by Perry Diaz


Capone’s ghost haunts tax evaders


In 1931, when the United States failed to prosecute Alphonse “Scarface Al” Capone for the St. Valentine’s Day Massacre and other heinous crimes, government investigators took a different approach in bringing Capone to justice -- he was charged for tax evasion.  The following year, Capone was found guilty and sentenced to 11 years in federal prison.  Thus ended his reign of mayhem, murder, and corruption during the “Roaring Twenties.”


Since then, the United States had routinely used “tax evasion” to prosecute criminals whose illicit and unlawful activities were impenetrably shielded from the law.  And with today’s technology, hiding ill-gotten money is like keeping it in a cookie jar.


In the Philippines, prosecution of tax evaders is prone to fail because laws were passed to protect the “privacy” of citizens… including the good, the bad, and the ugly. Simply put, government prosecutors cannot pry into a depositor’s bank accounts unless they get an authorization from the account holder. Imagine a prosecutor asking a suspected tax evader, “Excuse me, but could you please give me your authorization to look into your bank accounts so we can proceed with our investigation of your unexplained wealth?”  


Military corruption


The recent Senate Blue Ribbon Committee investigation into the generals’ controversial “slush funds” was put to the test when Sen. Franklin Drilon was questioning Lt. Gen. Jacinto Ligot’s brother-in-law, Edgardo Yambao.  Arrogantly, Yambao challenged the authenticity of the documents presented by Drilon on the bank accounts and properties allegedly owned by Yambao.  Drilon then revealed that based on reports from the Anti-Money Laundering Council (AMLC), Yambao had about P300 million in questionable accounts in Citibank, Metrobank, and the United Overseas Bank.  Yambao was flustered by Drilon’s revelation and said, “I have never waived my rights under the Bank Secrecy Law, that’s why I am surprised by this revelation.”


When Drilon asked Yambao to explain why he had no taxable income between 1999 and 2003, Yambao insisted that he paid his taxes.  It was at this point that Drilon brought the issue of tax evasion: “Mr. Yambao, you know you have undeclared deposits of P255 million. You have a potential income tax liability of P91 million. I’m telling you for these undeclared deposits, you stand liable for tax evasion and we will be asking the BIR to examine your accounts and file charges of tax evasion against you.”  Drilon remarked that if Yambao insisted that he paid his taxes but there were no records of income tax returns filed, then he was lying. 


As a result of the Senate investigation into the “slush funds” corruption scandal, the Bureau of Internal Revenue (BIR) filed tax evasion charges against retired Maj. Gen. Carlos Garcia and Lt. Gen. Jacinto Ligot, their respective spouses, and Yambao.

Tax evasion


In another front of the “war on corruption,” the BIR filed a P74-million tax evasion case against Rep. Juan Miguel “Mikey” Arroyo and his wife, Angela, for attempting to avoid paying taxes and failing to file income tax returns.  Mikey is the son of ex-president and now Pampanga Rep. Gloria Macapagal Arroyo.


Faced with twelve counts of violation of the National Internal Revenue Code, the Arroyo couple could be incarcerated for a minimum of 18 years up to a maximum of 84 years. 


In defiance, Mikey claimed that the tax evasion charges were a “political gimmick” intended to boost President Benigno Aquino III’s plummeting ratings. He said that he could defend himself from those charges; however, he refused to show documents to back his assertion that he indeed filed income tax returns on those years in question.


As reported in the news, “The case stemmed from tax deficiencies that BIR discerned after a review of the Statement of Assets, Liabilities, and Net Worth (SALN) from 2004 to 2009 of Rep. Arroyo, as well as the income tax returns that he had filed for certain years during the same period. The SALN is a document that a public official is required to file, notarize, and certify to be the true and correct picture of his wealth.”


And just like in the case of mobster Al Capone, the Philippine government’s case against the Garcias, Ligots, Arroyos, and Yambao shouldn’t be hard to prosecute.  The burden of proof would be upon the defendants; that is, proving that they filed their tax returns.


Anti-money laundering


Aquino’s shift in strategy to go after corrupt officials for tax evasion instead of prosecuting them for graft and corruption could be the linchpin in the crusade against corruption, drug trafficking, illegal gambling, human trafficking, and other money-generating crimes. With today’s global fight against money laundering, hiding illicit money generated from these crimes is going to be very challenging – and frustrating -- for criminal elements. 


Last March 2011, the AMLC asked the Senate to make the necessary and “long overdue” amendments to the Anti-Money Laundering Act (AMLA), which would expand the definition of “money laundering” to “include not only the transaction of criminal proceeds but also the possession, use, transfer, acquisition, concealment, conversion and disguise of the proceeds.”  Indeed, this would give AMLA more latitude in going after “dummies” of corrupt officials who have been pretty successful in camouflaging their ill-gotten wealth by transferring them to relatives and friends like in the case of the Garcias and Ligots.  

According to ALMC executive director Atty. Vicente Aquino, “ALMA is ‘incomplete’ or suffers from some ‘deficiencies’ because under it, persons concealing, transporting or disguising without transacting criminal proceeds may not be held liable for money laundering.”  This is the big loophole that corrupt officials use to escape prosecution from charges of corruption or plunder. 


“The taxman cometh”


It’s because of this loophole that the Garcias and Ligots thumbed their noses jeeringly at the senators, thinking that they were untouchable by the law. Wrong!  Little did they know that while they might be able to get away with corruption, they couldn’t escape the scrutiny of the taxman.    


The specter of going to prison for tax evasion gives the Garcias, Ligots, Arroyos, and Yambao goose bumps.  And to the corrupt officials who have until now evaded the scrutiny of the taxman, the ghost of Al Capone haunts them endlessly… until they, too, will fall under the axe of the taxman. 



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