Retroactivity of tax laws vs. social media influencers?
Income tax laws have been around since, at the latest, the early American regime
from the period 1898 to 1901. During this period, the Philippines was ruled by
American military governors. In 1902, the first civil government was established
under William H. Taft. However, it was only during the term of second civil
governor Luke E. Wright that the Bureau of Internal Revenue (BIR) was created
through the passage of Reorganization Act No. 1189 dated July 2, 1904. On August
1, 1904, the BIR was formally organized and made operational under the Secretary
of Finance, Henry Ide (author of the Internal Revenue Law of 1904), with John S.
Hord as the first Collector (Commissioner). The first organization started with
69 employees, which consisted of a Collector, Vice-Collector, one Chief Clerk,
one Law Clerk, one Records Clerk and three (3) Division Chiefs. (BIR
History, www.bir.gov.ph)
On May 1921, by virtue of Act No. 299, the Real Estate, License and Cash
Divisions were abolished and their functions were transferred to the City of
Manila. As a result of this transfer, the Bureau was left with five (5)
divisions, namely: 1) Administrative, 2) Law, 3) Accounting, 4) Income Tax
and 5) Inspection. Thereafter, the Bureau established the following: 1) the
Examiner's Division, formerly the Income Tax Examiner's Section which was
later merged with the Income Tax Division and 2) the Secret Service Section,
which handled the detection and surveillance activities but was later
abolished on January 1, 1951. Except for minor changes and the creation of
the Miscellaneous Tax Division in 1939, the Bureau's organization remained
the same from 1921 to 1941. (BIR History, www.bir.gov.ph)

Hence, it is safe to say that,
for at least the past 100 years, income tax has been levied and
collected
from citizens of the Philippines. Income, as defined by the Supreme Court,
"means all the wealth which flows into the taxpayer other than a mere
return on capital."[1.1] In simplistic terms,
if you earn money, you get taxed; of course, this should not be taken as a
complete guide on income taxes which is a very complicated field of law.
Recently, in a press release, the Bureau of Internal Revenue said that it will
start cracking down on social media influencers (SMIs) who avoid the payment
of taxes. Through Revenue Memorandum Circular No. 97-2021, BIR launched
an all-out investigation against monetized SMIs or vloggers who do not pay
taxes from their huge income.[1.2]
There are some law students and even lawyers who argue against the collection
of taxes against SMIs or vloggers. They say that doing so would be a violation
of the constitutional proscription against ex post facto laws.
In simplistic terms, again, to save time, one form of ex post facto laws is a
law which punishes an act which was innocent when done. According to the 1987
Constitution, "No ex post facto law or bill of attainder shall be enacted."
(Section 22, Article III) However, it must be noted that, in one case, the
Supreme Court sad: "Indeed, a legislation merely imposing taxes, without
strictly penal sanctions for violations thereof, may have a retrospective
operation, without being an ex post facto law."[2]
The discussion on the retroactive application of income tax laws vis-a-vis the
law on tax evasion would gain more color in light of
the argument by these law students and lawyers that RMC No. 97-2021 cannot
be retroactively applied. They are wrong and the first point
that must be settled here is that RMC No. 97-2021 implements an existing
law.
Social media influencers, as defined in the circular, shall be liable to
Income Tax and Percentage Tax or Value-Added Tax (VAT) pursuant to
the provisions of the National Internal Revenue Code (NIRC) of 1997, as
amended, and other existing laws. It must noted and emphasized that income tax
laws, percentage tax laws and VAT laws have been in existence even before
YouTube which was founded only on February 14, 2005. The same is true for tax
evasion laws.
RMC 97-2021 was issued to revenue officers, revenue employees and other
concerned who are ordered to enhance tax compliance and eventually, increase
tax revenues, by advising concerned BIR offices to conduct a full-blown tax investigation against social media influencers residing and/or registered within their respective jurisdictions.[3]
It would be a mistake to argue using the ex post facto clause against RMC No.
97-2021 because there is no revenue statute that is sought by BIR to be
implemented retroactively. RMC No. 97-2021 itself does not levy the tax
because only a statute passed by Congress can do that. Those who have actually
read the circular know by now that the circular is not meant to retroactively
implement a law but it was "issued to clarify the tax obligations of all
social media influencers, individual or corporation, with the end goal of
raising revenues from their undeclared income and at the same time, reminding
them of their obligations under the law and of the possible consequences of
their failure to pay taxes."[4] The basis of such issuance is the reports
received by BIR that certain social media influencers have not been paying
their income taxes despite earning huge income from the different social media
platforms.[5]
[1.1] G.R. No. 191999, July 30, 2014, https://lawphil.net/sc_res/2014/pdf/gr_191999_2014.pdf.
[2] CIR v. Caltex, G.R. No. L-24192, May 22, 1968, citing Lorenzo vs.
Posadas, 64 Phil., 353; Seattle v. Kellcher, 195 U.S. 351, 360, 49 L. ed.,
232, 25 Sup. Ct. Rep. 44.
[3] https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2021%20RMCs/RMC%20No.%2097-2021.pdf.
[4] Id.
[5] Id.