Willful blindness doctrine

Posted on July 23, 2013

Let’s Talk
MERE RELIANCE on another person in preparing, filing and paying Tax
income taxes is not a justification for failure to file the right Maridelle
information on income taxes. M. Ramos
In People v. Gloria Kintanar (CTA EB Crim. No. 006, Dec. 3, 2010), Ms. Kintanar
was charged with failure to make or file her income tax returns (ITR), violating
Section 255 of the 1997 National Internal Revenue Code (NIRC), as amended. She
claimed that she did not actively participate in the filing of her joint ITR with her
husband since she entrusted such duty to the latter who, in turn, hired an accountant to perform their
tax responsibilities. She testified that she did not know how much her tax obligation was; nor did she
bother to inquire or determine the facts surrounding the filing of her ITRs. Despite several notices and
subpoena received by the accused, only an unsupported protest letter made by her husband was filed
with the Bureau of Internal Revenue (BIR). The Court of Tax Appeals (CTA) En Banc found her neglect
or omission tantamount to “deliberate ignorance” or “conscious avoidance”. As an experienced
businesswoman, her reliance on her husband to file the required ITR without ensuring its full
compliance showed clear indication of deliberate lack of concern on her part to perform her tax
obligations. This ruling was sustained by the Supreme Court (SC) in 2012.

Based on the foregoing, the willful blindness doctrine was applied by the CTA, as sustained by SC on
cases where there is a natural presumption that the taxpayer knows his/her tax obligations under the
law considering the factual circumstances of the case, such as being a businesswoman or official of a
company. This case set a precedent that mere reliance on a representative or agent (i.e., accountant
or husband) is not a valid ground to justify any noncompliance in tax obligations. The taxpayer must
inquire, check and validate whether or not his/her representative or agent has complied with the
taxpayer’s tax responsibilities.

However, in the recent case of People v. Judy Ann Santos (CTA Crim. Case no. 012, Jan. 16, 2013),
the CTA Division seemed to have a change of heart and acquitted Ms. Santos despite having almost
the same circumstances as that of the case of Ms. Kintanar. In this case, Ms. Santos was accused of
failure to supply correct and accurate information in her ITR. She claimed that by virtue of trust,
respect and confidence, she has entrusted her professional, financial and tax responsibilities to her
manager since she was 12 years old. She participated and maintained her intention to settle the case,
and thus provided all the documents needed as well as payment of her taxes. The element of
willfulness was not established and the CTA found her to be merely negligent. The CTA also noted the
intention of Ms. Santos to settle the case, which negates any motive to commit fraud. This was
affirmed by the SC in its resolution issued April 2013.

THE DIFFERENCES
“Willful blindness” is defined in Black’s Law Dictionary as “deliberate avoidance of knowledge of a
crime, especially by failing to make a reasonable inquiry about suspected wrongdoing, despite being
aware that it is highly probable.” A “willful act” is described as one done intentionally, knowingly and
purposely, without justifiable excuse.

“Willful” in tax crimes means voluntary, intentional violation of a known legal duty, and bad faith or
bad purpose need not be shown. It is a state of mind that may be inferred from the circumstances of
the case; thus, proof of willfulness may be, and usually is, shown by circumstantial evidence alone.
Therefore, to convict the accused for willful failure to file ITR or submit accurate information, it must
be shown that the accused was (1) aware of his/her obligation to file annual ITR or submit accurate
information, but that (2) he/she, or his/her supposed agent, nevertheless voluntarily, knowingly and
intentionally failed to file the required returns or submit accurate information. Bad faith or intent to
defraud need not be shown.
As can be observed in the first case, the accused knew that she had to timely file and supply correct
and accurate information of the joint ITR with the BIR in relation to the profession or the position she
holds. The knowledge was presumed based on the fact that Ms. Kintanar is an “experienced”
businesswoman, having been an independent distributor of a product for several years. However,
despite this knowledge, the CTA found that she voluntarily, knowingly and intentionally failed to fulfill
her tax responsibilities by not participating in the filing of the ITR and ensuring that everything was
filed correctly and accurately. As compared with the Santos case, which the SC affirmed, the element
of “voluntarily, knowingly and intentionally” was taken differently by the CTA in consideration of the
facts of the case. Ms. Santos fully entrusted her tax obligations and finances to her manager since she
was a child. It can be said that she is not an “experienced” manager of her finances and taxes since
she never handled such task, as compared with the situation of Ms. Kintanar, who is considered an
experienced businesswoman who manages her business as well as her financial and tax
responsibilities -- which is expected of somebody in her position (i.e., president and/or
businessperson).

The concept of willful blindness doctrine is new in Philippine jurisprudence. The application of this
doctrine by the CTA in the said cases was guided by the appreciation of the facts and the pieces of
evidence produced by the prosecution and accused to prove the non-existence of willfulness. However,
defined and clear standards in its application must be done as guidance for future application. This is
necessary to avoid arbitrary application and to encourage proper use of the doctrine by both parties in
the case.

The author is a tax associate with Punongbayan & Araullo’s (P&A) Tax Advisory and Compliance
Division. P&A is a leading audit, tax and an advisory service firm and is the Philippine member of
Grant Thornton International Ltd. For comments and inquiries please e-
mail Madel.Ramos@ph.gt.com or call 886-5511.