WHEN taxes are evaded, the consequences extend beyond the taxpayer and the Bureau of Internal Revenue (BIR).
Undeclared income, fraudulent transactions and other forms of tax abuse can reduce the revenue available to fund public services and place a greater burden on taxpayers who comply with the law. Yet tax violations can be difficult for tax authorities to detect without information from individuals who have direct knowledge of how these violations are committed.Recognizing this, Philippine law gives ordinary Filipinos a formal role in uncovering tax violations. Section 282(A) of the National Internal Revenue Code (NIRC) provides an informer’s reward to qualified persons whose information leads to the discovery of fraud against internal revenue laws or violations of the NIRC, resulting in the recovery of revenues, surcharges or fees, the conviction of the guilty party, or the imposition and collection of a fine or penalty.The provision thus creates a statutory incentive for whistleblowing in tax enforcement, but not every complaint qualifies for a reward.Under the NIRC, an informer must voluntarily provide definite and sworn information that is not yet in the possession of the BIR. The information must lead to the discovery of a tax violation and must not refer to a case already pending or previously investigated or examined by the BIR or the Department of Finance.The law likewise disqualifies certain persons from receiving the reward, including internal revenue officials and employees, other public officials and employees, and their relatives within the sixth degree of consanguinity. Public officials, whether incumbent or retired, are also prohibited from claiming a reward when they acquired the information in the performance of their official duties.Importantly, the submission of information alone does not entitle an informer to a reward.The information must ultimately produce a result contemplated by Section 282(A), such as the recovery or collection of revenues, surcharges or fees, or the conviction of the guilty party or the imposition and collection of a fine or penalty. The same reward may likewise be granted where the taxpayer offers to compromise the tax violation, the compromise is accepted by the Commissioner of Internal Revenue and the resulting taxes are subsequently collected from the taxpayer.The reward is equivalent to 10 percent of the revenues, surcharges or fees recovered and/or the fine or penalty imposed and collected, or P1 million per case, whichever is lower. If no revenue, surcharge or fee is actually recovered or collected, the informer is not entitled to a reward. The reward shall be subject to 10-percent final withholding tax.Revenue Regulations (RR) 16-2010, dated Nov. 25, 2010, supplements this statutory framework by prescribing the rules for filing and investigating confidential information. It requires the information to be definite, concise, credible and supported by substantial evidence. In other words, mere allegations are not enough; the information should be accompanied by relevant documents or records that establish the alleged tax violation.Once submitted, the information is first evaluated by the BIR to determine whether it qualifies as valid confidential information. If sufficient, it is forwarded for preliminary investigation to determine whether there is probable cause to believe that tax fraud or a violation of the NIRC was committed. Meanwhile, where the evidence is insufficient, the informant shall be notified of such finding, and the supporting documents shall also be returned.RR 16-2010 likewise protects the informer’s identity throughout the investigation. The appropriate BIR division is required to remove the informer’s name and other identifying information from the copy of the information used for investigation, while the case docket generally contains no information that would identify the informer, subject to the limited exceptions provided under the regulations.For the public, reporting tax violations has also become more accessible through the BIR’s eComplaint system, where complaints concerning tax evasion and other taxpayer-related concerns may be submitted electronically.At the legislative level, the existing reward system is also being reviewed. Senate Bill 1011, filed by Sen. Jinggoy Estrada on Aug. 11, 2025, proposes higher rewards for informers who provide information leading to the discovery of tax violations and smuggling.For tax violations, the proposed reward may reach P10 million or 10 percent of recovered taxes, whichever is lower, while smuggling cases may carry a reward of up to P10 million or 20 percent of the value of confiscated goods, whichever is lower. The bill also proposes additional punitive action for violation of the confidentiality of informers.The measure remains a bill and has not yet been passed into law to amend the existing statutory framework. For now, Section 282(A) of the NIRC and RR 16-2010 remain the principal rules governing informer’s rewards and confidential information in tax enforcement.Ultimately, the informer’s reward system provides a formal avenue for individuals to contribute information that may assist the government in uncovering tax violations. Its operation, however, depends not simply on reporting suspected tax abuse, but on providing credible and sufficiently supported information that is new to the BIR, withstands investigation, and contributes to the discovery and enforcement of an actual violation.Wenver James C. Dela Rosa is an associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. For questions or comments regarding this article, the author may be reached at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.
