MAP Insights

“Public office is a public trust” is enshrined in the 1987 Philippine Constitution. Congress plays a crucial role in upholding accountability and the system of checks and balances in both executive and judicial branches of the government.

An investigation in aid of legislation is indeed necessary to avoid any possible tax evasion, smuggling, graft and corruption or money laundering, especially in government procurement or spending of taxpayer’s money during a pandemic.

The Senate Committee on Accountability of Public Officers and Investigations (Blue Ribbon) presided by Senator Richard “Dick” J. Gordon conducted its 15th public hearing on Friday, Nov. 26, on the 2020 Commission on Audit (CoA) Report and other issues related to budget utilization of the Department of Health (DoH), especially its expenditures related to the fight against the coronavirus disease 2019 (COVID-19).

While the investigation is far from over, the Senate Blue Ribbon already released an initial report and filed cases against those who are responsible for the procurement of the alleged overpriced face masks, face shields, and other medical supplies.

In the last 14 hearings, due diligence has been underscored as mandatory and indispensable for any government agency and/or officials in spending public funds even during a state of emergency. While the Bayanihan to Heal as One Law (Bayanihan I) allows an “expeditious” manner of procurement, the Government Procurement Reform Act or Republic Act (RA) 9184 must not be totally disregarded in the exercise of due diligence.

Unfortunately, the Data Privacy Act (RA 10173) and the Bank Secrecy Law (RA 1405) have been invoked by the officers of Pharmally Pharmaceutical Corporation to evade providing information to verify the facts and uncover the truth. Although the National Privacy Commission has already issued an official statement clarifying that the Data Privacy Act cannot be invoked in refusing to submit subpoenaed documents, the Senate Blue Ribbon has yet to secure required financial documents to expedite the investigation.

The Philippines is among the three countries in the world that have ultra-strict bank secrecy laws. The other two countries are Lebanon and North Korea. This has to be repealed or lifted especially during fraud investigations whether on tax evasion or graft and corruption cases to prosecute violators particularly corrupt public officials who have been inadvertently benefiting from the bank secrecy.

But will Congress repeal the Bank Secrecy Law which might expose alleged ill-gotten wealth?

As the investigation continues, several deficiencies, material misstatements and undisclosed information were cited. These would have been prevented if concerned government agencies were more strenuous and tax information was required to check the veracity of financial documents submitted without compromising ease of doing business.

In incorporating a company, the Securities and Exchange Commission (SEC) must require a Tax Identification Number instead of passport number, latest income tax return, and bank statement as proof of financial capacity of incorporators/shareholders. Further, basic due diligence must be done before approving articles of incorporation particularly on affiliate companies with the same directors, foreign investors or dummy incorporators and use of offshore accounts or illegal sources of capital.

Mandatory audit and investigations of government contractors and suppliers must also be conducted before issuing tax clearance, which is required to join government bidding.

Evidently, the role of Certified Public Accountants (CPAs) has been highlighted once again like in previous cases involving tax evasion, graft and corruption, and other fraudulent activities. Needless to say, the accountants and auditors are equally responsible for filing fraudulent tax returns or audited financial statements with material misstatements.

Section 253 of the tax code provides automatic revocation or cancellation of a certified public accountant (CPA) license upon conviction of tax evasion. However, this does not apply to accountants and auditors working for individuals or companies violating the tax code.

The Bureau of Internal Revenue must include both accountants and auditors who prepared and audited the financial statements and fraudulent tax returns, in filing tax evasion case/s against offenders. This will send a strong message to everyone, especially CPAs, that violating the tax code is a serious civil and criminal offense.

Further, Section 253 of the tax code includes that, “if the offender is a public officer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from the public service and perpetually disqualified from holding any public office, to vote and to participate in any election.”

For foreigners doing business in the Philippines, they shall be deported immediately after serving the sentence without further proceedings for deportation if found guilty of tax evasion.

In spite of these, tax evaders and offenders seem fearless and heartless, while others even aspire for higher government positions.

The Senate Blue Ribbon has an immense responsibility to shed light on all these allegations by continuing the investigation in aid of legislation and enact laws which will uphold the constitution, i.e., “PUBLIC OFFICE IS A PUBLIC TRUST.”

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.


Raymond “Mon” A. Abrea is member of the MAP Ease of Doing Business Committee, Founding chair and senior tax advisor of Asian Consulting Group and co-chair of Paying Taxes – EODB Task Force. He is trustee of Center for Strategic Reforms of the Philippines — the advocacy partner of the BIR, Department of Trade and Industry (DTI), and Anti-Red Tape Authority (ARTA) on ease of doing business and tax reform.