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The pitfalls of inadequate personal delivery in tax assessments

AMONG the priority programs and projects of the Bureau of Internal Revenue (BIR) in 2023 was to generate revenue via a range of audit and enforcement activities to ensure that taxpayers meet their obligations.

While the BIR is yet to release its 2024 priority programs, I am willing to bet that tax audits will still be one of the priorities, considering that the first order of the newly sworn-in Finance Secretary Ralph G. Recto is to collect P4.3 trillion worth of taxes.

In the grand scheme of things, higher taxes would mean more money for the government to promote the general welfare of and provide services to the public. As noble as this sounds, unfortunately, the pursuit of higher revenue has led to more assertive audits by the BIR. This heightened scrutiny has brought apprehension and at times, unexpected courage, among taxpayers, especially in cases of seemingly disproportionate findings.

But how can one mount a proper defense if the findings were not duly received? If one is not informed of the findings, one is deprived of the opportunity to be heard and consequently, one’s constitutional right to due process is violated.

In a recent case, the Supreme Court delved upon the importance of proper service of the findings and due process.

Personal delivery must be acknowledged by the taxpayer or his duly authorized representative

Section 228 of the Tax Code provides that when the BIR finds that proper taxes should be assessed, the taxpayer must be properly notified of the findings. In case of deficiency tax findings, current regulations require that the same be sent to the taxpayer by personal delivery, substituted service, or service by mail.

In practice, assessment notices are usually sent via personal delivery. Personal delivery shall be made by sending a copy personally to the taxpayer at his registered or known address or wherever he may be found. Under Section 3.1.4 of Revenue Regulation (RR) No. 12-99, if findings are sent by personal delivery, the taxpayer or his duly authorized representative shall acknowledge receipt thereof in the duplicate copy of the letter of demand, showing the following: (a) His name; (b) signature; (c) designation and authority to act for and in behalf of the taxpayer, if  received by a person other than the taxpayer himself; and (d) date of receipt thereof.

The above provision was the basis of the Supreme Court (SC) when it issued a decision in GR No. 244202 dated July 10, 2023. The SC emphasized that while Sections 3.1.1 and 3.1.2 of the RR govern Notice of Informal Conference (NIC, which was replaced by Notice of Discrepancy) and Preliminary Assessment Notice (PAN) bear no similar qualifications for personal delivery as those found in Section 3.1.4, the same requirements shall still apply on the grounds that the sending and actual receipt of PAN are part and parcel of the due process requirement in the issuance of a deficiency tax findings that the BIR must strictly comply with.

LACK OF DUE PROCESS INVALIDATES THE ASSESSMENT
In the case, the NIC and PAN were served upon a person whose indicated position was “Client Service Assistant.” The FAN, on the other hand, was personally served upon the taxpayer’s reliever security guard at the time, and who was not an employee of the taxpayer. Having failed to properly serve the NIC and PAN, the SC ruled that it necessarily follows that the succeeding FAN was void and without effect.

The Court also held that even if the NIC and PAN were properly served by strictly implementing Sections 3.1.1 and 3.1.2 and agree that there was proper receipt by the taxpayer’s receptionist, the serving of the FAN remains problematic.

It is a well-settled rule that an assessment that fails to strictly comply with the due process requirements set forth in Section 228 of the Tax Code and the above-mentioned RR, as amended, is void and produces no effect.

Personally, I believe that strict adherence to due process is hitting two birds with one stone. It would not invalidate the tax findings, thereby increasing the probability of the bureau’s collection of taxes, while also increasing taxpayers’ confidence in the tax system as their constitutional rights are upheld.

In the above case, the High Court emphasized the wisdom of the requirement to ensure that assessments are received by the taxpayer or his authorized representative — that it requires a certain degree of authority or discretion to grasp the gravity of the service of an assessment notice and its potential financial impact on the taxpayer, That being said, I sincerely hope taxpayers take comfort in knowing that the courts impose strict adherence to the due process accorded to them by the law.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Frenz Angelie B. Hechanova is an assistant manager at the Tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network.

frenz.angelie.hechanova@pwc.com

Philippines has largest online video consumption and influencer following in the world

FREEPIK

By Miguel Hanz. L. Antivola, Reporter

The Philippines globally ranked first in the consumption of online video, vlogs, and the number of social media users following influencers, according to a report.

Findings from the 2024 Digital Report of consumer intelligence firm Meltwater and creative agency We Are Social showed 97.2% of Filipino internet users aged 16-64 consuming online videos each week — above the global benchmark of 92%.

It added that 50.7% have watched vlogs or influencers each week, higher than the 23.8% global average.

Filipinos spent three hours and 34 minutes on social media daily, more than the global average of two hours and 23 minutes, according to the study.

“As social media enters its next chapter with five billion-plus users, understanding usage patterns, engagement, and emerging trends is crucial to helping brands find their unique voice amidst all the online chatter,” Alexandra Saab Bjertnæs, chief strategy officer at Meltwater, said in an e-mailed press statement on Wednesday.

“The rise of TikTok, coupled with Instagram’s ‘favorite’ status and the growth of professional networking platforms like LinkedIn, paints a picture of evolving preferences,” she added.

“With so many platform choices, brands need to really understand where their target audience is going for information—and shape compelling narratives that engage them with unparalleled precision and authenticity.”

The report found Filipinos using approximately eight social media platforms on average, with 60% in pursuit of brands and its content, which is above the 48.9% global average.

It noted 72.7% of Filipino internet users watching online music videos each week, alongside 58.3% viewing tutorial or educational videos.

The Philippines also placed second (95.9%) to Indonesia (96.5%) when it comes to video game consumption on any device.

“For marketers, understanding platform nuances – and how to use social media to connect in culturally relevant ways – will be more crucial than ever,” said Nathan McDonald, co-founder and group chief executive at We Are Social.

Japan quake survivors battle freezing, unsanitary conditions

A man makes his way along Asaichi-dori street, which burned down due to a fire following an earthquake, in Wajima, Japan, Jan. 4, 2024. — REUTERS

SUZU, Japan — A month on from a huge earthquake that struck Japan’s west coast, survivors are battling freezing and unsanitary conditions while tens of thousands of homes remain without running water.

Some areas in the isolated Noto peninsula may not have water restored for another two months, the government of Ishikawa prefecture said, adding to risks for those living in cramped evacuation centers where authorities say respiratory infections and gastroenteritis have been detected.

“There’s no water, so we can’t wash our clothes or bathe,” said Yoshio Binsaki, a 68-year-old resident of the battered coastal town of Suzu, as he prepared to haul a 20 liter (5.3 US gallon) water tank to his car to take home.

More than 230 people died in the magnitude 7.6 quake, Japan’s deadliest in eight years, which also left 44,000 homes fully or partially destroyed while 40,000 have no running water. More than 13,000 residents are living in evacuation centers, according to the Ishikawa government.

Chisa Terashita, a mother of three who evacuated from her wrecked home in Suzu, said that immediately after the quake her husband and she drank as little water as possible to conserve what they had, and still face tough decisions on how to ration water to keep the family healthy.

“The one non-negotiable I have is washing and sanitizing our hands after going to the toilet, given it’s the season when infections can spread quickly,” she added.

Bitter cold is also posing a challenge, especially for scores of residents who are sleeping in their cars after their homes were wrecked.

The area was hit by heavy snow over the past week and authorities have warned of the risk of landslides. “This life is becoming the norm — I think we can get through it,” Ms. Terashita said. “Well, we have no other choice.”

Over 900 deaths from the devastating Kobe earthquake of 1995 happened after the quake, due in part to the spread of flu and lack of medical care at evacuation centers, according to public health experts.

Authorities in the Ishikawa prefecture are set to begin vaccinating evacuees for influenza on Thursday.

Around mid-afternoon on Tuesday at a primary school in Suzu, where around 4,800 houses still have no water, children played on the swings while locals gathered around a communal water tank that has become a lifeline for many.

As evening fell, residents gathered to bathe in a makeshift public bath set up at the school by soldiers sent in to help with relief work — an improvement from immediately after the quake when people would queue for an hour in the rain for 5 liters of water. — Reuters

China reports death of woman from combined H3N2, H10N5 bird flu

PIXABAY

BEIJING — China on Wednesday reported the death of a woman due to an infection of combined H3N2 and H10N5 strains of bird flu after a cross-species transmission, but said the risk of human-to-human transmission is low.

The 63-year-old woman from Anhui province had underlying health conditions and developed cough, sore throat, fever and other symptoms on Nov. 30 and died on Dec. 16, the National Disease Control and Prevention Administration in a statement.

Screenings of close contacts were negative and no suspected cases were found, it said.

Whole genome sequence analyses of the virus showed that the H10N5 virus is of avian origin and did not have the ability to effectively infect humans, the agency said.

“The outbreak is an episodic cross-species transmission from bird to humans,” it said.

The risk of the virus infecting people is low, and no human-to-human transmission has occurred, it added.

China has huge populations of both farmed and wild birds of many species, creating an ideal environment for avian viruses to mix and mutate. — Reuters

Explorer may have found the wreckage of Amelia Earhart’s plane in Pacific

WIKIPEDIA.ORG

A FORMER US Air Force intelligence officer says he believes he has found the wreckage of Amelia Earhart’s plane, which disappeared nine decades ago, on the bottom of the Pacific Ocean using sonar data from a deep-sea drone.

Hoping to solve an 87-year-old mystery, explorer Tony Romeo plans to launch a mission later this year or next to find the long-lost plane, which a massive US search failed to do in 1937.

“She’s America’s most famous missing person, right? As long as she’s missing, there’s always going to be somebody out there searching,” Mr. Romeo said. “If we can help bring closure to this story and bring Amelia home, we’d be super excited.”

Ms. Earhart, an American aviator, became the first woman and second person ever to fly solo and nonstop across the Atlantic in 1932, five years after Charles Lindbergh accomplished the feat. Along with navigator Fred Noonan, she was attempting to fly around the world when their plane went missing over the Pacific. If she succeeded, she would have become the first female pilot to do so.

Mr. Romeo, chief executive of the private exploration company Deep Sea Vision, believes the wreckage of Earhart’s plane lies on the ocean floor more than 5,000 meters (16,400 feet) beneath the surface, about 160 km (100 miles) from Howland Island, roughly halfway between Hawaii and Australia.

Blurry sonar images from the deep-sea drone show a plane-like shape on the flat, sandy ocean bottom, he said.

Deep Sea Vision’s 16-member crew searched more than 13,400 square km (5,200 square miles) over 100 days at the end of last year.

Mr. Romeo said the images showed what appeared to be a plane matching the size of Ms. Earhart’s Lockheed Model 10-E Electra. The image, he said, appeared to show a distinguishing characteristic of the plane: its twin vertical stabilizers on the tail.

Romeo supposes Earhart ran out of fuel and landed the plane on the ocean surface and that the craft later sank to the bottom, where it would have lay ever since, little disturbed by the light currents.

“The first step is to confirm it,” he said. “The next step would be, if it’s possible, to raise it to the surface and restore it,” Mr. Romeo said, adding that the process could take years. — Reuters

Billionaire rips Harvard, says colleges spawn ‘whiny snowflakes’

KEN GRIFFIN — LIONEL NG, BLOOMBERG

Ken Griffin, one of the largest donors to Harvard University, said he won’t support the school financially unless it makes significant changes and accused elite US colleges of producing “whiny snowflakes” instead of future leaders.   

“I’m not interested in supporting the institution,” Mr, Griffin said of Harvard at the MFA Network conference in Miami on Tuesday. The billionaire said the university must make clear that it will “resume its role educating young American men and women to be leaders and problem solvers.”

Mr. Griffin, an alumnus who donated $300 million to Harvard last year, joins a wave of wealthy donors who have halted gifts because of concerns over the school’s handling of antisemitism on campus since Hamas’ Oct. 7 attack on Israel, in addition to broader concerns over the influence of diversity initiatives and left-wing bias at the university.

Harvard is still struggling to resolve tensions even after President Claudine Gay resigned this month amid an onslaught of criticism over her response to antisemitism, as well as accusations of plagiarism in her scholarship.

The school has also come under intense scrutiny from lawmakers, students and alumni. Two congressional committees have begun investigations, with one of them criticizing Harvard last week for providing “woefully inadequate” responses to its questions. The US Education Department is conducting its own probe of discrimination including antisemitism and Islamophobia at Harvard and other schools.

Harvard didn’t immediately respond to a request for comment about Mr. Griffin’s remarks.

The founder of hedge fund Citadel, whose net worth is valued at $36.8 billion according to the Bloomberg Billionaires Index, said he was concerned after watching Ms. Gay’s Dec. 5 testimony in Congress, where she declined to condemn calls for genocide against Jews as a violation of university policies.

Mr. Griffin said he told members of Harvard Corp., the university’s top governing board, that he won’t support the school unless it makes changes. The council is led by Penny Pritzker, a former US commerce secretary.

“Where are we going with education in elite schools in America?” Griffin said, questioning whether Harvard can re-prioritize. “Or are they going to maintain being lost in the wilderness of microaggressions and a DEI (diversity, equity and inclusion) agenda that seems to have no real end game.”

After his gift to Harvard last year, the Graduate School of Arts and Sciences was renamed in his honor. Mr. Griffin, who graduated from Harvard College in 1989, also gave $150 million to the school in 2014, mainly to support financial aid.

His decision to pull back now will deepen the university’s financial pain. Harvard alumnus Len Blavatnik, whose family foundation has given at least $270 million to Harvard, paused donations last month. Donors such as billionaires Idan Ofer and Leslie Wexner had earlier halted support, and US Senator Mitt Romney accused the university of ignoring the safety of Jewish students.

Harvard depends on gifts from donors large and small to pay for expenses and add to its $51 billion endowment. The fund, which was built on donations that have been invested, has returned an annualized 8.2% in the past decade.

During its latest fiscal year, 37% of Harvard’s revenue came from  endowment distributions, its largest source of income. Another 8% came from current-use gifts. — Bloomberg 

Thai court rules election winners violated constitution on royal insults law

REUTERS

BANGKOK — A Thai court on Wednesday ruled the biggest party in parliament had violated the constitution in seeking to change a law against insulting the monarchy, in what could set a precedent for any future review of one of the world’s strictest lese majeste laws.

The Move Forward Party won last year’s election on a progressive platform that included a once unthinkable proposal to amend the lese majeste law, which carries penalties of up to 15 years in jail for each perceived insult of Thailand’s powerful crown.

The Constitutional Court ordered Move Forward to abandon that plan, which it ruled was tantamount to an attempt to “overthrow the democratic regime of government with the king as a head of state” and therefore in violation of the constitution.

In a country where reverence for the monarch has for decades been promoted as central to national identity, the law, under which at least 260 people have been prosecuted in the past few years, is seen by many royalists as sacrosanct.

Move Forward’s proposal outraged conservatives and saw the party’s attempt to form a government torpedoed last year by lawmakers allied with and appointed by the royalist military.

Though the court had no remit to prescribe punishments for Move Forward, some politicians have suggested there could be legal efforts to seek its dissolution and political bans for its leaders over its stance on the monarchy law.

The court case was the latest twist in a two-decade battle for power in Thailand that broadly pits a nexus of royalists, military and old money families against parties elected on populist or progressive platforms.

Its predecessor, Future Forward, was disbanded for violating campaign funding rules and its former leader and prime minister candidate Thanathorn Juangroongruangkit was disqualified over a shareholding issue. — Reuters

‘Narrower’ models sought for generative AI platforms

FREEPIK

By Miguel Hanz L. Antivola, Reporter

Technology developers must build well-defined large language models (LLMs) for artificial intelligence (AI) to optimize business processes responsibly, according to global professional services company Accenture.

“It’s how you set it up for primary function,” Arvin Yason, innovation lead at Accenture Technology in the Philippines, said during a briefing on Wednesday.

“The narrower you set up the LLM, the more effective it is, also at preventing hallucinations,” he added on knowledge conflicts and gaps as avoidable circumstances in such rapidly evolving tech advancements.

However, seeking AI solutions must first identify business dimensions and functions it can benefit.

“Look at it in terms of your business use case and target outcome,” said Mike Lao, data and AI lead at Accenture Technology in the Philippines.

“What is the long term value for your employees and customers?” Mr. Yason added, noting the importance of human-centric design when introducing tech solutions in business.

In Accenture’s Technology Vision 2024 report, AI-curated responses through advice and a summation of results are expected to grow, where “searching now becomes synthesizing.”

“Business leaders who reimagine how information works in the organization and equip their people with AI-enabled enterprise knowledge tooling will realize exponential performance gains and competitive advantages,” the study said.

According to the Accenture Pulse of Change 2024 index, Asia Pacific companies are already moving toward customizing foundation models with proprietary data from proof of data.

It noted 77% of C-suite executives in the region planning an increase in AI-related spending this year.

The company is set to expand its network of generative AI studios in the Philippines as part of its $3 billion global investment announced last year, targeting industry-specific solutions and doubling of AI talent to 80,000.

“The studios will cater to a wide range of industry and functional needs, but each will also specialize in one or more industries including banking, insurance, telecommunications, public sector, manufacturing, renewable energy, chemicals, and mining,” Accenture said in a press statement.

The platforms, which were introduced during the briefing, include Companion, which enables utility and field service with optimized routes and chatbot inquiries, reducing manual inspection time.

It also allows field personnel to quickly assess damages via image input and generate a corresponding work order with bill of materials.

CareCoach, the training tool for tech support representatives, is able to build scenarios and simulate customer persona, even according to specifications like churn or level of difficulty.

It can be customized according to industry relevance, also providing personalized feedback and scores depending on the criteria set.

Moreover, Gen-E, the new innovation team member at the Accenture Philippines office, is an internal AI assistant prompt-engineered by the company’s own knowledge sources to simulate the viewpoint of an employee.

It can operate via text, image, and speech input, able to conduct tours in the office.

With such AI developments available to the market this year, Mr. Lao emphasized a close and continuous loop with companies leading with value, building its digital core, transforming work and talent, and fostering responsibility.

“It’s not something that is just technology-led,” he said. “It is making sure everyone is empowered for productivity and creativity in the workplace.”

Yemen’s Houthis say they will target US, British warships in self defense – Al Massirah

STOCK PHOTO | Image by Gerhard Traschütz from Pixabay

DUBAI — Yemen’s Iran-aligned Houthis said on Wednesday they plan to continue targeting US and British warships in the Red Sea in self defense, the group’s military spokesperson said in a statement carried by Al-Massirah TV.

The Houthis fired missiles at US warship USS Gravely, the statement added. On Tuesday night, the US military’s central command said they had shot down one anti-ship cruise missile fired from Yemen towards the Red Sea with no damage reported.

The Houthis, who control the most populous parts of Yemen, have been attacking ships in and around the Red Sea in solidarity with Palestinians in the Gaza war.

The US and British have launched strikes on Houthi targets in Yemen, and returned the militia to a list of “terrorist” groups. — Reuters

South Korea’s Yoon warns North Korea may try to disrupt April poll

South Korean President Yoon Suk-yeol. — REUTERS

SEOUL — South Korean President Yoon Suk Yeol warned on Wednesday that North Korea could stage provocations such as armed actions near the shared border, drone intrusions, cyber attacks or spreading fake news in a bid to interfere in an election in April.

Yoon made the remarks as he convened an annual meeting of the central integrate defense council that brings together the military, government and civil defense entities.

In recent weeks, Pyongyang has ramped up tensions on the Korean peninsula with missile tests and verbal threats against Seoul and Washington, while scrapping its decades-long goal of a peaceful reunification and redefining the South as a separate, enemy state.

Yoon warned that North Korea could stage “numerous provocations” to intervene in the upcoming election and called for a tighter security posture.

South Korea is set to elect new members of parliament on April 10, with 300 seats up for grab.

“The North Korean regime is going through fire and water solely for the sake of maintaining its hereditary totalitarian regime, while blatantly ignoring international law and UN Security Council resolutions by trading arms with Russia,” Yoon told the meeting.

Russia and North Korea have overseen a series of high-level exchanges since last year amid growing criticism of Pyongyang’s role in the Ukraine war by allegedly shipping artillery and missiles to Russia.

Both North Korea and Russia deny the accusation and also the charge that Pyongyang has been receiving advanced technology for developing strategic military capability from Moscow in return.

Yoon called for greater cooperation between his country’s military, government, police, and private actors, as well as additional measures to prevent possible cyber attacks on national infrastructure, and attempts to disseminate false propaganda.

“Cyber attacks can paralyze national functions and people’s daily lives in an instant. Fake news and false propaganda may also cause great chaos in society,” he said.

Seoul’s defense council meeting this year was specifically designed to examine practical ways of responding under various scenarios to North Korean provocations, including long-range artillery and electromagnetic pulse (EMP) attacks, Yoon’s office said. — Reuters

Philippines says China’s claim over Scarborough shoal have no legal basis

A LANDSAT 7 image of Scarborough Shoal in the West Philippine Sea. — WIKIPEDIA

MANILA — China’s repeated claims of sovereignty over the Scarborough shoal in the South China Sea has no legal basis under international law, a senior Philippine security official said on Wednesday.

“Since the Philippines exercises sovereign rights over Bajo de Masinloc and its surrounding waters under international law, only the Philippines has the authority to exercise maritime law enforcement functions to the exclusion of other countries,” Jonathan Malaya, spokesperson at the Philippines’ national Security Council said in a statement, referring to the disputed shoal by the Philippine name.

China’s coastguard late on Tuesday said Beijing indisputable sovereignty over the shoal, which is located within the Philippines’ exclusive economic zone. — Reuters

Pacific Islands need to boost digital security to join undersea cable, says US official

FREEPIK
SYDNEY — Pacific Islands nations that want to connect to US-funded undersea cables will need to secure their digital ecosystems to guard against data risks from China, a senior US State Department official said.
The United States pledged last year to jointly fund two undersea cables, to be built by Google connecting the US territory of Guam with hubs in Fiji and French Polynesia, and further branching out across remote Pacific Islands.
The proposed intra-Pacific cable project has offered to branch out to Papua New Guinea, Samoa, Tuvalu, Fiji, Nauru, Marshall Islands, Kiribati, Cook Islands, Wallis and Futuna, and the Federated States of Micronesia.
The US Department of State’s ambassador at large for cyberspace and digital policy, Nathaniel Fick, visited Fiji this week as Washington prioritizes which islands will have the opportunity to plug in.
The digital ecosystems in countries connecting to the cables need to be secured “from end to end”, which excluded what he called “untrusted” Chinese-built datacenters or phone towers, he told reporters in Sydney on Wednesday.
“Investing a lot of money in these nodes is going to require these states to behave in some ways that mitigate the risk, to the greatest possible extent,” he said.
“It’s going to be in their interests to do that if they want to be trusted nodes for the long haul and attract continued investment.”
China and the US are jostling for influence in the Pacific Islands with competing offers for infrastructure. The Solomon Islands, which struck a security pact with Beijing, is rolling out a Chinese-funded mobile network built by Chinese telecommunications company Huawei.
Australian telecommunications company Telstra, a partner in the new US-backed project, said in a statement this month the cables will “dramatically improve the diversity of paths between Guam to Australia via Fiji and other Pacific islands, and between the US mainland and Australia”.
Guam is home to US military facilities that would be key to responding to any conflict in the Asia-Pacific region, and Microsoft warned last year it had been targeted by a Chinese hacker group, Volt Typhoon, seeking to disrupt critical communications infrastructure between the US and Asia in any future crisis. China said the hacking allegations were disinformation. – Reuters
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