A SUBPOENA is a vital tool used in the administration of justice and tax enforcement in the Philippines. A subpoena ad testificandum requires an individual to appear and testify at a hearing or trial, or for an investigation, while a subpoena duces tecum (SDT) requires a person to bring with him or her any books, documents or other things under his or her control.
The Commissioner of Internal Revenue (CIR) is authorized to issue an SDT to compel the production of essential documents pursuant to Section 5(c) of the National Internal Revenue Code of 1997 (Tax Code). This provision empowers the CIR to summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other.
The SDT is generally issued after a letter of authority and authorizes the Bureau of Internal Revenue (BIR) to examine a taxpayer's books and records, and after said taxpayer shall have failed to comply with requests for production of documents. Three notices to comply are usually given by the BIR before it issues an SDT. Refusal or neglect to comply with an SDT has significant legal consequences, including potential criminal charges, administrative penalties and an alternative method of tax assessment.
Under Section 266 of the Tax Code, any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda or other papers, or to furnish information as required under the pertinent provisions of the Code, neglects to appear or to produce such books of accounts, records, memoranda or other papers, or to furnish such information, shall, upon conviction, be punished by a fine of not less than P5,000 but not more than P10,000 and suffer imprisonment of not less than a year but not more than two. Section 266 is violated if the following elements are present: the offender is duly summoned by the BIR, the offender is required to produce books and records, or testify as per the summons, and the offender neglects to comply with the summons.
In Lo v. People, the Court of Tax Appeals (CTA) en banc ruled that failure to comply with an SDT under Section 266 of the Tax Code constituted a mala prohibita offense. Mala prohibita offenses are criminalized because they are prohibited by law and intent or moral wrongdoing is immaterial in such cases. Criminal intent or moral culpability is not required for the commission of the offense; the mere act of failing to comply with a summons is sufficient to establish a violation.
In Ang v. People, the CTA ruled that good faith was not a valid defense in mala prohibita offenses and the taxpayer's claim of good faith for failing to comply with the SDT was rejected. The court emphasized that the law punishes the act itself, not the motives or intentions behind it. Therefore, noncompliance with an SDT is punishable irrespective of the taxpayer's reasons or good faith efforts.
However, in BIR v. Guevarra, the CTA ruled that the BIR failed to present sufficient evidence to warrant the filing of information against the taxpayer. In this case, the CTA emphasized that the BIR must clearly inform the taxpayer about the documents that must be produced in response to an SDT. Without clear communication, the BIR's case for noncompliance is weakened.
It is important to note that if the taxpayer is an association, partnership or corporation, the penalty, including the criminal liability, may be imposed on the partners, president, general manager, branch manager, treasurer, officer in charge or any other employees responsible for the violation. It has been settled that certain individuals may be held criminally liable for noncompliance of corporate taxpayers, depending on their role in the failure to adhere to tax requirements.
Lastly, it is also important to note that when a taxpayer fails to provide the necessary records, the BIR may resort to an alternative form of tax assessment. Under Revenue Memorandum Circular 23-00, the BIR is authorized to assess taxes based on the best evidence obtainable when the taxpayer's records are unavailable or insufficient.
In summary, the issuance of an SDT is a critical tool in tax enforcement. It allows the BIR to compel taxpayers to produce necessary documents for the proper assessment of taxes. Noncompliance with an SDT can lead to significant legal consequences, including criminal charges and administrative penalties. It also empowers the BIR to adopt alternative methods of assessment or obtaining information. Taxpayers should thus not take any SDT issued against them lightly.

Xela Leona D. Laqui is an associate at Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment, you may email the author at info@mtfcounsel.com or visit the MTF website at www.mtfcounsel.com.