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Marcoses vs. BIR: Explaining the family's 25-year, multibillion estate tax case

By SAAB LARIOSA Published Mar 30, 2022 6:30 pm Updated Mar 31, 2022 8:40 am

Finance Secretary Carlos Dominguez III has confirmed that the Bureau of Internal Revenue (BIR) is going after the Marcos family for failure to settle pending estate taxes, a day after President Rodrigo Duterte called on the agency to go after a certain "estate tax."

"BIR is collecting and demanded payment from the Marcos Estate administrators," Domiguez's statement read. "They have not paid."

“BIR will continue to consolidate the titles in favor of the government on those properties which have been levied upon. The procedure may take time as it involves selling at public auction to convert to cash,” said Dominguez.

“Bottomline Marcos does not take any steps to settle and pay because pending litigation.”

Dominguez's statement comes a day after Duterte called out the BIR for failing to collect certain estate taxes that could aid in the government's financial situation.

“Sa taxation natin, ang gobyerno can only prod. Hindi naman kailangan na reminder sa Malacañang. Nandiyan yung BIR so tanungin natin yung BIR bakit hanggang ngayon hindi nakolekta yung estate tax,” Duterte said in his March 29 address, without elaborating further.

With their family's estate tax case the subject of contention, presidential aspirant Ferdinand "Bongbong" Marcos Jr. previously said that "there's a lot of fake news involved" in the case. Marcos Jr.’s lawyer Victor Rodriguez has also previously said that the issue is “all about politics.”

Here is a lowdown of the circumstances and background of the case so far.

What is estate tax? How is it collected?

As opposed to the income tax imposed on individuals based on their salaries or profits, estate tax refers to the "right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death." It is also called inheritance tax.

It is six percent of the net value of the inherited asset and payable to the BIR. It is not the entirety of one's assets after death, but the tax that their heirs must pay as prescribed by the law. 

Not because the judgement isn't final or executory, but it’s in which assets are needed to satisfy that judgment.

Under the tax code, the state through the BIR has every five years to enforce the collection of taxes. With their latest notice last Dec. 2, every administration since Marcos Sr.'s passing has sent out demand letters to the Marcoses for the same 1997 case.

"Kasi pag hinayaan 'yan na five years nakalipas, hindi ka nag-send ng demand letter, parang finorfeit na ng government ang right niya to collect," 2019 Bar Topnotcher and Taxation Law professor Atty. Mae Diane Azores told PhilSTAR L!fe "As long as ine-exercise ni BIR yung right to collect within those five year periods, hindi mawawala yung right ng government." 

How is Marcos, Jr. caught up in his father's taxes?

When Ferdinand Marcos Sr. died in 1989, Marcos Jr. and his mother, Imelda Marcos, served as co-administrators of his estate.

"Under the tax code, estate tax is the privilege to bank on your assets. It is the executor that is primarily liable to pay estate tax," said Azores.

"Kung hindi gawin [ng executors] yung responsibilities na yun, pwede silang kasuhan kasi sila yung may primary liability to pay."

After Marcos Sr.'s death, the BIR formed a special task force to seek out the former dictator's total assets. As a result of that audit, the BIR found deficiencies in the tax amounting to P23.29 billion. Copies of the notices to pay were sent to the Marcoses in 1991.

When heirs are given the notices, they are given 30 days to contest the claims before it is deemed unappealable. The Marcoses did not contest or question the case at the time, therefore deeming it final and executory.

"In taxation law, there is a doctrine stipulating that the assessment of the BIR are presumed correct and made in good faith unless they are proven to be arbitrary," Azores said. "Once finality is attained, it becomes correct for the BIR to proceed."

Once the tax notices are final, it becomes the BIR's duty to find assets that will help pay off the tax. As such, the BIR collected the estates of the Marcoses and sold them through a public auction. Eleven parcels of land were up for sale, but there was no bidder and the lots were thereby forfeited in favor of the government. 

Ang mangyayari kung iuphold yung argument ni BBM, edi papatagalin at papatagalin

When the BIR was in the process of procurement, Marcos Jr. questioned the case and sought a restraining order against their estate.

However, Azores brought up the "lifeblood doctrine" principle in taxation law.

"Since taxes are the lifeblood of the government and the government relies on the payment of taxes to operate, its collection cannot be made to rely on the decision of the probate court," she explained.

"Ang mangyayari kung i-uphold yung argument ni BBM, edi papatagalin at papatagalin."

In 1997, the case was handed to the Supreme Court, where the Supreme Court eventually affirmed the decision of the Court of Appeals recognizing BIR's assessments on the Marcos family's deficiency in estate taxes as "final and unappealable."

The Marcos' filed a motion to reconsider shortly after, with the SC junking the motion in 1999.

"We do not see any cogent or compelling reason to allow the same issues to be opened anew in the instant petition. As a settled rule, once a judgment or an order has become final, issues therein should be laid to rest," the SC's 1999 ruling reads.

Twenty-five years later, the P23B has since grown due to the accrued interest payments. Though the incumbent BIR leadership has not made public their comptutation to date of the tax liability, one figure that has been reportedly quoted is P203 billion, which was first floated in a newspaper column by retired Supreme Court Justice Antonio Carpio, who is a lead convenor of the opposition group 1Sambayan.

Because the Supreme Court had deemed the case as categorically final, Rodriguez's claim that it is still "pending" has since been the subject of concern.

"Talagang malinaw sa kanila na final and executory na yung assessment, dapat lang na mangolekta si BIR," Azores said.

Why is it taking 25 years?

Former BIR Chief Kim Henares said that collecting the reported deficiencies in estate taxes of the Marcos has been beset with challenges due to the location of the family's assets.

"For the Marcos estate, there's a lot of difficulty because one, a lot of their properties were sequestered, so it's owned by the government. Second, a lot of their properties are abroad. The BIR cannot go abroad and attach those properties since we don't have jurisdiction," Henares said during a March 22 airing of ANC's Headstart.

Azores added that it has taken 25 years "not because the judgment isn't final or executory, but because of the assets needed to satisfy the judgment."

"Hindi kasi pwede habulin ng BIR yung assets na may question pa kung talagang nakaw ba o hindi," she explained. 

"I think they have sufficient properties to satisfy the judgment," Azores said. "It's really the subject of respecting the decision of the SC and compliance with the law."

In a March 24 interview with TeleRadyo, former associate justice Antonio Caprio shared the same sentiment: "Ngayon, kung talagang wala silang pera, sabihin nila sa BIR na talagang wala. Wala silang sinasabing ganyan."

What's next?

If the BIR finds that there is a "willful failure to pay taxes" on the Marcoses' part, Azores said that criminal charges could be filed. However, it must be through the BIR's jurisdiction.

"The BIR should be the one to file a complaint," Azores explained. "Hindi pwede ang taxpayer lang in going to the Department of Justice."

Carpio added that the Senate could only pass a resolution to push forward the case, however, it is still up to the BIR and the executive department, which is helmed by the President, to enforce the decision.

"[The Senate] can always pass a resolution... but at the end of the day it's up to the BIR," he said. "Dapat ang president ang magsabi."

With the 2022 national elections looming, questions have been raised about what will happen to the case if Marcos Jr. becomes president, such as whether the president's six-year term could prevail over BIR's periodic 5-year issuance of demand letters to collect the said estate taxes.

"Wala pa ganong scenario na umabot ng 25 years," Azores said. "Wala ka nang tatakbuhan after the Supreme Court says it is final and executory. Supposedly, wala na sila magagawa because it is the highest tribunal."