What Are The Effects Of Fraud?

The effects of fraud with regards to taxation are as follows:

Civil fraud results in the imposition of the 50% surcharge while Criminal fraud involves the imposition of penal sanctions by the Regional Trial Court or the Court of Tax Appeals (CTA), depending on the amount of basic tax, upon conviction.

The power of the Commissioner to assess the tax is extend to ten (10) years from date of discovery of the falsity or fraud;

Cases involving fraud cannot be the subject of compromise; and

Suspension and temporary closure of the business operations of a taxpayer.

Civil Fraud Vs. Criminal Fraud With Regards to Taxation

Civil fraud - when all the elements of fraud cannot be proven beyond reasonable doubt, but these elements can be established by clear and convincing evidence amounting to more than a mere preponderance of evidence.

Criminal fraud - a criminal tax fraud case results when all the elements of fraud can be proven beyond reasonable doubt. "Proof beyond reasonable doubt".

Types of Tax Fraud Cases

Types of Tax Fraud Cases are as follows:

1. Criminal Fraud - A criminal tax fraud case results when all the elements of fraud can be proven beyond reasonable doubt. "Proof beyond reasonable doubt" does not mean such a degree of proof as absolute certainty, excluding possibility of error.

2. Civil Fraud - When all the elements of fraud cannot be proven beyond reasonable doubt, but these elements can be established by clear and convincing evidence amounting to more than a mere preponderance of evidence, civil fraud exists.

From routine examination of returns:

1. Keeping no records of inadequate records despite substantial transactions reflected in the returns;

2. Standard in living of the taxpayer, such as the possession of expensive cars and jewelries; or staying in luxurious mansion, and ownership properties whose values far exceed his probable sources of income as declared per return;

3. Records verified were not properly declared for the tax purposes;

4. False vouchers and receipts of the routine examination.

From information furnished by:

1. An informant who has knowledge of the transactions of the taxpayer which were not properly declared for tax purposes;

2. Referrals from other government offices or from other investigating units of the BIR.

Thru initiative of the investigating officers:

1. From newspaper reports;

2 Thru research of available government records such as from offices of the Register of Deeds, Bureau of Highways, and other government offices; and

3. In relation to an investigation of another taxpayer, where suspects that certain transactions were not declared for tax purposes.