Abaquita, Jose Carlo Alfonso L.

Tax 2 Saturday 4:00-7:00 PM

Submitted to: Atty: Gerry Sebastian, CPA.

**Third Section 29 of R.A. 9298 states that the accountant-client privilege does
not apply if the production of documents is through a subpoena issued by any
court, tribunal or government regulatory or administrative body

**Sec. 140.1 of the Code of ethics of professional accountants provides that

professional accountants shall refrain from disclosing outside the firm or
employing organization confidential information as a result of professional and
business relationship unless there is a legal right or duty to disclose.

Lifeblood doctrine

Revenue Memorandum Circular No. 12-2018 attempts to clarify the force

of Section 5 NIRC between two types of privileges; the attorney-client privilege
and the accountant-client privilege. The position of the Revenue Memorandum
circular is that the Commissioner of Internal Revenue is empowered to collect
from any person besides whom tax liability is subject to investigation or audit.
__ issues are herein presented disproving the claim of RMC no. 12-2018

A revenue memorandum circular is an administrative ruling issued by the

CIR through Section 4 Title I of the National Internal Revenue Code, to
interpret tax laws. It is widely accepted that an interpretation by the executive
officers, whose duty is to enforce the law, is entitled to great respect. 1 However,
such interpretation is not conclusive and will be disregarded if found to be
judicially incorrect, nor can it modify the law. 2 Additionally, judicial decisions
applying or interpreting the laws shall form part of the legal system of the
Philippines.3 With these premises, the conclusion is that judicial decisions form
part of the law of the land therefore no revenue memorandum circular may
derogate from it.

The reasons of the RMC no. 12-2018 are incorrect. On the first reason of
the RMC, their reliance on Rule 21.01 of the Code of Professional Responsibility
is misplaced. Among others, a lawyer owes fidelity to the cause of his client and
he shall be mindful of the confidence reposed in him. 4 More importantly a
lawyer is prohibited to reveal any secrets of his client which he has learned in
his professional capacity.5 Therefore, the laws prohibit an attorney from
divulging the secrets of his client. The Supreme Court further elucidates in the
case of Regala v. Sandiganbayan, (G.R. No. 105938, 1996) where the
Presidential Commission on Good Governance is compelling the lawyers of
ACCRA law firm to reveal the identity of their clients by including the latter in
the PCGG case no. 33. The court laid down the rules: (1) Client identity is
privileged where a strong probability exists that revealing the client's name
would implicate that client in the very activity for which he sought the lawyer's
1
Mitsubishi Corporation v. Commissioner of Internal Revenue, G.R. No. 175772, (2017).
2
ING Bank v. Commissioner of Internal Revenue (2016); Philippine Bank of Communications v. Commissioner
of Internal Revenue, (1999); Commissioner of Internal Revenue v. Court of Appeals et. Al., (1995).
3
Article 8, R.A. No. 386, Civil Code of the Philippines (1949).
4
Canon 17, Code of Professional Responsibility.
5
Article 209, Act No. 3815, An Act Revising the Penal Code and Other Penal Laws, (1930).
advice; (2) Where disclosure would open the client to civil liability; his identity
is privileged; (3) Where the government's lawyers have no case against an
attorney's client unless, by revealing the client's name, the said name would
furnish the only link that would form the chain of testimony necessary to convict
an individual of a crime, the client's name is privileged. (4) the content of any
client communication to a lawyer lies within the privilege if it is relevant to the
subject matter of the legal problem on which the client seeks legal assistance. 6

These interpretations of law, established by the Supreme Court, has the

force and effect of law. Therefore, they are controlling, not the interpretation
made by the RMC.

The second claim of the RMC, invoking the obiter dictum of Genato vs.
Silapan, is true and conceded. The ruling is in line with what was mentioned
earlier regarding the privileged communication. This case adds that it is not
within the profession of a lawyer to advise a client as to how he may commit a
crime as a lawyer is not a gun for hire. Thus, the attorney-client privilege does
not attach, there being no professional employment in the strict sense. In fact, it
has also been pointed out to the Court that the "prosecution of the honorable
relation of attorney and client will not be permitted under the guise of privilege,
and every communication made to an attorney by a client for a criminal purpose
is a conspiracy or attempt at a conspiracy which is not only lawful to divulge,
but which the attorney under certain circumstances may be bound to disclose at
once in the interest of justice.7 Therefore, the interpretation of the RMC does
not apply because no attorney-client relationship exists in the first place if the
information sought is in furtherance of a crime.

The error of the third claim lies on its blanket application. There are two
kinds of subpoenas; ad testificandum and duces tecum. The latter used to
compel the production of books, records, things or documents therein
specified.8 Article. 29 of R.A. 9298 pertains to work papers thus limits the
argument to subpoenas duces tecum. The position of the RMC is that any
document may readily be subpoenaed. This is wrong.

Administrative agencies may enforce subpoenas issued in the course of

investigation whether adjudication is involved or whether probable cause is
shown.9 The purpose of the administrative subpoena is to discover evidence, not
to prove a pending charge, but upon which to make one if the discovered
evidence so justifies.10 However, administrative subpoenas are bound by the
restraints against infringement of constitutional rights or when the subpoena is
unreasonable or oppressive and when the relevancy of the books, documents, or
things does not appear.11 The authority to require the production of documents
under a subpoena duces tecum shall be subject to the same restrictions and
qualifications as applied in judicial proceedings of a similar character except
insofar as to require a pending trial or hearing. 12 Before such a subpoena may
be issued the following requisites must be present: (1). The books, documents
or other things requested must appear prima facie relevant to the issue subject
6
Regala v. Sandiganbayan, G.R. No. 105938, (1996).
7
People of the Philippines v. Sandiganbayan, G.R. Nos. 115439-41, (1997).
8
Roco v. People, G.R. No. 158275, (2005).
9
1 Davis, Administrative Law Treatise 171.
10
Evangelista v. Jarencio (1975), citing SEC v. Vacuum Can Co., 157 F. 2d 530, cert den, 330 US 820.
11
Evangelista v. Jarencio G.R. No. L-29274 (1975).
12
id.
of the controversy, though in this case the investigation, this is the test of
relevancy; (2) such books must be reasonably described by the parties to be
readily identified, this is the test of definiteness. 13 Therefore, the accountant
may only be compelled to disclose documents relevant to an investigation.

13
Roco v. People, citing H.C. Liebenow vs. The Philippine Vegetable Oil Company (1918); Universal Rubber
Products, Inc. v. CA, et al., 215 Phils. 85, 91 (1984), citing Arnaldo v. Locsin, 69 Phil. 113, 120 (1939).