MANILA, Philippines - Former Armed Forces of the Philippines (AFP) comptroller Carlos Garcia and his wife, Clarita, are asking the Department of Justice (DOJ) to reverse a review resolution that recommended the filing of charges against them for tax evasion in violation of the National Internal Revenue Code of 1997.
The Garcias have a pending motion for reconsideration before the DOJ that challenges the review resolution's finding of probable cause against them.
The couple, who face plunder charges at the Sandiganbayan, were found to have under declared their income of P12.25 million for 2002 and P14.109 million for 2003.
However, the Garcias told the DOJ that the Bureau of Internal Revenue (BIR), in wanting "to prove the existence of 'income' from documents obtained from his pending criminal case of plunder," is taking a baseless position.
"In short, complainant posits that the funds which were 'supposedly plundered' constitutes 'income' which is subject to tax," Garcia's opposition read.
‘Proceeds from crime, not income’
"Assuming purely for the sake of argument that the funds were indeed plundered, the same cannot be considered 'income.' Rather, the said funds must be considered as 'proceeds of a crime.' 'Income' is profit from legitimate sources, while 'proceeds of a crime' is profit from unlawful activity," the opposition read.
The Garcias added that if the BIR insists that the subject funds are "income," then the plunder case should be dismissed, while the tax evasion complaint must be dismissed if the BIR insists, on the other hand, that the funds are "proceeds."
A complaint filed by the BIR in 2005 alleged that based on Garcia's statement of assets, liabilities and net worth (SALN), his primary source if income was derived from salaries, wages and allowances, and director's fee from the AFP Savings and Loan Association, Inc. (AFPSLAI).
However, records obtained from the Sandiganbayan, the Office of the Ombudsman, and the Securities and Exchange Commission (SEC) showed that he and his wife Clarita had various financial transactions for said period.
These include Garcia’s wife paying P120,000 for shares in 2 corporations: IJT Mango Orchard, Inc. and IJT Katamnan Corporation; Clarita brining to the United States US $48,000, or P2.4 million as shown by a currency and monetary instruments report dated May 10, 2002; and Clarita having foreign currency deposits with Allied Banking Corporation as shown in a foreign currency certificate of time deposit dated June 5, 2002 and October 10, 2002 in the amount of $75,000 and $30,000 respectively; and, Garcia himself having deposits with AFPSLAI amounting to P4,052,755.
The review resolution by senior deputy state prosecutor Miguel Gudio, Jr., dated December 23, 2010, also raised a comparative review of Garcia's 2001 and 2002 SALNs wherein an increase in his assets was noted in the amount of P320,000.
These totaled Garcia's total transactions to p4.37-million for 2002.
For taxable year 2003, Garcia declared his income at only P1,133,809 but it was found that he grossly under-declared his and his wife's income with the discovery of the following investments: AFPSLAI deposits under the spouses' names in the amount of P1,182,547 (Carlos Garcia) and P1,838,345 (Clarita Garcia); $100,000 brought to the US by Clarita Garcia; $100,000 brought to the US by the couple's son, Juan Paolo, in December 2003 that was seized by Customs personnel.
The Garcias, however, pointed out that Clarita Garcia is a US citizen and is therefore "not obligated to disclose her sources of income from outside of the Philippines, since such income is not taxable here."
The Garcias also claimed that the BIR has not been able to establish that they resorted to a scheme to evade the payment of correct taxes, but only established existing bank accounts with deposits not corresponding to the income reporters in Carlos Garcia's tax returns.
The couple insist this "does not necessarily imply that there was a 'scheme' perpetrated precisely to evade the payment of taxes" and challenged the BIR to prove that the amounts in question were not reflected in the tax returns "in an attempt to willfully and deliberately mislead the bureau of internal revenue 'with the sole object of avoiding the tax.'"
They also raised the issue of genuineness and authenticity of documents obtained from the case pending at the anti-graft court.
Granting that said documents are genuine, the Garcias claimed that still that does not establish that the funds in question were from sources within the country so as to make it taxable, rather, establish only that "certain amounts were deposited into certain existing bank accounts, and these amounts do not correspond to the income declared in the tax returns."