Protecting Client Privacy: Supreme Court Limits Government Access to Professional Records

Integrated Bar of the Philippines v. Secretary Cesar V. Purisima, G.R. No. 211772, April 18, 2023

Imagine your doctor being required to submit your appointment schedule to the government. Or your lawyer having to disclose your name and consultation details. This might sound like an invasion of privacy, and in the Philippines, the Supreme Court agrees.

In a landmark decision, the Supreme Court weighed the government’s need to monitor tax compliance against the fundamental right to privacy. The case involved a challenge to Revenue Regulations No. 4-2014, which required self-employed professionals like lawyers, doctors, and accountants to disclose client information. The Court ultimately struck down portions of the regulation, affirming the importance of protecting client confidentiality and limiting government intrusion into professional records. This case provides clarity on the boundaries of state power and the sanctity of professional-client relationships.

The Right to Privacy and Taxation in the Philippines

The Philippine Constitution explicitly protects the right to privacy. Article III, Section 3 states, “The privacy of communication and correspondence shall be inviolable except upon lawful order of the court, or when public safety or order requires otherwise, as prescribed by law.” This right extends beyond mere communication; it encompasses various “zones of privacy” recognized and protected in our laws.

The right to privacy is not absolute. The State has the power to tax and to ensure compliance with tax laws. Section 5 of the National Internal Revenue Code (NIRC) grants the Commissioner of Internal Revenue broad authority to obtain information and examine records to ascertain the correctness of tax returns. Specifically, it states:

“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…”

However, this power is not unlimited. The core legal question in this case was: can the government, in the name of tax collection, compel professionals to disclose information that infringes upon their clients’ right to privacy and professional ethics?

The Battle Over Revenue Regulations No. 4-2014

The controversy began with the issuance of Revenue Regulations No. 4-2014. It mandated that self-employed professionals:

• Submit an affidavit indicating their rates, manner of billing, and factors considered in determining service fees.
• Register their books of account AND appointment books, including client names and appointment details, with the BIR.
• Issue BIR-registered receipts showing a 100% discount for pro bono services.

The Integrated Bar of the Philippines (IBP), along with medical and accounting associations, challenged the constitutionality of this regulation. The petitioners argued that it violated client privacy, infringed on professional ethics, and exceeded the BIR’s authority.

The case followed this procedural path:

1. The IBP filed a Petition for Prohibition and Mandamus with the Supreme Court.
2. The Supreme Court issued a Temporary Restraining Order (TRO) against the regulation’s implementation, initially only for lawyers.
3. Other professional organizations (doctors, dentists, accountants) intervened, and the TRO was extended to their members.
4. The Office of the Solicitor General initially defended the regulation but later changed its position, arguing that portions were unconstitutional.
5. The Supreme Court consolidated the petitions and, after memoranda were filed, ruled on the merits.

The Supreme Court emphasized the importance of the right to privacy:

“Clients and patients have a reasonable expectation of privacy when they set appointments with the professionals that petitioners represent here…That clients and patients may think twice about consulting with professionals, if the government can create a dossier on them based on sensitive information extracted from the appointment book, is more than just an imagined fear.”

The Court also recognized the ethical obligations of professionals:

“Mandating a registered appointment book violates the ethical standards of petitioners’ professions. The nature of their profession requires strict adherence to confidentiality rules…”

Key Lessons for Professionals and Clients

This ruling has significant implications for professionals and their clients:

• Client privacy is paramount: The government cannot arbitrarily demand access to client information under the guise of tax enforcement.
• Professional ethics are protected: The ruling safeguards the confidentiality that is essential to attorney-client, doctor-patient, and accountant-client relationships.
• Government power is limited: Administrative agencies cannot exceed the authority granted to them by law. Regulations must be reasonable and not unduly oppressive.

Key Lessons: Professionals should review their record-keeping practices to ensure they are compliant with privacy laws. Clients can be confident that their consultations remain confidential.

Frequently Asked Questions (FAQ)

Q: What specific parts of Revenue Regulations No. 4-2014 were declared unconstitutional?

A: The Supreme Court struck down the requirements for self-employed professionals to submit an affidavit indicating their rates, manner of billing, and factors considered in determining their service fees, and to register their appointment books with the BIR.

Q: Does this ruling mean that professionals can now evade taxes?

A: No. The BIR still has the power to audit and investigate tax returns. However, it cannot use overly intrusive methods that violate privacy rights.

Q: What information can the BIR legally request from professionals?

A: The BIR can request information relevant to concluded transactions, such as receipts, sales records, and other data necessary to determine tax liability.

Q: What should I do if the BIR asks for my client list or appointment book?

A: Consult with a qualified lawyer. You have the right to refuse to disclose information that is protected by privacy laws and professional ethics.

Q: How does this ruling affect the Data Privacy Act?

A: This ruling reinforces the importance of the Data Privacy Act in protecting sensitive personal information and limiting government access to such data.

Q: What is the test for determining a violation of the right to privacy?

A: Courts use the “reasonable expectation of privacy” test, considering whether the individual has exhibited an expectation of privacy and whether that expectation is one that society recognizes as reasonable.

ASG Law specializes in tax law and data privacy. Contact us or email hello@asglawpartners.com to schedule a consultation.