At first blush, the idea of mediation as a mode of settling a dispute between the government and the taxpayer that has already reached the courts seems strange. It is precisely because there was no settlement at the lower levels that the matter was raised to the level of the courts. So, how then could there be, at this seemingly late stage, any possibility of mediation?
However, I suggest that the idea of getting the government and the taxpayer to settle even after their dispute has reached the courts deserves a try. An en banc resolution of the Court of Tax Appeals (CTA), Number 07-2010, provides that the interim guidelines for implementing mediation in the CTA, if successful, can result in declogging the judicial system, in encouraging compliance from a population naturally averse to paying taxes, and in helping the government in need of revenues for its programs and projects.
Section 204 of the National Internal Revenue Code (Tax Code) opens the window of opportunity for internal revenue taxes. It permits the compromise by the internal revenue commissioner in two instances—first, when a reasonable doubt as to the validity of the claim against the taxpayer exists, and second, when the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
Customs duties may also be subject to compromise and, thus, susceptible to mediation. Included are protest cases decided by the customs commissioner relating to customs duties, fees and other money charges, fines, forfeitures and related penalties or other matters arising under the Tariff and Customs Code (TCC), or other laws administered by the Bureau of Customs. Similarly, decisions of the finance secretary on cases automatically appealed under Section 2315 of the TCC, or of the trade and industry secretary and the agriculture secretary in instances of importations that attract (a) dumping and countervailing duties under the TCC or (b) safeguard measures authorized under Republic Act 8800. (Safeguard measures are those taken by the government in response to increased imports that cause or threaten to cause serious injury to certain domestic industries and producers.)
The wide universe of cases that can be mediated is circumscribed by a listing of cases that are beyond the pale of mediation. First among these is where the jurisdiction of the CTA, the Bureau of Internal Revenue, the Bureau of Customs, and of the secretaries of finance, trade and industry or agriculture is in issue. The reason is obvious: Jurisdiction is a matter of law, of legislative fiat, and thus not subject to negotiation. The time for making any impact on that matter is when the law is under deliberation by Congress and not after it has been approved by the President.
Another significant instance that cannot be subject to mediation is when there is a pending application by a party for a temporary restraining order or preliminary injunction for the suspension of collection of taxes. That application must first be resolved before mediation can proceed. Indeed, the pendency of an application to restrain or stop the proceedings for collection is inconsistent with attempts to coming to an agreement on how much the amount to be collected will be.
Criminal cases, presumably those filed by the BIR under its RATE (Run After Tax Evaders) program or by the BOC under its RATS (Run After Tax Smugglers) also cannot, of course, be mediated. Crimes per se are offenses by its subjects against the state, and the state, at least in theory, cannot subject its dignity and sovereignty to compromise.
The last three instances that are beyond mediation involve cases where there is already a final and executory decision. These cases are the ones decided by the Regional Trial Court in national as well as local tax collection cases, by the Central Board of Assessment Appeals in cases of assessment and collection of the real property tax, and all civil cases arising from all types of tax assessment that are already final and executory.
Because the purpose of mediation is to facilitate the early termination of tax cases, the process is triggered at the early stages, certainly before the case has taken up substantial time of court, typically after the filing of the last contentious pleadings or the holding of the pretrial. The parties are expected to agree to the mediation process where available; after all, it’s expected to be the last chance for peace, the last time before the swords are drawn and cannons are fired. Only mediators accredited by the CTA may be chosen.
Once the mediation process is set in motion, a great deal depends on the skill of the chosen mediators. To ensure that the mediators have the proper acumen, they are required to undergo training and internship. The first crop of mediators attended the first ever orientation for this purpose last July 18 to 20 at the CTA auditorium. The orientation—packed with theory and practice, lectures and role-playing—was designed to make them effective in fulfilling their task. Completion of their internship practice will put in place this major improvement in the resolution of tax disputes in the country.
Ricardo J. Romulo is a senior partner of Romulo Mabanta Buenaventura Sayoc & De Los Angeles.