Unconscionable CTA filing fees

Taxpayers who are at the receiving end of tax assessments from the Bureau of Internal Revenue (BIR) are up in arms against what they perceive to be exorbitant filing fees being charged for appeals to the Court of Tax Appeals (CTA).

Effective early 2004, the Supreme Court, upon the recommendation of the CTA, approved an increase by ten-fold or 1,000 percent of the filing fee for petitions or appeals to the CTA of disputed assessments.

What makes this new scale of filing fees so oppressive is that assessments, in general, are far from being objective (usually issued without the benefit of a thorough examination). More often than not, they are based on questionable findings or fact or interpretation of the law or regulation. The amount is usually bloated since it includes interest and surcharge (accounting for no less than 50 percent of the entire assessment), on top of the basic tax. But even the basic tax (on which the interest and penalty are based) is also usually inflated.

Given the nature of an assessment – that it is practically a unilateral determination by the BIR of what is the "correct" tax – simply basing the filing fee on such assessment (i.e., basic tax, plus interest and surcharge) makes it arbitrary. As it is, the amount of the assessment is not a fair basis for filing fee.

Unfortunately, an assessment enjoys a prima facie presumption of validity, which has emboldened BIR examiners to issue dubious assessments. "We assess, it is up to you to appeal, if you do not agree" seems to be the prevailing attitude of the examiners. Ironically, the burden of proof is on the taxpayer to show that the assessment is without basis (instead of the BIR proving that its assessment is valid). The rule on the burden of proof should be revised in order to protect taxpayers from dubious assessments.

The issue regarding the filing fees is complicated by the rule that if the BIR fails to act within 180 days from the time the taxpayer’s protest of the assessment was completed, the protest is "deemed denied." This leaves the taxpayer with no choice but to appeal the "denial" to the CTA, otherwise the assessment will become final and the tax due and payable.

Because the 180-day period is rather short, the BIR is under pressure to summarily deny the protest (after a token compliance with the administrative due process) or let the period lapse without acting on the protest. In either case, the taxpayer’s only remedy is to appeal to the CTA, subject to the payment of the unconscionable filing fee, to protect his interest.

Instead of expediting the resolution of disputed assessments, by providing for sanctions, the 180-day rule encourages indolence by the BIR and, in effect, rewards inaction by relieving the BIR of its primary responsibility, by simply allowing it to pass the buck to the CTA.

This quirk in the rules renders the appeal process a travesty, as the work that the BIR is tasked to do, in the first place, ends up being performed by the CTA. The CTA may just end up being a convenient dumping place for unresolved protested assessments and thus clog its docket. This demeans the CTA which has recently been elevated to a full-fledged appellate court, reducing it to a virtual adjunct of the BIR.

The prospect of having to pay a prohibitive filing fee based on a questionable assessment may just spawn corruption as it provides BIR examiners with a made-to-order "Sword of Damocles" with which to intimidate and push taxpayers into striking a "deal," to reduce the tax and avoid a protracted and costly litigation.

Unless the filing fee is rationalized and substantially reduced by changing its basis, it may lead to a virtual denial of due process, since the right to avail of the ultimate remedy (resort to the court) will be too burdensome.

Remedial legislation may be in order to reorient the administrative due process relation to assessments, with the end in view of avoiding unnecessary and costly (both on the part of the government and the taxpayers) litigation. The investigation or examination by revenue agents must be objective and fair. A new approach to solve the problem of reconciling the opposing and understandably biased perspectives of the BIR and the taxpayers must be explored. Perhaps, the process of mediation, which the Supreme Court has institutionalized in settling disputes in the ordinary litigation, should be employed in resolving tax disputes. It is about time that the adversarial approach give way to a more amicable and expeditious process.

Finally, it is a challenge to our pork-barrel-oriented legislature to display a flash of brilliance by introducing appropriate amendments which are the product of incisive study and brilliant debate, befitting its stature as a lawmaking body (instead of the 180-day rule which betrays a simpleton’s approach). There should be a Bill of Rights for taxpayers, instead of all the rules being stacked against them.

(The author may be reached at tel. nos. 830-8000/894-0109; e-mail address; [email protected])