s failure to comply with RMO 20-90 and RDAO 05-01. This case appears to have reversed its earlier ruling in Next Mobile. Was the doctrine in Next Mobile overturned? Has it been qualified?



To aid in answering these question, it is best to examine the facts and circumstances of the two cases:

Both cases were governed by RMO 20-90 and RDAO 05-01 for the rules on waivers. The cases were decided by different divisions, PDI through the Second Division and Next Mobile in the Third Division. The amount of tax deficiency in PDI was only P4,679,005.55, while Next Mobile involved P313,339,610.42. PDI involved three (3) waivers executed within the same year of 2007, extending the assessment period by a few months at a time; while Next Mobile involved five (5) waivers, two (2) of which were executed in 2004 and three (3) were executed in 2005, all of which extended the assessment period by a few months at a time but all within the same year of 2005. In PDI, (1) the CIR failed to provide PDI with the third copy of the First and Second Waiver; and (2) the Third Waiver was not executed in three copies. In Next Mobile, (1) the signatory for Next Mobile had no notarized written authority; (2) the dates of acceptance by the BIR was not indicated; (3) no fact of receipt by Next Mobile appeared in the Second Waiver; (4) Next Mobile received its First and Third Waiver on the same day; and (5) Next Mobile received its Fourth and Fifth Waiver on the same day.

What could have caused the different conclusions? Was it simply the number of waivers executed? Was it due to the disparity in the amount that the government stood to lose? Or was it the kinds of defects present on the waivers?

To appreciate the facts, the Supreme Court’s pronouncement in Next Mobile should be properly understood.

In Next Mobile, the Court categorically held that requirements under RMO 20-90 and RDAO 05-01 should generally be complied with. The “peculiar” facts of the case, however, necessitated an exception. This was predicated on four grounds:

• The parties were in pari delicto;

• The parties came to the court with unclean hands;

• The respondent was estopped from questioning the validity of its own waivers; and

• The respondent could not insist on the invalidity of the waivers on the same defects that it had caused.

Although the Court also noted that the BIR was equally at fault, it ruled that the proper solution was to impose the appropriate administrative sanctions on the erring officials instead of invalidating the waivers. In this manner, the government would not be prejudiced in terms of non-collection of millions of pesos that could have been due. It is thus clear: compliance with regulation requirements is still the general rule. If there are “peculiar” circumstances, the Court will apply the Next Mobile exception.

How do we then read the PDI ruling?

A simple way of interpreting the PDI case is that the Court applied the general rule due to the absence of “peculiar” circumstances. Indeed the grounds used by the Court in Next Mobile were based on the defects present on the waivers, where it held that the taxpayer itself caused one of the defects. In contrast, the defects in the waivers in PDI can be said to be solely the fault of the BIR.

On the other hand, one may argue that the defects in Next Mobile, although due partly to the taxpayer’s fault, were of a graver nature than that found in PDI. The defects in Next Mobile were substantive, while those found in PDI were merely procedural in nature. It raises several questions as to the threshold of what constitutes “peculiar” to merit the application of Next Mobile. This would undoubtedly lead to scenarios wherein taxpayers would cling unto the PDI doctrine whilst the BIR would cling unto Next Mobile. I hope the Court will shed light on this in the future so that clearer guidelines may be set to properly guide taxpayers.