THE GRAND SCAM OF THE MILLENNIUM:

How Rene Bañez Perpetrated Economic Sabotage at the BIR

Privilege Speech Of Rep. Aniceto G. Saludo, Jr.

of the Lone District of Southern Leyte

Honorable Speaker,

I stood before this august chamber less than a month ago to alert our people to the huge shortfall in the government’s tax collection effort.

I pointed out in my speech that for the first time in two decades, the Bureau of Internal Revenue posted a double-digit  tax collection shortfall in the first six months of this year amounting to PhP33.4 billion.

I emphasized that this huge shortfall, which is the worst performance of the BIR in the postwar era, was the result of the gross mismanagement and outright violation of our tax laws by no less than the Commissioner of Internal Revenue, Rene Bañez. 

And I urged the President to expel Mr. Bañez from office if only to restore our people’s faith and confidence in the government’s revenue collecting arm.

Last August 19, however, Bañez tendered his resignation as BIR chief, claiming that saboteurs within the bureau were deliberately cutting back on tax collections and undermining the reforms he  had initiated. 

While Finance Secretary Jose Isidro Camacho even thanked Bañez “for his patriotism and self-sacrifice” and President Gloria Macapagal-Arroyo accepted the BIR chief’s resignation “with a sad heart,” I have it on good authority that instead of voluntarily stepping down from his post, Bañez was actually forced to resign by Malacañang  because of his failure to meet the BIR’s tax collection targets.

In other words, Mr. Speaker, he was booted out for sheer incompetence, barely a year after the President herself had extolled his virtues in her first State-of-the Nation Address in July 2001.

I know for a fact that the vast majority of BIR officials and rank-and-file are very thankful right this very moment that Bañez has packed his bags.

I too should be very happy that Bañez is now out of the BIR. But while I am glad that Bañez has stepped down from his lofty perch, he cited the wrong reason for doing so.

His claim that saboteurs are undermining the reforms which he initiated in the BIR flies in the face of reality.

My question is: Who are these saboteurs whom Bañez claimed were out to undermine the BIR’s collection targets? 

Isn’t it a fact that upon his assumption to office in 2001, Bañez promptly reshuffled BIR personnel and posted his trusted men in key positions? Ninety (90) percent of BIR collections come from the Large Taxpayers Service and the Metro Manila Revenue District Offices. These key offices are now headed by Bañez appointees, including the Deputy Commissioners for Operations and Legal Group. 

Even a cursory examination of the BIR’s tax collection performance, published in several newspapers on August 16 this year, would reveal that  the biggest shortfalls in tax collection were posted by his own hand-picked people.

The real saboteurs in the BIR, Mr. Speaker, are the very same people that Bañez appointed  to their positions.

The Bañez appointees responsible for the biggest tax collection shortfalls in the first six months of this year are the real saboteurs in the BIR.

The biggest saboteur in the BIR, however, is no less than Bañez himself. 

I do not intend to pillory Mr. Bañez before the court of public opinion  when he has already resigned his position.

But Bañez is not down and out at all. As a matter of fact, the conspiracy which he led to defraud the government of precious revenue makes previous scams look like child’s play.

My question is: Can 13,000 employees of the BIR be so wrong and only Bañez is so right?  

I am convinced, based on a careful scrutiny of the facts, that if indeed there has been sabotage within the BIR, it is none other than Mr. Bañez himself who should be held responsible for it.

Bañez is the biggest saboteur in the BIR, and he knows it.

Let me cite irrefutable proof that Mr. Bañez is not the knight in shining armor that he wanted us to believe, but a plunderer and economic saboteur of the first order who should instead be placed behind bars. 

Mr. Speaker, BIR will stand to lose as much as P10 billion in tax revenue collections in the Grand Scam of the Millennium, with P15 million in tax credit already consummated which would eventually result to P6 billion tax credit loss and P1.19 billion in SARO.

Mr. Speaker, I accuse Banez of at least three crimes for which he must be charged before a court of law, economic sabotage, violation of the Anti- Graft and corrupt practices law, and gross negligence in the VAT tax credit case involving the Fort Bonifacio Development Corporation.

How did this big scam take place?

FBDC filed several tax credit/refund claims with the BIR involving a total of P6 billion. One of the claims involving P15 million was denied by the BIR, Banez was not yet a commissioner. FBDC appealed a case to the Court of Tax Appeals and got the favorable decision. BIR should have appealed the decision but with Banez as commissioner, he chose to protect his former employer, no appeal was filed.

The Entry of Judgment issued January 30, 2002 became final and executory, setting a precedent for the other remaining cases.  As a result of Banez failure to appeal, government was defrauded of P15 million and ultimately will stand to lose a total of P6 billion.

It is clear from all this that Bañez is liable for economic sabotage, gross negligence and gross violation of the Anti-Graft and Corrupt Practices Law.

But that is not all, Mr. Speaker.

I accuse Bañez of economic sabotage and gross violation of the Anti-Graft and Corrupt Practices Law in the case of the Special Allotment Release Order as payment for FBDC’s Documentary Stamp Tax liability.

Let me explain this in detail, Mr. Speaker.

Fort Bonifacio Development Corporation (FBDC) won the bid in the sale of 214 hectares of Fort Bonifacio Land for P71.2 billion through a promissory note.

On February 13, 1995, the BIR issued a ruling which stated that FBDC is liable to pay DST on the sale.

RA 7917 Amending RA 7227 exempted BCDA from all forms of tax and this exemption cannot be extended to FBDC, being a private corporation.

On December 10, 1999, the BIR issued a P1.068 billion tax assessment to FBDC on the sale of the 214 hectares of Fort Bonifacio land.

On November 27, 2000, DBM issued Special Allotment Release Order (SARO) for DST on the sale of the property.

In effect, Mr. Speaker, BCDA assumed the tax obligation of FBDC in the amount of P1.18 billion.

On February 19, 2001, the Bureau of Treasury certified the correctness of the amount and availability of appropriations for SARO dated November 27, 2000 and approved the crediting of the amount to the account of the BIR. 

On February 28, 2001, the BIR was furnished a copy of the approved SARO as payment for FBDC’s DST liability which was credited as part of BIR collections in 2001. Without this, 2001 collections would have resulted to shortfall.

The issue here, Mr. Speaker, is why did government, through BCDA, pay for the liability of FBDC, a private corporation? Bañez is culpable here on five counts.

By allowing the crediting of billions of pesos to pay the tax obligations of a former private client, Bañez caused undue injury to the government and gave his former client unwarranted benefits and advantage.

Bañez also entered into a transaction grossly and manifestly disadvantageous to the government.

Bañez directly or indirectly intervened in a transaction where he has financial interest.

Bañez also directly or indirectly became interested or had material interest in a transaction requiring approval of the BIR of which he was then the head.

And Bañez knowingly granted a benefit in favor of a former private client not qualified for or not legally entitled to such payment.     

I also accuse Bañez of violation of the Anti-Graft and Corrupt Practices Law in the case of the reduction of the zonal valuation of Fort Bonifacio land.

Using the influence of his high position, Bañez caused the reduction of the valuation of Fort Bonifacio land from P100,000 per square meter to P35,000 per square meter.         

This resulted in huge losses to government.

In short, Bañez gave a private corporation unwarranted benefits that directly led to huge losses in tax revenues for the government.

 What I have explained in detail, Mr. Speaker, is how Bañez brazenly and wantonly favored private interests at the expense of the public welfare.

Through these schemes I have mentioned, Mr. Speaker, private corporations may have avoided payment of taxes to the government by as much as P10 billion because of Bañez’s rulings when he was still BIR chief.

What we have here is in fact a grand conspiracy by Bañez, the Philippine Long Distance Telephone Company, Smart Communications and the Metro Pacific Corporation to reduce payment of taxes to the government. 

This is pure and simple economic sabotage, Mr. Speaker.  

Published reports on the top 7000 corporations would show that while the telecommunications giant PLDT and other Metro Pacific affiliates and subsidiaries posted hefty profits year after year, the amount of taxes they pay to the government has  substantially diminished year after year, thanks to Bañez.

May I point out, Mr. Speaker, that this is the same Rene Bañez who before his appointment as BIR Commissioner worked as Vice President of  Metro Pacific Corporation, and as President and Chief Executive Officer of Smart Communications, both of which are now headed by Manuel Pangilinan.

Pangilinan, as we all know, is the chair and CEO of PLDT, Smart Communications and Metro Pacific Corporation.

What is unfortunate in this whole sordid episode is that Bañez was conniving with his former employer in evading payment of the correct taxes due the government even as he was harping on reforming the country’s tax collection system.

We have a term in the vernacular, bantay-salakay, that aptly describes  what Bañez did in the BIR during his watch. 

Even as Bañez kept talking about reforming the tax collection system, he was in fact working round the clock to defraud the government coffers of hundreds of millions of pesos in tax revenues.

And yet Bañez has the temerity to blame others for his own colossal failure as the head of the government’s tax collection agency.

By pinning the blame on so-called saboteurs, Bañez is resorting to  classic squid tactics to obfuscate his own culpability in the whole mess.    

Contrary to his sworn duty  to protect the public interest as head of a sensitive government agency, Bañez was in  fact using the BIR to protect private interests.

Bañez is not part of the solution at the BIR, he is a big part of the problem.

And that is why, Mr. Speaker, I now ask the House good government and the ways and means committees to conduct an investigation in aid of legislation on the performance of Mr. Bañez while in office. This should be without prejudice to the filing of criminal charges against him for plunder, economic sabotage and gross violation of the anti-graft and corrupt practices law.

If this administration is really serious about building a strong republic, then it has to send Bañez and his co-conspirators to jail. 

            Manuel Pangilinan, Banez’s former boss in Metro Pacific Corporation, should be investigated for his involvement in this tax scam.

And the Salim Group should likewise be investigated for brazen violation of our Constitution.

I have it on good authority that the designated officer-in-charge of the BIR, Undersecretary Cornelio Gison, is equally liable for the collection shortfall and anomalies committed during the term of Bañez, being the Undersecretary of Finance for Revenue Operations, which supervised the BIR.

What I am saying is that even without Bañez at the helm, we can very well expect the same shenanigans to take place in the BIR all over again.

And I would like to warn my colleagues in the House that the grand conspiracy piracy in the BIR continues, even with Bañez officially out of it.   Finance Secretary Lito Camacho has named him as an adviser on BIR affairs. What that means is that Gison will be reporting directly to Bañez.  Banez’s resignation, in short, is all for show.  He will still wield all the powers of the BIR chief,  but without any accountability for his actions.

Bañez and Gison came from the two (2) biggest auditing firms in the country. Bañez once worked for Joaquin Cunanan & Co., a member-firm of Price Waterhouse and Coopers Lybrand. On the other hand, Gison was a partner in the tax department of Sycip, Gorres and Velayo or SGV formerly affiliated with the notorious Andersen Consulting but now affiliated with Ernst  and Young. I seriously doubt if Gison just like Bañez can uphold the public interest over the interests of the clients of SGV.

The sooner we undertake genuine tax reform, the better for the country, Mr. Speaker.

Good governance should start with those who are responsible for making the bureaucracy run, and run efficiently.

And I believe that the Bureau of Internal Revenue should be headed by someone who is not only competent to handle the complex requirements of the job, but also possesses an unsullied integrity, untainted by conflict of interest.

The President should appoint someone with clean hands to take over the job  of BIR Commissioner. 

The next BIR chief should be free and unburdened by any conflict of interest arising from former employment with the big auditing and accounting firms in the country.

If the President chooses the permanent successor of Bañez, then she should choose someone whose expertise and integrity are completely beyond reproach.            

To do otherwise is to bring this government, and the nation as a whole, hostage to private interests.

This is not what a strong republic is all about, and this is not what our people want.

All that our people want is someone they can trust, and trust is bestowed only on the honest and the truthful.

Bañez has been less than forthright during his brief stint in the country’s tax collection agency, and therefore his resignation is welcome.

But mere resignation should not erase the fact that Bañez has committed serious crimes that deserve harsh punishment from the state.

As if to rub salt on injury, Finance Secretary Jose Isidro Camacho has even kicked Bañez upstairs by appointing him as his adviser on BIR affairs.

If criminals are rewarded rather than punished, then this nation cannot go anywhere but backward.  

But if we are to restore our people’s faith and confidence in government, then by all means we must file the proper charges against Bañez and his fellow saboteurs in the BIR. 

And if Bañez and his cohorts are found guilty after a fair trial in a court of law, then I am willing to accompany law enforcers in bringing him straight to Muntinlupa.

Thank you, Mr. Speaker.

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