RMC 12-2018 is a valid circular.

To date, no one filed proper actions

in a proper venue to question to ascertain the validity of the circular.
This is to petition for the rechecking and reevaluation of the RMC. In
Constitutional Law, the presumption of constitutionality is the legal
principle that the judiciary should presume Administrative Issuances,
which are in effect are statues to be constitutional, unless the law is
clearly unconstitutional or a fundamental right is implicates. Hence,
it is presumed to be valid and is not contrary to the Constitution or
any law. In the case of of Land Bank of the Philippines vs. American
Rubber Corporation, it ruled that Administrative Issuances partake of
the nature of a statute and have in their favor a presumption of
legality. G.R. No. 188046, July 24, 2013. Note that a Revenue
Memorandum Circular (RMC) are issuance that publish pertinent
and applicable portions, as well as amplifications, of laws, rules,
regulations and precedents issued by the Bureau of Internal Revenue
and other agencies/offices. The amplifications made in Section 5 of
the National Internal Revenue Code, R.A. No. 8424, as amended,
clarifies the duty of the CIR to inquire and obtain third party
information. That, even when there is attorney-client privilege or
accountant-client privilege when the purpose is to ascertain the
correctness of any return, or in making a return when none has been
made, or in determining the liability of any person for any internal
revenue tax, or in collecting any such liability, or in evaluating tax
compliance the CIR can still inquire and obtain third party
information which had the effect of relaxing the privilege. In Rule
21.01, Code of Professional Responsibility, a lawyer shall not reveal
the confidences or secrets of his client except; (a) When authorized
by the client after acquainting him of the consequences of the
disclosure; (b) When required by law; (c) When necessary to collect
his fees or to defend himself, his employees or associates or by
judicial action. Although as a general rule, the attorney is of no
reason to reveal the confidences and secrets of his client, this rule is
not absolute, such rule mentioned some exceptions when the
privilege may not be used to defeat the government in determining
proper tax liabilities. When a law required the third party or even the
lawyer or the account to reveal all information that are connected in
ascertaining proper tax liabilities of their client. They are duty bound
to disclose them. In case of determining payment deficiencies in
VAT or any other type of tax which the accountant could be
knowledgeable then, the CIR can compel the accountant on the
possible supplemental information

Section 5 of the National Internal Revenue Code, R.A. No. 8424, as

amended states that Power of the Commissioner to Information, and
to Summon, Examine, and Take Testimony of Persons- In
ascertaining the correctness of any return, or in making a return when
none has been made, or in determining the liability of any person for
any internal revenue tax, or in collecting any such liability, or in
evaluating tax compliance, the Commissioner is authorized:
(A) To examine any book, paper, record, or other data which may be
relevant or material to such inquiry;
(B) To obtain on a regular basis from any person other than the
person whose internal revenue tax liability is subject to audit or
investigation, or from any office or officer of the national and
local governments, government agencies and instrumentalities,
including the Bangko Sentral ng Pilipinas and government-
owned or controlled corporations, any information such as but
not limited to costs and volume of production, receipts or sales
and gross income of taxpayers, and the names, addresses, and
financial statements of corporations, mutual fund companies,
insurance companies, regional operating headquarters of
multinational companies, joint accounts, associations, joint
ventures or consortia and registered partnerships, and their
members: Provided That the Cooperative Development Authority
shall submit to the Bureau a tax incentive report, which shall
include information on the income tax, value added tax and other
tax incentives availed of by cooperatives registered and enjoying
incentives under Republic Act No. 6938, as amended: Provided,
further, That the information submitted by the Cooperative
Development Authority to the Bureau shall be submitted to the
Department of Finance and shall be included in the database
created under Republic Act No. 10708, otherwise know as “The
Tax Incentives Management and Transparency Act (TIMTA)”;
(C) To summon the person liable for tax or required to file a return or
any officer or employee of such person, or any having
possession, custody, or care of the books of accounts and other
accounting records containing entries relating to the business of
the person liable for tax, or any other person, to appear before the
Commissioner or his duly authorized representative at a time and
place specified in the summons and to produce such books,
papers, records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as
mat be relevant or material to such inquiry; and
(E) To cause revenue officers and employees to make a canvass from
time to time of any revenue district or region and inquire after
and concerning all persons therein who may be liable to pay any
internal revenue tax, and all persons owning or having the care,
management or possession of any object with respect to which a
tax is imposed.
The provisions of the foregoing paragraphs notwithstanding,
nothing in this Section shall be construed as granting the
Commissioner the authority to inquire into bank deposits other
than as provided for in Section 6(F) of this Code.

Under Section 5 of the National Internal Revenue Code (NIRC),

as amended – in ascertaining the correctness of any return, or in
making a return when none has been made, or in determining the
liability of any person for any internal revenue tax, or in
collecting any such liability, or in evaluating tax compliance –
the Commissioner of Internal Revenue (CIR) is empowered,
inter-alia, to obtain on a regular basis from any person other than
the person whose internal revenue liability is subject to audit or
investigation any information, such as, but not limited to, receipts
or sales and gross income of taxpayers, and the names, addresses,
and financial statements of corporations, registered partnership,
and their members. Non-compliance therewith by any person
warrants the imposition of the amount of One Thousand Pesos
(P1,000) for each such failure under Section 250 of the NIRC, as
amended, as well as the imposition of a fine of Ten Thousand
Pesos (P10,000) and suffer imprisonment of not less than one (1)
year but not more than ten (10) years under Section 255 of the
NIRC, as amended.
On the other hand, there is attorney-client privilege under the
Code of Professional Responsibility and the Revised Rules on
Evidence, wherein an attorney cannot, without the consent of his
client, be examined as to any communication made by the client
to him, or his advice given thereon in the course of, or with a
view to, professional employment. Similarly, there is accountant-
client privilege under Republic Act No. 9298, or the Philippine
Accountancy Act of 2004, and the Code of Ethics for
Professional Accountants stating that all working papers,
schedules and memoranda made by a certified public accountant
in the course of an examination, including those prepared and
submitted by the client, incident to or in the course of an
examination, by such certified public accountant shall be treated
confidential and privileged, and that professional accountants
shall refrain from disclosing outside the firm or employing
organization confidential information acquired as a result of
professional and business relationships.
Let it be clarified, however, that the power of the Commissioner
to obtain information under Section 5 of the NIRC of 1997, as
amended, serves as an exception to both the attorney-client and
accountant-client privilege.
First, Rule 21.01 of the Lawyer’s Code of Professional
Responsibility provides that a lawyer shall not reveal the
confidence or secrets of his client except, among others, when
required by law. Second, in Genato vs Silapan, the Supreme
Court stressed that the privilege against disclosure of confidential
communication or information does not extend to those made in
contemplation of a crime or perpetration of fraud. Notably,
attempt to evade or defeat tax is a criminal offense defined and
punishable under Section 254 of the NIRC, as amended. Third,
Section 29 of RA 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. Fourth, Section 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 acquired as a
result of professional and business relationships unless there is a
legal right or duty to disclose. Finally, taxes are the lifeblood of
our nation so its collection should be actively pursued without
unnecessary impediment.
Clearly, therefore, the privileged communication of attorney-
client and accountant-client cannot be used to defeat the very
purpose and objective of the Commissioner’s power to obtain
information under Section 5 of the NIRC, as amended.
All revenue officials and employees are hereby enjoned to give
this Circular as wide a publicity as possible.