Tax Fraud Flashcards
“actual evil motive or intent to evade taxes which are legally due to government or willfully acting contrary to truth within the taxpayer’s knowledge.”1; existence of motive or intent is sufficient.
Tax fraud
omission to do something to which a reasonable man, guided by those ordinary considerations which ordinarily regulate human affair would do, or the doing of something which a reasonable and prudent man would not do; with the same effect of fraud but without intent or motive.
Negligence
generic term embracing all the ways one person can falsely represent a fact to another in order to induce that person to surrender something of value. ____ denotes deceit, deception or trickery; all ways or means to falsely represent a thing or fact to another person; deception, deceit, trickery.
Fraud
is the attempt to minimize the payment or altogether eliminate tax liability by lawful means. It refers to the exploitation by a taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income in order to reduce tax liability. It is not criminally punishable (made through lawful means)
Tax Avoidance
elimination or reduction of one’s correct and proper tax by fraudulent means. It is criminally punishable, a fine of not less than P500,000.00 but not more than P10,000,000.00 and suffer imprisonment of not 6 years but not more than 10 years. It connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes. Similar in objective to tax avoidance (that is to minimize or reduce the amount of taxes to be paid) but differs in methodology.
?????
Tax Evasion
He said that Taxation states that what constitutes fraud is a question of fact and the determination of which frequently requires nicely balanced judgments.
Jacob Mertens, in his book Law on Federal Income Taxation
one where the guilt of the accused cannot be proven beyond reasonable doubt, though through a little more than a mere preponderance of evidence but short of being beyond reasonable doubt, the fact of fraud can still be proven. Fraud is proven but not to warrant criminal conviction.
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The taxpayer shall be liable, aside from the deficiency taxes, to civil penalty of fifty percent (50%) surcharge (Sec. 246 of RA 8424, as amended). This penalty is one which the Commissioner imposes even without the concurrence of any court.
Civil Tax Fraud
the testimony addressed by one side is more credible than that of the other
Preponderance of evidence
____ need not rise to prove beyond reasonable doubt as in criminal cases but yet must be stronger than mere preponderance of evidence
Clear and convincing evidence
is one when all the elements of fraud can be proved beyond reasonable doubt and that the accused taxpayer can be charged guilty thereof.
***The taxpayer upon conviction shall be liable, aside from the deficiency taxes, to both criminal and civil penalties. Note that, Sections 248, 254 and 263 of RA 8424 will not apply
- Criminal Tax Fraud
signifies the judgement and conscience of the trial judge, as a reasonable man, is convinced that the defendant is guilty of the crime charged.
Moral certainty
In the establishment of fraud, the burden of proof is on the _______
Bureau of Internal Revenue.
“In criminal cases, the burden of proof as to the offense charged lies on the ______”
prosecution
T or F?
Fraud is never presumed, it must be proven
True
must be in an affidavit form filed either with the Prosecution Division in the National Office, or with the Legal Division in the Regional Offices. In both instances, the ____ must be numbered and registered in the records of the Records Division for the determination of the date and time of the filings thereof.
Confidential Information (CI)
This is undertaken without contact with the subject of the investigation, usually thru access to records/letters whereby records or documents are obtained from the different offices of the Bureau of Internal Revenue offices or from third-party sources.
Covert/Discreet Investigation
This is also known as the surveillance operation “per se” and is applicable in those cases where the alleged fraud could be established and validated thru actual visual contact.
Covert/Discreet Investigation
This is done when there is difficulty in the retrieval process of obtaining information relative to the subject of the investigation. When this happens, it becomes expedient or more practical that direct contact be made with the subject of the investigation thru the following schemes
Overt investigation
The monitoring of sales or receipts of a subject taxpayer by assigning Revenue Officers to the subject’s business establishment or premises. This is sanctioned under Section 6(C) of the National Internal Revenue Code which provides, that – “The Commissioner may, at any time during the taxable year, order inventory/stock taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes. The findings may be used as a basis for assessing the taxes for the other months or quarters of that same or different taxable years and such assessment shall be deemed prima facie correct.”
Open Surveillance
This is the inventory taking mentioned in Section 6
(C) of the NIRC (supra) and consists of the verification of the actual volume, number or level of inventory or stock so as to ascertain the flow or average trend of business transactions for purpose of determining the correct internal revenue tax liabilities of the subject.
Stock-Taking
For non-issuance of an invoice or receipt by a VAT- registered person under Section 113 and 115 of the National Internal Revenue Code, non-issuance of receipts or sales or commercial invoices under Section 237 and failure or refusal to issue receipts or sales, or commercial invoices violations related to the printing of such receipts or invoices, and other violations under Section 264, all of the National Internal Revenue Code.
Apprehension
In line with the Bureau’s effort to expand its tax collection effort, the Commissioner spearheaded actual tax mapping activities under the TCVD project. This is aimed at establishing cordial relationship with taxpayers by giving assistance thru tax information drive and verification of taxpayer’s compliance requirements during the actual visitation of taxpayer’s establishment and its branches.
*(2)______ calls for an information drive prior to the conduct of the (1)_______ itself so that businesses can comply and avoid being caught in violation of BIR business rules and regulations.
Tax Compliance Verification Drive (TCVD) / Modified Tax Compliance Verification Drive (MTCVD)
This is sanctioned under Section 15 of the NIRC which gives internal Revenue Officers the authority to make arrests and seizures.
Raid
T or F?
The arrests or seizures mentioned in that provision (Sec. 15) of the NIRC DO NOT REQUIRE any previous warrants but they must cover violations committed within the view of the internal revenue officials and employees.
True
T or F?
Sections 16 and 171 of the NIRC further provide other instances when warrantless searches and seizures may be made and these are the searches for and the seizures of goods subject to excise tax where the excise taxes have not been paid.
Other than the aforequoted instances however, search and seizure warrants must first be obtained from the proper courts.
True
Under this phase of investigation, it is opined that there is no need for the issuance of a Letter of Authority to undertake an investigation to establish the internal revenue tax liabilities of a subject taxpayer in the following cases:
When the documentary evidence confirming the existence of the alleged fraudulent schemes and practices are SO OVERWHELMING that the tax liability could be arrived at with complete certainty; and
When there is a NEED FOR IMMEDIATE DETERMINATION of the tax liability of the subject, such as, when there is danger that the taxpayer might abscond which would render nugatory the entire tax investigation effort.
Kind of Evidence
When it proves the fact in dispute without the aid of any inference or presumption.
Example: existence of multiple sets of invoices labeled set A to E and records to show only one set being declared for tax purposes.
Direct Evidence
Kind of Evidence
is the proof of facts from which, taken collectively, the existence of the particular fact in dispute may be inferred as a necessary or probable consequence.
Example: the substantial accumulation of net worth, lavish lifestyle and material expenses by a person grossly disproportionate to his/her declared income.
Circumstantial evidence
Kind of Evidence
that which suffices for proof of a particular fact until it is contradicted and overcome by other evidence.
Prima facie
Kind of Evidence
that which is incontrovertible.
Conclusive evidence
Kind of Evidence
where the objects are presented for the inspection of the court
Object (Real) evidence
Kind of Evidence
supplied by written instruments, or derived from conventional symbols, such as letters, by which ideas are presented on material substances. It includes books, papers, accounts, and the like.
Documents as evidence consists of writings or any material containing letters, words, numbers, figures, symbols or other modes of written expressions offered as proof of their contents.
Documentary evidence
Kind of Evidence
testimony given in court or deposition given by one who have had occasion to observe the fact to which he is testifying.
Personal knowledge is necessary, otherwise, “Hearsay Evidence Rule”
Credibility is paramount
Objectivity
Testimonial evidence
Kind of Evidence
expert witness; testimony by a person in authority of a particular field or subject matter, such as forensic experts, hand writing experts on the originality, genuineness of a documents (such as Deed of Sales, bank receipts, Certificate Authorizing Registration).
Expert evidence
Kind of Evidence
affords the greatest certainty of the fact in question. In an action on a written contract for example, the original of the instrument is the _____ evidence of its content.
Primary or best evidence
Kind of Evidence
is necessarily inferior to primary evidence and shows on its face that better evidence exists.
Example - A copy of the written instrument or the testimony of a witness as to its content.
Secondary evidence
Kind of Evidence
affirms a fact or affirms that a fact did not occur
Example: evidence of the multiple sets of invoices
Positive
Kind of Evidence
admissible only if it tends to contradict positive evidence of the other side
Example: Documents presented such as internal records to show that the declarations per taxpayer’s filed tax returns are grossly under declared.
Negative
Kind of Evidence
additional evidences of a different kind and character tending to prove the same point
Example: Testimonies given by Hope Sun Merchandising to prove the validity and veracity of the daily sales records/documents
Corroborative
Kind of Evidence
evidence of the same kind and character as that already given and tends to prove the same proposition.
Example: Seizure of Monthly Summary of Sales, Inventory and Hope Sun Merchandising to prove the validity and veracity of the daily sales records or documents.
Cumulative
Kind of Evidence
has tendency in reason to establish the probability or improbability of a fact in issue.
Example: Submission of data, i.e., records from the Land transportation Office or other government agencies with financial data of taxpayers to establish such taxpayer’s correct amount of net worth.
Relevant
Kind of Evidence
when it is directed to prove a fact in issue
Example: to prove that a taxpayer has not declared its correct sales by at least 80 percent, the seizure and presentation of the taxpayer’s five sets of invoices.
Material
Kind of Evidence
has no probative value.
Irrelevant
Kind of Evidence
not qualified with respect to witness; inadmissible.
Incompetent
Kind of Evidence
the offered evidence is directed to prove some fact which is not properly in issue.
Immaterial
Kind of Evidence
most probably because of the hearsay rule.
Inadmissible
Kind of Evidence
given to explain, repel, counteract or disproved facts given in evidence by the adverse party.
Rebuttal or Sur -Rebuttal
Kind of Evidence
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion; more than a “mere preponderance of evidence” but not “to prove beyond reasonable doubt;” sufficient for civil fraud but not criminal fraud.
Example: proof that a taxpayer has under declared his or her correct taxable revenue by omission of his or her December sales but insufficient that there is premeditation, ill-motive and bad faith not pay the correct amount of taxes due the government.
Substantial evidence
Kind of Evidence
when it is not excluded by law in a particular case; admissible, lawfully obtained; relevant.
Example: Documents such as reply to access to records lawfully obtained pursuant to Sec. 5 of the Tax Code, as amended.
Competent evidence
Where written documents exist, they shall be produced as being the best evidence of their own contents. The reason for the rule is that when parties have reduced their agreement to writing, it is presumed that they have made the writing the only repository and memorial of the truth and whatever is not found in the writing must be understood to have been waived and abandoned except in cases therein specifically mentioned.
The Parol Evidence Rule (Sec. 9, Rule 130):
T or F?
Not every written act of a public officer may be classified as public document.
Only the written official acts should be so classified.
T
T or F?
Not all notarial documents are to be considered as public document. Only those which are acknowledged are public documents.
T
T or F?
An official receipt printed in accordance with the standard forms required by the government is a public document.
T
