Transcript
TAX ATION San Beda College of LAW – ALABANG GENERAL PRINCIPLES I. Concepts, Nat!e and C"a!acte!#st#cs of Ta$at#on and Ta$es. Ta$at#on %ef#ned& As a p!ocess , it is a means by which the soverei sovereign, gn, through through its law-making law-making body, raises raises revenue to defray the necessary expenses of the government. It is merely a way of apportioning the costs of gover governme nment nt among among those those wh who o in some some meas measur ures es are are priv privil ileg eged ed to enjo enjoy y its its benefits and must bear its burdens. As a po'e! , taxation refers to the inherent power of the state to demand enforced contributions for public purpose or purposes. Rat# Rat#on onal ale e of Ta$at# a$at#on on ( The Supreme ourt held! "It is said that taxes are what we pay for civili#ed society. $ithout taxes, the government would be paraly#ed for lack of the motive power to activa activate te and operat operate e it. %ence %ence,, despit despite e the natur natural al reluc reluctan tance ce to surre surrende nderr part part of one&s one&s hard-e hard-ear arned ned income income to the taxing taxing author authoriti ities es,, every every person person who is able able must must contri contribut bute e his shar share e in the the runn runnin ing g of the the gove govern rnme ment nt.. The The government for its part is expected to respond in the the form form of tangi tangibl ble e and and inta intang ngib ible le bene benefi fits ts intended to improve the lives of the people and enhan enhance ce their their moral moral and materi material al values values.. The s)*+#o s)*+#ot#c t#c !elat#o !elat#ons" ns"#p #p #s t"e !at#on !at#onale ale of ta$at#on and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. Taxation Taxation is a symbiotic relationship, whereby in exchange for the protection that the citi citi#e #ens ns get get from from the the gove govern rnme ment nt,, tax taxes are are paid.' paid.' (ommi (ommiss ssion ioner er of Inter Internal nal )evenu evenue e vs *llegre, Inc.,et al., +-/, 0eb. 12, 13 P!poses and O+ect#-es of Ta$at#on Ta$at#on
1.Re-e Re-en ne e – to provide funds or property with which the State promotes the general welfare and protection of its citi#ens.
2.Non(Re-ene 45) 657 a.P!o*ot Taxation P!o*ot#on #on of Gene!a Gene!all Welfa! Welfa!e e – Taxation may be used as an implement of police power in orde orderr to prom promot ote e the the gene genera rall welf welfar are e of the the people. 4see +ut# vs *raneta ( 5hil 183 and 9sme 9sme:a :a vs 9rbo 9rbos s (;.) (;.)..
1, >1, 1>37
b.Reglat#on – *s in the case of taxes levied on exci excise ses s and and priv privil ileg eges es lik like thos those e impo impose sed d in toba tobacc cco o or alco alcoho holi lic c prod produc ucts ts or amus amusem emen entt places like night clubs, cabarets, cockpits, etc. In the the cas case of Caltex Phils. Inc. vs COA (;.). S 7
1.It is levie levied d by the la'(*a/#ng la'(*a/#ng +od) of the State The power to tax is a legislative power which under the onstitution only ongress can exerc ercise thr through ough the the enact nactme men nt of laws aws. *cco *ccord rdin ingl gly, y, the the obli obligat gatio ion n to pay pay tax taxes is a statutory liability. 2.It is an enfo!ced contribution * tax tax is not not a vol volunt untary ary paym paymen entt or dona donati tion on.. It is not not depe depend nden entt on the the will will or contra contractu ctual al assent assent,, expr expres ess s or implie implied, d, of the person taxed. Taxes are not contracts but positive acts of the government. 3.It is generally payable in *one)
TAX ATION San Beda College of LAW – ALABANG
Tax Tax is a pecuniary burden @ an exaction to be discharged alone in the form of money which must be in legal tender, unless Aualified by law, such as )* >B8 which allows backpay certificates as payment of taxes.
4.It is p!opo!t#onate in character - It is ordinarily based on the taxpayer’s ability to pay . 5.It is levie levied d on pe!son pe!sons s o! p!ope! p!ope!t) t) ( * tax may also be imposed on acts, transactions, rights or privileges. 6.It is levied for p+l#c p!pose p!pose o! p!poses ( Taxation Taxation involves, and a tax constitutes, a burden to provide income for public purposes. 7.It is levied by the State which has jurisdiction over over the person persons s or prope property rty. - The person persons, s, property or service to be taxed must be subject to the jurisdiction of the taxing state. T"eo!) and Bas#s of Ta$at#on 0.Necess#t) T"eo!) Taxes Taxes proceed upon the theory that the existen existence ce of the government government is a necessit necessityC yC that it cannot continue without the means to pay its expensesC and that for those means, it has the right to compel all citi#ens and properties within its limits to contribute. In a case, the Supreme ourt held that! Taxation Taxation is a power emanating from necessity. It is a necessary burden to preserve the Stat State& e&s s sove sovere reig ignt nty y and and a mean means s to give give the the citi#enry an army to resist aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for for the enjo enjoym ymen entt of the the citi citi#e #enr nry y and and thos those e whic wh ich h come come with with the the Stat State& e&s s ter territo ritory ry and and facilities, and protection which a government is supposed to provide. (Phil. Guaranty Co., Inc. vs Comm Commis issi sion oner er of Inte Intern rnal al eve evenu nue, e, !" #CA #CA $$%&. 1.T"e Benef#ts(P!otect#on T"eo!) The basis of taxation is the reciprocal reciprocal duty of prote otection between the state and its inhabitant inhabitants. s. In return return for the contributi contributions, ons, the taxpayer taxpayer receive receives s the general general advantages advantages and prote protecti ction on which which the gover governme nment nt affor affords ds the taxpayer and his property. 2al 2al#f #f#c #cat at#o #ons ns T"eo!)&
of
t"e t"e
Bene Benef#t f#t(P (P!o !otec tect#o t#on n
a.It does not mean that only those who are able to pay and do pay taxes can enjoy the privileges and protection given to a citi#en by the government. b.0 b.0rom the the contr ontriibuti bution ons s receive eived, d, the the government renders no special or commensurate benefit to any particular property or person. c. The The only benefit to which the taxpayer is entitled is that derived from his enjoyment of the priv privil ileg eges es of livi living ng in an orga organi ni#e #ed d soci societ ety y established and safeguarded by the devotion of taxes to public purposes. (Gome' vs Palomar, % #CA )*& taxpay ayer er canno cannott obje object ct to or resis esistt the the d.* taxp paymen paymentt of taxes taxes solely solely becaus because e no person personal al benefit to him can be pointed out as arising from the tax. (+oren'o vs Posaas, - Phil "%"& 3.L#fe+lood T"eo!) Taxes Taxes are the lifeblood of the government, being such, their prompt and certain availability is an imperious need. (Coll (Collect ector or of Inter Internal nal evenue vs. Goorich International ubber Co., $ithout taxes, taxes, the governmen governmentt #ept. #ept. -, !*-%& !*-%& $ithout would be paraly#ed for lack of motive power to activate and operate it. Nat!e of Ta$#ng Po'e!
1.In"e!en The powe ower of In"e!entt #n so-e!e so-e!e#gn #gnt) t) @ The taxation is inherent in sovereignty as an incident or attr attrib ibut ute e ther thereo eof, f, bein being g esse essent ntia iall to the the exist xisten ence ce of every very gove goverrnmen nment. t. It can can be exerc ercised by the the gove overnment ment even if the the onstitution is entirely silent on the subject. a.onstitutional provisions relating to the power of taxation do not operate as grants of the power to the the gove govern rnme ment nt.. They They mere merely ly cons consti titu tute te limitations upon a power which would otherwise be practically without limit. b.$h b.$hil ile e the the powe powerr to tax tax is not not expr xpressl essly y provided for in our constitutions, its existence is recogni#ed by the provisions relating to taxation. In the case case of /actan Cebu International Airport Authority vs /arcos, /arcos, #ept. !!, !**-, as an incide incident nt of sover sovereig eignty nty,, the power power to tax has been been desc descri ribe bed d as "unl "unlim imit ited ed in its its rang range, e, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislative which imposes the tax on the constituency who are to pay it.' 2.Leg#slat#-e #n c"a!acte! @ The power to tax is exclusively legislative and cannot be exercised by the executive or judicial branch of the government.
TAX ATION San Beda College of LAW – ALABANG
Tax Tax is a pecuniary burden @ an exaction to be discharged alone in the form of money which must be in legal tender, unless Aualified by law, such as )* >B8 which allows backpay certificates as payment of taxes.
4.It is p!opo!t#onate in character - It is ordinarily based on the taxpayer’s ability to pay . 5.It is levie levied d on pe!son pe!sons s o! p!ope! p!ope!t) t) ( * tax may also be imposed on acts, transactions, rights or privileges. 6.It is levied for p+l#c p!pose p!pose o! p!poses ( Taxation Taxation involves, and a tax constitutes, a burden to provide income for public purposes. 7.It is levied by the State which has jurisdiction over over the person persons s or prope property rty. - The person persons, s, property or service to be taxed must be subject to the jurisdiction of the taxing state. T"eo!) and Bas#s of Ta$at#on 0.Necess#t) T"eo!) Taxes Taxes proceed upon the theory that the existen existence ce of the government government is a necessit necessityC yC that it cannot continue without the means to pay its expensesC and that for those means, it has the right to compel all citi#ens and properties within its limits to contribute. In a case, the Supreme ourt held that! Taxation Taxation is a power emanating from necessity. It is a necessary burden to preserve the Stat State& e&s s sove sovere reig ignt nty y and and a mean means s to give give the the citi#enry an army to resist aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for for the enjo enjoym ymen entt of the the citi citi#e #enr nry y and and thos those e whic wh ich h come come with with the the Stat State& e&s s ter territo ritory ry and and facilities, and protection which a government is supposed to provide. (Phil. Guaranty Co., Inc. vs Comm Commis issi sion oner er of Inte Intern rnal al eve evenu nue, e, !" #CA #CA $$%&. 1.T"e Benef#ts(P!otect#on T"eo!) The basis of taxation is the reciprocal reciprocal duty of prote otection between the state and its inhabitant inhabitants. s. In return return for the contributi contributions, ons, the taxpayer taxpayer receive receives s the general general advantages advantages and prote protecti ction on which which the gover governme nment nt affor affords ds the taxpayer and his property. 2al 2al#f #f#c #cat at#o #ons ns T"eo!)&
of
t"e t"e
Bene Benef#t f#t(P (P!o !otec tect#o t#on n
a.It does not mean that only those who are able to pay and do pay taxes can enjoy the privileges and protection given to a citi#en by the government. b.0 b.0rom the the contr ontriibuti bution ons s receive eived, d, the the government renders no special or commensurate benefit to any particular property or person. c. The The only benefit to which the taxpayer is entitled is that derived from his enjoyment of the priv privil ileg eges es of livi living ng in an orga organi ni#e #ed d soci societ ety y established and safeguarded by the devotion of taxes to public purposes. (Gome' vs Palomar, % #CA )*& taxpay ayer er canno cannott obje object ct to or resis esistt the the d.* taxp paymen paymentt of taxes taxes solely solely becaus because e no person personal al benefit to him can be pointed out as arising from the tax. (+oren'o vs Posaas, - Phil "%"& 3.L#fe+lood T"eo!) Taxes Taxes are the lifeblood of the government, being such, their prompt and certain availability is an imperious need. (Coll (Collect ector or of Inter Internal nal evenue vs. Goorich International ubber Co., $ithout taxes, taxes, the governmen governmentt #ept. #ept. -, !*-%& !*-%& $ithout would be paraly#ed for lack of motive power to activate and operate it. Nat!e of Ta$#ng Po'e!
1.In"e!en The powe ower of In"e!entt #n so-e!e so-e!e#gn #gnt) t) @ The taxation is inherent in sovereignty as an incident or attr attrib ibut ute e ther thereo eof, f, bein being g esse essent ntia iall to the the exist xisten ence ce of every very gove goverrnmen nment. t. It can can be exerc ercised by the the gove overnment ment even if the the onstitution is entirely silent on the subject. a.onstitutional provisions relating to the power of taxation do not operate as grants of the power to the the gove govern rnme ment nt.. They They mere merely ly cons consti titu tute te limitations upon a power which would otherwise be practically without limit. b.$h b.$hil ile e the the powe powerr to tax tax is not not expr xpressl essly y provided for in our constitutions, its existence is recogni#ed by the provisions relating to taxation. In the case case of /actan Cebu International Airport Authority vs /arcos, /arcos, #ept. !!, !**-, as an incide incident nt of sover sovereig eignty nty,, the power power to tax has been been desc descri ribe bed d as "unl "unlim imit ited ed in its its rang range, e, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislative which imposes the tax on the constituency who are to pay it.' 2.Leg#slat#-e #n c"a!acte! @ The power to tax is exclusively legislative and cannot be exercised by the executive or judicial branch of the government.
TAX ATION San Beda College of LAW – ALABANG S+ec ectt to cons const# t#t tt# t#on onal al an and d #n"e #n"e!e !ent nt 3.S+ l#*#tat#ons @ *lthough in one decided case the Supreme ourt called it an awesome power, the power of taxation is subject to certain limitations. =ost of these limitations are specifically provided in the onstitution or implied therefrom while the rest are inherent and they are those which spring from from the the natu naturre of the the taxi taxing ng powe powerr itse itself lf although, they may or may not be provided in the onstitution. Scope of Leg#slat Leg #slat#-e #-e Ta$#ng Po'e! 4S * 5 D * =7
1.s+ects of Ta$at#on (the persons, property or occupation etc. to be taxed3 1.a*ont o! !ate of t"e ta$ 3.p!poses fo! '"#c" ta$es s"all +e le-#ed p!o-#ded t"e) a!e p+l#c p!poses 4.appo!t#on*ent of t"e ta$ 5.s#ts of ta$at#on 6.*et"od of collect#on Is t"e Po'e! to Ta$ t"e Po'e! to %est!o)7 %est! o)7
In the case of Chu Churchi rchilll, et al. vs Concepcion (" Phil *-*& it has been ruled that! The power to impose taxes is one so unlimited in force and so searching in extent so that the courts scarcely venture to declare that it is subjec subjectt to any restr restrict iction ion wh whate atever ver,, excep exceptt such such as rest rest in the discre discretio tion n of the authori authority ty which exercise it. .generally, no limit as to amount imposed
8.imposed only by the government
-s Toll 1.demand of proprietorship .paid for the use of another&s property >.amount depends on the cost of construction or maintenance of the public improvement used 8.imposed by the government or private individuals or entities
b.Penalt) -s Ta$ Penalt) @ any sanctions imposed as a punishment for violations of law or acts deemed injurious. Ta$ 1.generally intended to raise revenue .imposed only by the government
-s Penalt) 1.designed to regulate conduct .imposed by the government or private individuals or entities
c.Spec#al Assess*ent -s Ta$ Spec#al Assess*ent @ an enforced proportional contribution from owners of lands especially or peculiarly benefited by public improvements.
TAX ATION San Beda College of LAW – ALABANG Ta$ Assess*ent 1.imposed on persons, property and excise .personal liability of the person assessed
>.based on necessity as well as on benefits received 8.general application (see *postolic 5refect vs Treas. 9f Jaguio, 21 5hil ?823
-s
Spec#al
1.levied only on land .not a personal liability of the person assessed, i.e. his liability is limited only to the land involved >.based wholly on benefits 8.exceptional both as time and place
I*po!tant Po#nts to Cons#de! Rega!d#ng Spec#al Assess*ents& 1.Since special assessments are not taxes within the constitutional or statutory provisions on tax exemptions, it follows that the exemption under Sec. (>3, *rt. HI of the onstitution does not apply to special assessments. 2.%owever, in view of the exempting proviso in #ec. " of the +ocal Government Coe, properties which are actually, irectly an exclusively use for reli3ious, charitable an eucational purposes are not exactly exempt from real property taxes but are exempt from the imposition of special assessments as well.( see Aban& > . The general rule is that an exemption from taxation does not include exemption from special assessment.
d.L#cense o! Pe!*#t 9ee -s Ta$ L#cense o! Pe!*#t fee @ is a charge imposed under the police power for the purposes of regulation. Ta$ L#cense:Pe!*#t 9ee 1.enforced contribution assessed by sovereign authority to defray public expenses .for revenue purposes
persons and property /.non-payment does not necessarily make the act or business illegal
to exercise privilege /.non-payment makes the act or business illegal
T"!ee /#nds of l#censes a!e !ecogn#>ed #n t"e la'& 1.+icenses for the regulation of useful occupations. .+icenses for the regulation or restriction of nonuseful occupations or enterprises >.+icenses for revenue only I*po!tance of t"e d#st#nct#ons +et'een ta$ and l#cense fee& 1.Some limitations apply only to one and not to the other, and that exemption from taxes may not include exemption from license fees. 2. The power to regulate as an exercise of police power does not include the power to impose fees for revenue purposes. (see American /ail +ine vs City of 8utuan, +4!-$, /ay "!, !*-$ an relate cases& >.*n extraction, however, maybe considered both a tax and a license fee. 8.Jut a tax may have only a regulatory purpose. 5. The general rule is that the imposition is a tax if its primary purpose is to generate revenue and regulation is merely incidentalC but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition of a tax. (see Pro3ressive 9evelopment Corp. vs :ue'on City, !$ #CA -*&
e.%e+t -s Ta$ ebt is based upon juridical tie, created by law, contracts, delicts or Auasi-delicts between parties for their private interest or resulting from their own acts or omissions.
-s
1.legal compensation or reward of an officer for specific purposes
.for regulation purposes >.an exercise of the >.an exercise of the taxing power police power 8.generally no limit in 8.amount is limited to the amount of tax to be the necessary expenses paid of inspection and regulation ?.imposed also on ?.imposed on the right
Ta$ 1.based on law
.generally, cannot be assigned >.generally payable in money 8.generally not subject to set-off or compensation ?.imprisonment is a sanction for nonpayment of tax except poll tax
-s %e+t 1.based on contracts, express or implied .assignable
>.may be paid in kind 8.may be subject to set-off or compensation ?.no imprisonment for non-payment of debt
TAX ATION San Beda College of LAW – ALABANG
/.gove /.govern rned ed by speci special al pres prescr crip ipti tive ve peri period ods s provided for in the Tax ode 2.does not draw inte interrest est except cept only only when delinAuent
/.governed by the ordi ordina nary ry per period iods of prescriptions 2.draws 2.draws interes interestt when so stipulated, or in case of default
Gene!al Rle& Taxes are not subject to set-off or legal legal compen compensat sation ion.. The gover governme nment nt and the taxpayer are not creditors and debtors or each other. 9bligations in the nature of debts are due to the government in its corporate capacity, while taxes are due to the government in its sovereign capacity (Philex /inin3 Corp. vs CI, * #CA -)$; epublic vs /ambulao +umber Co., - #CA -&
$he ere both both the the clai claims ms of the the E$ce E$cept pt#o #on n& $h government and the taxpayer against each other have have alread already y become become due and demand demandabl able e as well as fully liAuated. (see 9omin3o vs Garlitos, +4 !)*5, 6une *, !*-"&
Pe!t#nent Case& P"#le P"#le$ $ ;#n# ;#n#ng ng Co!p Co!p.. -s Co** Co**#s #ss# s#on one! e! of Inte!nal Re-ene ;.). ;.). senses! a.*s a book of rates drawn usually in alph alphab abet etic ical al orde orderr cont contai aini ning ng the the name names s of several kinds of merchandise with the corresponding corresponding duties to be paid for the same. b.*s b.*s duti duties es paya payabl ble e on good goods s impo import rted ed or exported (5 B3 c.*s the system system or principl principle e of imposing imposing duties on the importationKexportation of goods. 5.Inte!nal Re-ene @ refers to taxes imposed by the legislative other than duties or imports and exports. 6.;a!g#n 9ee @ a currency measure designed to stabili#e the currency. 7.T!#+te @ syno synony nymo mous us with with taxC taxC taxa taxati tion on implies tribute from the governed to some form of sovereignty. 8.I*post @ in its general sense, it signifies any tax, tribute or duty. In its limited sense, it means a duty on imported goods and merchandise. In"e!ent Po'e!s of t"e State
1.5olice 5ower .5ower .5ower of 6minent omain >.5ower of Taxation %#st#nct#ons a*ong t"e T"!ee Po'e!s Ta$at#on
Pol#ce Po'e!
P<PO#= - levied levied for ( exercised the to prom promot ote e purpos purpose e of public raising welfare welfare thru revenue regulations A/O<>2 O7 =?AC2IO> - no limit limit - limit limited ed to the the cost cost of regulations, issuan issuance ce of the the lice licens nse e or surveillance 8=>=7I2# =C=I@=9 - no special - no dir direct or direct benefits benefits but benefits a healthy received economic but the standa standard rd of enjoyment soci ociety or
E*#nent %o*a#n
taking property public use
of for
- no exact xactio ion, n, compensation paid by the government
- direct direct benefi benefitt resul esults ts in the the form of just compensation
TAX ATION San Beda College of LAW – ALABANG
of the 0amnum privileges absue of livi living ng in inBuria1 is an attained organi#ed society >O>4I/PAI/=>2 O7 CO>2AC2# the contract - contracts may impairment may be be impaired rule subsist impaired 2A>#7= O7 POP=2 IGD2# - taxes paid - no transfer - property is become but only taken by the part of restrain restraintt on gov&t upon public the exercise exercise payment of just funds of prope propert rty y compensation right exists #COP= - affects all - affe affect cts s all all - affe affec cts only only persons, persons, the the part partic icul ular ar property property, property and excise privileges, comprehended and even rights 8A#I# public public -public necessity necessity necessity, and the private property righ rightt of the the is taken for state and public use the public to selfprotection and selfpreservation A<2DOI2 EDICD EDICD =?=CI#=# =?=CI#=# 2D= POE= - only by - only by the may be the government granted to governmen or its public public servi service, ce, t or its political comp compan anie ies, s, or political subdivisions public utilities subdivision s III. L#*#tat#ons on t"e Po'e! of Ta$at#on Ta$at#on L#*#tat#ons, Class#f#ed
a.In"e!ent L#*#tat#ons or those which restrict the power although they are not embodied in the onstitution 45 < I T 67 1.P+l#c 5urpose of Taxes Taxes 2.Non-delegability of the Taxing 5ower 3.Te!!#to!#al#t) or the Situs of Taxation 4.E$e*pt#on of the ;overnment from taxes
5.Inte!nat#onal omity or those Const#tt# t#ona onall L#*#ta L#*#tat#o t#ons ns b.Const#t expr expres essly sly found found in the consti constitut tution ion or implie implied d from its provision
1.%e process of law 2.Eal protection of law 3.0reedom of Speec" and of the press 4.Non(#nf!#nge*ent of religious freedom 5.Non(#*pa#!*ent of contracts 6.Non(#*p!#s Non(#*p!#son*en on*entt for debt or non-payment of poll tax 7.9rigi igin of App!op!#at#on, )evenue evenue and Tariff ariff Jills 8.?n#fo!*#t), 6Auitabil 6Auitability ity and 5rogr 5rogressi essitivi tivity ty of Taxation Taxation 9.%elegat#on of +egislative *uthority to 0x Tariff )ates, Import and 6xport Luotas 10. Tax Tax 6xemption of P!ope!t#es *ctually, ir irectl ectly, y, and and 6xcl 6xclus usiv ivel ely y used used for for )elig eligio ious us haritable oting reAui reAuire remen ments ts in connec connectio tion n with with the 11.Hoting +egislative G!ant of Tax Tax 6xemption 6xemp tion 3 directly to promote the welfare of the community (taxation as an implement of police power3
TAX ATION San Beda College of LAW – ALABANG b. The The
term 0public purpose1 is synonymous with 03overnme purpos ose e 03overnmental ntal purpose1 purpose1;; a purp affe affect ctin ing g the the inha inhabi bita tant nts s of the the stat state e or taxi taxing ng dist distri rict ct as a comm commun unit ity y and and not not merely as individuals. c. * tax levied for a private purpose cons consti titu tute tes s a taki taking ng of prop proper erty ty witho without ut due due process of law. d. The The purp purpos oses es to be acco accomp mpli lish shed ed by taxation need not be exclusively public. *lthough private individuals are directly benefited, the tax would still be valid provided such benefit is only incidental. e. The test is not as to who receives the mone money, y, but but the char charac acte terr of the the purp purpos ose e for for which it is expendedC not the immediate result of the expenditure but rather the ultimate. g. In the imposition of taxes, public purpose is presumed.
2. Test #n dete!*#n#ng P+l#c P!poses #n ta$
a. %t) ther the thi thing to be %t) Test @ whethe threatened threatened by the appropriation of public revenue is something which is the duty of the State, as a government. b. P!o* P!o*ot ot#o #on n of Gene Gene!a !all Welfa elfa!e !e Test est @ whet wh ethe herr the the law law prov provid idin ing g the the tax tax dir directl ectly y promotes promotes the welfare welfare of the community community in eAual measure. Bas#c Bas# c P!#nc P!#nc#p #ple les s of a Son Sond d Ta$ S)st S)ste* e* @9AT
a. 9#scal Adeac) – the sources of tax revenue should coincide with, and approximate the needs of government government expendit expenditur ure. e. o. !5!$", 6uly ", !**& b. 9ele3a 9ele3atio tions ns to the +ocal +ocal Govern Governmen mentt (Art. ?. #ec. %, !*)$ Constitution& It has been held that the general principle against against the delegation delegation of legislati legislative ve powers powers as a cons conseA eAue uenc nce e of the the theo theory ry of sepa separa rati tion on of powe powers rs is subj subjec ectt to one one well well-e -est stab abli lish shed ed exception, namely, that legislative power may be delega delegated ted to local local gover governme nments nts.. The theory theory of non-de non-deleg legati ation on of legis legislat lative ive powers powers does does not appl apply y in mate maters rs of loca locall conc concer ern. n. (Pepsi4Cola 8ottlin3 Co. of the Phil, Inc. vs City of 8utuan, et . al., +4)!, Au3. ), !*-)& c. 9ele3atio 9ele3ation n to Aministra Aministrative tive A3encies with respect to aspects of 2axation not le3islative in character. exampleF assessment an collection 3.L#*#tat#ons on %elegat#on
a. It shall not contravene any onstitutional provisions or inherent limitations of taxationC b. The delegation is effected either by the onsti onstitut tution ion or by validl validly y enacte enacted d legis legislat lative ive measures or statuteC and c. The delegated levy power, except when the the dele delegat gatio ion n is by an expr expres ess s prov provis isio ion n of onstitution itself, should only be in favor of the local local legis legislat lative ive body body of the local local or munici municipal pal government concerned.
TAX ATION San Beda College of LAW – ALABANG
4.Ta$
Leg#slat#on -#s(=(-#s Ta$ Ad*#n#st!at#on ( 6very system of taxation consists of two parts! a. the elements that enter into the imposition of the tax 4S * 5 D * =7, or tax regulationC and b. the steps taken for its assessment and collection or tax administration If what is delegated is tax legislation, the delegation is invalidC but if what is involved is only tax administration, the non-delegability rule is not violated.
. Te!!#to!#al#t) o! S#ts of Ta$at#on 0.I*po!tant Po#nts to Cons#de!& a. Territoriality or Situs of Taxation means 0place of taxation1 depending on the nature of taxes being imposed. b.It is an inherent mandate that taxation shall only be exercised on persons, properties, and excise within the territory of the taxing power because! b.13 Tax laws do not operate beyond a country&s territorial limit. b.3 5roperty which is wholly and exclusively within the jurisdiction of another state receives none of the protection for which a tax is supposed to be compensation.
c.%owever, the fundamental basis of the right to tax is the capacity of the government to provide benefits and protection to the object of the tax. * person may be taxed, even if he is outside the taxing state, where there is between him and the taxing state, a privity of relationship justifying the levy. 1.9acto!s to Cons#de! #n dete!*#n#ng S#ts of Ta$at#on a.kind and lassification of the Tax b.location of the subject matter of the tax c.domicile or residence of the person d.citi#enship of the person e.source of income f.place where the privilege, business or occupation is being exercised
. E$e*pt#on of t"e Go-e!n*ent f!o* Ta$es 0.I*po!tant Po#nts to Cons#de!& Reasons fo! E$e*pt#ons& a.13 To levy tax upon public property would render necessary new taxes on other public property for the payment of
the tax so laid and thus, the government would be taxing itself to raise money to pay over to itselfC a.3 In order that the functions of the government shall not be unduly impedeC and a.>3 To reduce the amount of money that has to be handed by the government in the course of its operations. 2.Mnless otherwise provided by law, the exemption applies only to government entities through which the government immediately and directly exercises its sovereign powers (Infantry Post =xchan3e vs Posaas, % Phil )--& >.3 foreign government may not be sued without its consent so that it is useless to assess the tax since it cannot be collected b.83 reciprocity among states Const#tt#onal L#*#tat#ons
1.%e P!ocess of La'
a.Bas#s& #ec. ! Art. " 0>o person shall be eprive of life, liberty or property without ue process of law x x x.' Re#s#tes & 1. The interest of the public generally as distinguished from those of a particular class reAuire the intervention of the stateC . The means employed must be reasonably necessary to the accomplishment for the purpose and not unduly oppressiveC
TAX ATION San Beda College of LAW – ALABANG
>. The deprivation was done under the authority of a valid law or of the constitutionC and 8. The deprivation was done after compliance with fair and reasonable method of procedure prescribed by law. In a string of cases, the Supreme ourt held that in order that due process of law must not be done in an arbitrary, despotic, capricious, or whimsical manner. .Eal P!otect#on of t"e La'
a.Bas#s& #ec.! Art. " 0 xxx
>or shall any person be enie the eual protection of the laws. I*po!tant Po#nts to Cons#de! ! 1. 6Aual protection of the laws signifies that all persons subject to legislation shall be treated under circumstances and conditions both in the privileges conferred and liabilities imposed . This doctrine prohibits class legislation which discriminates against some and favors others.
b.)eAuisites for a Halid lassification 1. =ust not be arbitrary . =ust not be based upon substantial distinctions >. =ust be germane to the purpose of law. 8. =ust not be limited to exiting conditions onlyC and ?. =ust play eAually to all members of a class. >.?n#fo!*#t), E#ta+#l#t) P!og!ess#-#t) of Ta$at#on
and
a.Bas#s& Sec. (13 *rt. HI. The rule of taxation shall be uniform and eAuitable. The ongress shall evolve a progressive system of taxation. b. I*po!tant Po#nts to Cons#de!& 1. (eAuality or eAual ?n#fo!*#t) protection of the laws3 means all taxable articles or kinds or property of the same class shall be taxed at the same rate. * tax is uniform when the same force and effect in every place where the subject of it is found. . E#ta+le means fair, just, reasonable and proportionate to one&s ability to pay. >. P!og!ess#-e s)ste* of Ta$at#on places stress on direct rather than indirect taxes, or on the taxpayers& ability to pay 8. IneAuality which results in singling out one particular class for taxation or exemption
infringes no constitutional limitation. (see Commissioner vs. +in3ayen Gulf =lectric, !- #CA $& ?. The rule of uniformity does not call for perfect uniformity or perfect eAuality, because this is hardly attainable. 8.9!eedo* of Speec" and of t"e P!ess
a.Bas#s& Sec. 8 *rt. III. . %owever, an annual registration fee on all persons subject to the value-added tax does not constitute a restraint on press freedom since it is not imposed for the exercise of a privilege but only for the purpose of defraying part of cost of registration. ?.Non(#nf!#nge*ent of Rel#g#os 9!eedo*
a.Bas#s& Sec. ? *rt. III. "3 *rt. HI. "haritable institutions, churches and parsonages or convents appurtenant thereto, mosAues, non-profit cemeteries, and all lands, building, and improvements actually, irectly an exclusively used for religious, charitable or educational purposes shall be exempt from taxation.' b. I*po!tant Po#nts to Cons#de!& 1. +est of the tax exemption! the use and not ownership of the property . To be tax-exempt, the property must be actually, directly and exclusively used for the purposes mentioned. >. The word "exclusively' means "primarily&. 8. The exemption is not limited to property actually indispensable but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes. ?. The constitutional exemption applies only to property tax. /. %owever, it would seem that under existing law, gifts made in favor or religious charitable and educational organi#ations would nevertheless Aualify for donor&s gift tax exemption. (Sec. 1B1(3(>3, . Ta$ E$e*pt#ons of Re-enes and Assets, #ncld#ng g!ants, endo'*ents, donat#ons o! cont!#+t#ons to Edcat#onal Inst#tt#ons
a.Bas#s& Sec. 8(83 *rt. OIH. "Subject to the conditions prescribed by law, all grants, endowments, donations or contributions used actually, directly and exclusively for educational purposes shall be exempt from tax.' b. I*po!tant Po#nts to Cons#de!& 1. The exemption granted to non-stock, nonprofit educational institution covers income, property, and donor&s taxes, and custom duties. . To be exempt from tax or duty, the revenue, assets, property or donation must be used actually, directly and exclusively for educational purpose. >. In the case or religious and charitable entities and non-profit cemeteries, the exemption is limited to property tax. 8. The said constitutional provision granting tax exemption to non-stock, non-profit educational institution is self-executing. ?. Tax exemptions, however, of proprietary (for profit3 educational institutions reAuire prior legislative implementation. Their tax exemption is not self-executing. /. +ands, Juildings, and improvements actually, directly, and exclusively used for educational purposed are exempt from property tax, whether the educational institution is proprietary or non-profit. c.%epa!t*ent of 9#nance O!de! No. 03( F, dated %ec. 06, 0F The following are some of the highlights of the 90 order governing the tax exemption of nonstock, non-profit educational institutions! 1. The tax exemption is not only limited to revenues and assets derived from strictly school operations like income from tuition and other miscellaneous feed such as matriculation, library, )9T, etc. fees, but it also extends to incidental income derived from canteen, bookstore and dormitory facilities. . In the case, however, of incidental income, the facilities mentioned must not only be owned and operated by the school itself but such facilities must be located inside the school campus. anteens operated by mere concessionaires are taxable.
>. Income which is unrelated to school operations like income from bank deposits, trust fund and similar arrangements, royalties, dividends and rental income are taxable. 8. The use of the school&s income or assets must be in consonance with the purposes for which the school is createdC in short, use must be school-related, like the grant of scholarships, faculty development, and establishment of professional chairs, school building expansion, library and school facilities. Ot"e! Const#tt#onal P!o-#s#ons !elated to Ta$at#on
1.S+ect and T#tle of B#lls @Sec. 16@0 0F Const#tt#on "6very Jill passed by ongress shall embrace only one subject which shall be expressed in the title thereof.' in the Tolentino 6-H*T case, supra, the 6-vat, or the 6xpanded Halue *dded Tax +aw ()* 221/3 was also Auestioned on the ground that the constitutional reAuirement on the title of a bill was not followed. →
.Po'e! of t"e P!es#dent to .Necess#t) of an App!op!#at#on *ade +efo!e *one) *a) +e pa#d ot of t"e T!eas!) @Sec. 1@0, A!t. o. **))-, /ar. "!, !**"& →
/.Allot*ent to Local Go-e!n*ents Sec. 6, A!t. X of t"e 0F →Bas#s& Const#tt#on "+ocal ;overnment units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.'
I<. S#ts of Ta$at#on and %o+le Ta$at#on S#ts of Ta$at#on
1.S#ts of Ta$at#on literally means the Place of Ta$at#on. 2.Bas#c Rle @ state where the subject to be taxed has a situs may rightfully levy and collect the tax So*e Bas#c Cons#de!at#ons Affect#ng S#ts of Ta$at#on 0.P!otect#on * legal situs cannot be given to property for the purpose of taxation where neither the property nor the person is within the protection of the taxing state •
In the case of /anila =lectric Co. vs atco (-* Phil )*&, the Supreme ourt ruled that insurance premium paid on a fire insurance policy covering property situated in the 5hils. are taxable in the 5hils. 6ven though the fire insurance contract was executed outside the 5hils. and the insurance policy is delivered to the insured therein. This is because the Philippines Government must 3et somethin3 in return for the protection it 3ives to the insure property in the Phils. an by reason of such protection, the insurer is benefite thereby.
2.T"e *a$#* of Mobilia Personam and S#ts of Ta$at#on
Sequuntur
*ccording to this maxim, which means 'movable follow the person,' the situs of personal property is the domicile of the owner. This is merely a fiction of law and is not allowed to stand in the way of taxation of personalty in the place where it has its actual situs and the reAuisite legislative jurisdiction exists. E$a*ple& shares of stock may have situs for purposes of taxation in a state in which they are permanently kept regardless of the domicile of the owner, or the state in which he corporation is organi#ed. 3.Leg#slat#-e Po'e! to 9#$ S#ts If no constitutional provisions are violated, the power of the legislative to fix situs is undoubted. E$a*ple& our law fixes the situs of intangible personal property for purposes of the estate and gift taxes. (see Sec. 0H4, 0 NIRC3 Note& In those cases where the situs for certain intangibles are not categorically spelled out, there is room for applying the mobilia rule.
4.%o+le Ta$at#on and L#*#tat#on (see later topic3
t"e
S#ts
C!#te!#a #n 9#$#ng Ta$ S#ts of S+ect of Ta$at#on
a.Pe!sons @ 5oll tax may be levied upon persons who are residents of the State. b.Real P!ope!t) @ is subject to taxation in the State in which it is located whether the owner is a resident or non-resident, and is taxable only there. Rle of Le$ Re# S#tae
→
TAX ATION San Beda College of LAW – ALABANG
c.Tang#+le Pe!sonal p!ope!t) @ taxable in the state where it has actual situs @ where it is physically located. *lthough the owner resides in another jurisdiction. Rle of Le$ Re# S#tae
→
d.Intang#+le Pe!sonal P!ope!t) @ situs or personal property is the domicile of the owner, in accordance with the principle ;OBILIA SE2??NT?R PERSONA;, said principle, however, is not controlling when it is inconsistent with express provisions of statute or when justice demands that it should be, as where the property has in fact a situs elsewhere. (see Eells 7ar3o 8anH v. Collector $5 PDI+ "%; Collector v. 7isher +4 !!-, 6anuary, !*-!&
e.Inco*e @ properly exacted from persons who are residents or citi#ens in the taxing jurisdiction and even those who are neither residents nor citi#ens provided the income is derived from sources within the taxing state. f.Bs#ness, Occpat#on, and T!ansact#on @ power to levy an excise tax depends upon the place where the business is done, of the occupation is engaged in of the transaction not place. g.G!at#tos T!ansfe! of P!ope!t) @ transmission of property from donor to donee, or from a decedent to his heirs may be subject to taxation in the state where the transferor was a citi#en or resident, or where the property is located. <. ;lt#pl#c#t) of S#ts
There is multiplicity of situs when the same subject of taxation, like income or intangible, is subject to taxation in several taxing jurisdictions. This happens due to! a.Hariance in the concept of "domicile' for tax purposesC b.=ultiple distinct relationship that may arise with respect to intangible personalityC and c.The use to which the property may have been devoted, all of which may receive the protection of the laws of jurisdiction other than the domicile of the owner Re*ed) @ taxation jurisdiction may provide! a.6xemption or allowance of deductions or tax credit for foreign taxes
b.6nter into treaties with other states %o+le Ta$at#on T'o @1 #nds of %o+le Ta$at#on 1.O+no$#os o! %#!ect %pl#cate Ta$at#on (9ouble taxation in its strict sense& - In the objectionable or prohibited sense means that the same property is taxed twice when it should be taxed only once. Re#s#tes& 1.Same property is taxed twice .Same purpose >.Same taxing authority 8.$ithin the same jurisdiction ?.uring the same taxing period /.Same kind or character of tax
2.Pe!*#ss#-e
o! Ind#!ect %pl#cate Ta$at#on (9ouble taxation in its broa sense& @ This is the opposite of direct double taxation and is not legally objectionable. The absence of one or more of the foregoing reAuisites of the obnoxious direct tax makes it indirect. •Instances of %o+le Ta$at#on #n #ts B!oad Sense 1.* tax on the mortgage as personal property when the mortgaged property is also taxed at its full value as real estateC .* tax upon a corporation for its capital stock as a whole and upon the shareholders for their sharesC >.* tax upon a corporation for its capital stock as a whole and upon the shareholders for their sharesC 8.* tax upon depositions in the bank for their deposits and a tax upon the bank for their property in which such deposits are invested ?.*n excise tax upon certain use of property and a property tax upon the same propertyC and /.* tax upon the same property imposed by two different states.
;eans to Redce t"e Ja!s" Effect of Ta$at#on 1.Ta$ %edct#on – subtraction from gross income in arriving a taxable income 2.Ta$ C!ed#t – an amount subtracted from an individual&s or entity&s tax liability to arrive at the total tax liability •
* deduction differ from a tax credit in that a deduction reduces taxable income while credit reduces tax liability →
TAX ATION San Beda College of LAW – ALABANG
>.E$e*pt#ons 4.T!eat#es with other States ?.P!#nc#ple of Rec#p!oc#t) Const#tt#onal#t) ouble Taxation in its stricter sense is undoubtedly unconstitutional but that in the broaer sense is not necessarily so. 9ur onstitution does not Gene!al Rle& prohibit double taxationC hence, it may not be invoked as a defense against the validity of tax laws. a.$here a tax is imposed by the at#on, defined @ the reduction in the price of the taxed object eAual to the capitali#ed value of future taxes which the purchaser expects to be called upon to pay 3.T!ansfo!*at#on @ The method whereby the manufacturer or producer upon whom the tax has been imposed, fearing the loss of his market if he should add the tax to the price, pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units of products at a lower cost. 4.Ta$ E-as#on @ is the use of the taxpayer of illegal or fraudulent means to defeat or lessen the payment of a tax. Ind#c#a of 9!ad #n Ta$at#on a.0ailure to declare for taxation purposes true and actual income derived from business for two consecutive years, and b.Substantial underdeclaration of income tax returns of the taxpayer for four consecutive years couple with overstatement of euction. →
6vasion of the tax takes place only when there are no proceeds. 6vasion of Taxation is tantamount, fiscally speaking, to the absence of taxation. →
5.Ta$ A-o#dance @ is the use by the taxpayer of legally permissible alternative tax rates or method of assessing taxable property or income in order to avoid or reduce tax liability.
TAX ATION San Beda College of LAW – ALABANG
Tax *voidance is not punishable by law, a taxpayer has the legal right to decrease the amount of what otherwise would be his taxes or altogether avoid by means which the law permits. →
%#st#nct#on A-o#dance
+et'een
Ta$
E-as#on
and
Ta$ E-as#on -s Ta$ A-o#dance accomplished by accomplished by breaking the letter legal procedures or of the law means which maybe contrary to the intent of the sponsors of the tax law but nevertheless do not violate the letter of the law .=ay be created in a treaty on grounds of reciprocity or to lessen the rigors of international double or multiple taxation which occur where there are many taxing jurisdictions, as in the taxation of income and intangible personal property 6.E#t), not a g!ond fo! Ta$ E$e*pt#on There is no tax exemption solely on the ground of eAuity, but eAuity can be used as a basis for statutory exemption. *t times the law authori#es condonation of taxes on eAuitable considerations. (Sec 2/, 22, +ocal ;overnment ode3 0.#nds of Ta$ E$e*pt#ons 1.*s to +as#s a.Const#tt#onal E$e*pt#ons – Immunities from taxation which originate from the onstitution b.Statto!) E$e*pt#ons – Those which emanate from +egislation
2.*s to fo!* a.E$p!ess E$e*pt#on – $henever expressly
J.Nat!e of Ta$ E$e*pt#on 1.It is merely a personal privilege of the grantee .It is generally revocable by the government unless the exemption is founded on a contract which is protected from impairment, but the contract must contain the other essential elements of contracts, such as, for example, a valid cause or consideration. >.It implies a waiver on the part of the government of its right to collect what otherwise would be due to it, and in this sense is prejudicial thereto. 8.It is not necessarily discriminatory so long as the exemption has a reasonable foundation or rational basis. .Rat#onale of ta$ E$e*pt#on 5ublic interest would be subserved by the exemption allowed which the law-making body considers sufficient to offset monetary loss entailed in the grant of the exemption. (CI vs 8othelo #hippin3 Corp., +4!-"", 6une *, !*-$; CI vs PA+, +45*-5, Oct. "!, !*-)& .G!onds fo! Ta$ E$e*pt#ons 1.=ay be based on a contract in which case, the public represented by the ;overnment is supposed to receive a full eAuivalent therefore
granted by organic or statute of law b.I*pl#ed E$e*pt#on – 6xist whenever particular persons, properties or excises are deemed exempt as they fall outside the scope of the taxing provision itself
3.*s to e$tent a.Total E$e*pt#on – onnotes absolute immunity b.Pa!t#al E$e*pt#on – 9ne where collection of a part of the tax is dispensed with
;.P!#nc#ples Go-e!n#ng t"e Ta$ E$e*pt#on 1.6xemptions from taxation are highly disfavored by law, and he who claims an exemption must be able to justify by the clearest grant of organic or statute of law. (Asiatic Petroleum vs +lanes, * PDI+ --; Collector of Internal evenue vs. /anila 6ocHey Club, *) PDI+ -$5& 2.%e who claims an exemption must justify that the legislative intended to exempt him by words too plain to be mistaken. (@isayan Cebu 2erminal vs CI, +4!*%"5, 7eb. $, !*-%& >.%e who claims exemptions should convincingly proved that he is exempt 4. Tax exemptions must be strictly construed (Phil. Acetylene vs CI, +4!*$5$, Au3. !$, !*-$&
TAX ATION San Beda College of LAW – ALABANG
5. Tax 6xemptions are not presumed. (+eala =lectric Co. vs CI, +4!-), Apr. "5, !*-"& 6.onstitutional grants of tax exemptions are self-executing (Opinion >o. !"5, !*)$, #ec. Of 6ustice& 2.Tax exemption are personal. .eductions for income tax purposes partake of the nature of tax exemptions, hence, they are strictly construed against the tax payer 9.* tax amnesty, much like a tax exemption is never favored or presumed by law (CI vs CA, G.. >o. !5)%$-, 6an. 5, !***& 1B.The rule of strict construction of tax exemption should not be applied to organi#ations performing strictly religious, charitable, and educational functions o. !5!$!, 7eb. , !***& %oct!#ne of E#ta+le Recop*ent It provides that a claim for refund barred by prescription may be allowed to offset unsettled tax liabilities should be pertinent only to taxes arising from the same transaction on which an overpayment is made and underpayment is due.
This doctrine, however, was rejected by the Supreme ourt, saying that it was not convinced of the wisdom and proprietary thereof, and that it may work to tempt both the collecting agency and the taxpayer to delay and neglect their respective pursuits of legal action within the period set by law. (Collector vs <#2, !5 PDI+ !5-& Ta$pa)e!Ds S#t ( It is only when an act complained of, which may include legislative enactment, directly involves the illegal disbursement of public funds derived from taxation that the taxpayer&s suit may be allowed. .The rule of strict construction against the government is not applicable where the language of the tax law is plain and there is no doubt as to the legislative intent. 8.The exemptions (or eAuivalent provisions, such as tax amnesty and tax condonation3 are not presumed and when granted are strictly construed against the grantee. ?.The exemptions, however, are construed liberally in favor of the grantee in the following! a.$hen the law so provides for such liberal constructionC b.6xemptions from certain taxes granted under special circumstances to special classes of personsC
TAX ATION San Beda College of LAW – ALABANG
c.6xemptions in favor of the ;overnment, its political subdivisionsC d.6xemptions to traditional exemptees, such as, those in favor of charitable institutions. /.The tax laws are presumed valid. 2.The power to tax is presumed to exist. TAX A%;INISTRATION AN% EN9ORCE;ENT Agenc#es In-ol-ed #n Ta$ Ad*#n#st!at#on
1. Jureau of Internal )evenue and the Jureau of ustoms for internal revenue and customs law enforcement. It is noteworthy to note that the JI) is largely decentrali#ed in that a great extent of tax enforcement duties are delegated to the )egional irectors and )evenue istrict 9fficers. . 5rovincial, ity and =unicipal assessors and treasures for local and real property taxes. Agents and %ept#es fo! Collect#on of Nat#onal Inte!nal Re-ene Ta$es
Mnder Sec. 1 of the 12 o. --)"), !% April !*)).& E$cept#ons&
The ourt ruled in Commissioner of Internal evenue vs. C.A., et. al. G.. >o. !!$*), - 7eb !**$ that like other principles of law, the non-application of estoppel to the government admits of ex'eptions in the interest of
TAX ATION San Beda College of LAW – ALABANG (usti'e and fair play) as where in(usti'e will result to the taxpayer*
c.
Estoppel Aga#nst t"e Ta$pa)e!
$hile the principle of estoppel may not be invoked against the government, this is not necessarily true in case of the taxpayer. In CI vs. #uyac, !5 Phil )!* , the taxpayer made several reAuests for the reinvestigation of its tax liabilities such that the government, acceding to the taxpayers reAuest, postponed the collection of its liability. The taxpayer cannot later on be permitted to raise the defense of prescription inasmuch as his previous reAuests for reinvestigation have the effect of placing him in estoppel.
Nature and +inds of ssessments n assessment is the offi'ial a'tion of an administrative offi'er determinin! the amount of tax due from a taxpayer) or it may be the noti'e to the effe't that the amount therein stated is due from the taxpayer that the payment of the tax or defi'ien'y stated therein* (8isaya +an 2ransportation Co. vs CI, !5% Phil !"")&
d.
P!#nc#ples Go-e!n#ng Ta$ Assess*ents 0. ssessments are prima fa'ie presumed 'orre't and made in !ood faith*
Class#f#cat#ons& a.
b.
Self(assess*ent( Tax is assessed by the taxpayer himself. The amount is reflected in the tax return that is filed by him and the tax is paid at the time he files his return. (#ec. %- JAK L!K, !**$ >IC& %ef#c#enc) Assess*ent- This is an assessment made by the tax assessor whereby the correct amount of the tax is determined after an examination or investigation is conducted. The liability is determined and isC therefore, assessed for the following reasons! 1. The amount ascertained exceeds that which is shown as tax by the taxpayer in his returnC . IC&
Illegal and o )!-, ) Au3 !*)) *ll presumptions are in favor of tax assessments (9ayrit vs. Cru', +4"**!5, - #ept. !*))& 0ailure to present proof of error in the assessment will justify judicial affirmation of said assessments. (CI vs C.C. G.. >o. !5!%! an !5%%-", !5 /ar !**%& * party challenging an appraiser&s finding of value is reAuired to prove not only that the appraised value is erroneous but also what the proper value is (Caltex vs. C.C. G.. >o. !5$)!, !5 6uly !**)&
. *ssessments should not be based on presumptions no matter how logical the presumption might be. In order to stand the test of judicial scrutiny it must be based on a'tual fa'ts. >. *ssessment is discretionary on the part of the ommissioner. Mandamus will not lie to 'ompel him to assess a tax after investi!ation if he finds no !round to assess* Mandamus to 'ompel the Commissioner to assess will result in the en'roa'hment on exe'utive fun'tions , /eralco #ecuirities Corp. vs. #avellano, +4 "-!)! an +4"-$), " Oct !**&.
TAX ATION San Beda College of LAW – ALABANG =xceptF $he -IR Commissioner may be 'ompelled to assess by mandamus if in the exer'ise of his dis'retion there is eviden'e of arbitrariness and !rave abuse of dis'retion as to !o beyond statutory authority , /acea vs. /acarai3, G.. >o. ))*, ) 6une !**" .*
8. The authority vested in the ommissioner to assess taxes may be delegated. n assessment si!ned by an employee for and in behalf of the Commissioner of Internal Revenue is valid* /owever) it is settled that the power to ma%e final assessments 'annot be dele!ated* $he person to whom a duty is dele!ated 'annot lawfully dele!ate that duty to another* , City +umber vs. 9omin3o, +4!)-!!, "5 6an !*-&.
?. *ssessments must be directed to the right party. /en'e) if for example) the taxpayer bein! assessed is an estate of a de'edent) the administrator should be the party to whom the assessment should be sent , epublic vs. ela ama, +4 !!5), * >ov. !*--& ) and not the heirs of the de'edent
;eans E*plo)ed #n t"e Assess*ent of Ta$es A. E$a*#nat#on of Ret!ns& Confidentiality Rule
The Tax ode reAuires that after the return is filed, the ommissioner or his duly authori#ed representative shall examine the same and assess the correct amount of tax. The tax or the deficiency of the tax so assessed shall be paid upon notice and demand from the ommissioner or from his duly authori#ed representative. *ny return, statement or declaration filed in any office authori#ed to receive the same shall not be withdrawn. %owever, within three (>3 days from the date of such filing, the same may be modified, changed or amended, provided that no notice for audit or investigation of such return, statement or declaration has in the meantime been actually served upon the taxpayer. (#ec -JAK, !**$ >IC& *lthough Sec. 21 of the 12 > of the Secretary of 0inance. 3. $hen the production of the tax return is material evidence in a criminal case wherein the ;overnment is interested in the result. (Cu IC& -est Eviden'e 0btainable refers to any
data, record, papers, documents, or any evidence gathered by internal revenue officers from government offices or agencies, corporations, employers, clients or patients, tenants, lessees, vendees and from all other sources, with whom the taxpayer had previous transactions or from
TAX ATION San Beda College of LAW – ALABANG
whom he received any income, after ascertaining that a report reAuired by law as basis for the assessment of any internal revenue tax has not been filed or when there is reason to believe that any such report is false, incomplete or erroneous. * case in point on the use of the best evidence obtainable is #y Po vs C2A. In that case, there was a demand made by the ommissioner on the Silver up $ine ompany owned by petitioner&s deceased husband 5o Jien Seng. The demand was for the taxpayer to submit to the JI) for examination the factory&s books of accounts and records, so JI) investigators raided the factory and sei#ed different brands of alcoholic beverages. The investigators, on the basis of the wines sei#ed and the sworn statements of the factory&s employees on the Auantity of raw materials consumed in the manufacture of liAuor, assessed the corresponding deficiency income and specific taxes. The Supreme ourt, on appeal, upheld the legality of the assessment.
C* Inventory1$a%in!) Surveillan'e Presumptive "ross Sales and Re'eipts
b. That he intends to leave the 5hilippines or remove his property therefromC c. That the taxpayer hides or conceals his propertyC or d. That he performs any act tending to obstruct the proceedings for the collection of the tax for the past or current Auarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately. The written decision to terminate the tax period shall be accompanied with a reAuest for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or Auarter, or such portion thereof as may be unpaid. Said taxes shall be due and payable immediately and shall be subject to all the penalties prescribed unless paid within the time fixed in the demand made by the ommissioner (#ec. - JK, !**$ >IC 3
and
The ommissioner is authori#ed at any time during the taxable year to order the inventory-taking of goods of any taxpayer as a basis for assessment. If there is reason to believe that a person is not declaring his correct income, sales or receipts for internal revenue tax purposes, his business operation may be placed under observation or surveillance. The finding made in the surveillance may be used as a basis for assessing the taxes for the other months or Auarters of the same or different taxable years. (#ec. - JCK, !**$ >IC&
2* $ermination of $axable Period
The ommissioner shall declare the tax period of a taxpayer terminated at any time when it shall come to his knowledge! a. That the taxpayer is retiring from business subject to taxC
E. 9#$#ng of Real P!ope!t) IC&. 9. In#!) #nto Ban/ %epos#ts
6xamination of bank deposits enables the ommissioner to assess the correct tax liabilities of taxpayers. %owever, bank deposits are confidential under ).*. 18B?. IC&. Net Wo!t" ;et"od #n In-est#gat#on
The basis of using the , 12 . compensation for injuries or sicknessC 8. proceeds of life insurance policiesC ?. sweepstakes winningsC /. interest on government securities and the like Increase in net worth are not taxable if they are shown not to be the result of unreported income but to be the result of the correction of errors in the taxpayer&s entries in the books relating to indebtedness to certain creditors, erroneously listed although already paid. (7ernane' Dermanos Inc. vs. CI, +4!%%!, "5 #ept. !*-*&
Enfo!ce*ent of 9o!fe#t!es and Penalt#es
5roper adjustments for nondeductible items must be made. The following non-deductibles, as the case may be, must be added to the increase or decrease in the net worth! 1. personal, living or family expensesC . premiums paid on any life insurance policyC >. losses from sales or exchanges of property between members of the familyC 8. income taxes paidC ?. estate, inheritance and gift taxesC /. other non-deductible taxesC 2. election expenses and other expenses against public policyC
Statto!) Offenses and Penalt#es 0. Add#t#ons to t"e Ta$
*dditions to the tax are increments to the basic tax incident due to the taxpayer&s non-compliance with certain legal reAuirements, like the taxpayer&s refusal or failure to pay taxes andKor other violations of taxing provisions. *dditions to the tax consist of the! (13 civil penalty, otherwise known as surchar3e, which may either be ?N or
TAX ATION San Beda College of LAW – ALABANG
?B N of the tax depending upon the nature of the violationC
penalty (+im Co Chui vs. Posaas, $ Phil -5&
(3 interest either for a deficiency tax or delinAuency as to paymentC
The ommissioner is not vested with any authority to waive or dispense with the collection therof. (CI vs. CA, supra&. The penalty and interest are not penal but compensatory for the concomitant use of the funds by the taxpayer beyond the date when he is supposed to have paid them to the ;overnment.(Philippine efinin3 Company vs. C.A., G.. >o. !!))$*, ) /ay !**-&.
(>3 other civil penalties or administrative fines such as for failure to file certain information returns and violations committed by withholding agents. (#ecs. $ to %, !**$ >IC& Gene!al Add#t#on to ta$
Cons#de!at#ons
on
t"e
a. *dditions to the tax or deficiency tax apply to all taxes, fees, and charges imposed in the Tax ode. b. The amount so added to the tax shall be collected at the same time, in the same manner, and as part of the tax. c. If the withholding agent is the government or any of its agencies, political subdivisions or instrumentalities, or a government owned or controlled corporation, the employee thereof responsible for the withholding and remittance of the tax shall be personally liable for the additions to the tax prescribed (#ec. $JbK, !**$ >IC& such as the ?N surcharge and the BN interest per annum on the delinAuency (#ecs. ) an * JCK, !**$ >IC&
S!c"a!ge
The payment of the surcharge is manatory and the ommissioner of Internal )evenue is not vested with any authority to waive or dispense with the collection thereof. In one case, the Supreme ourt held that the fact that on account of riots directed against the hinese on certain dates, they were prevented from paying their internal revenue taxes on time, does not authori#e the ommissioner to extend the time prescribed for the payment of taxes or to accept them without the additional
*n extension of time to pay taxes granted by the ommissioner does not excuse payment of the surcharge (CI vs. Cu 1 abolished the income tax exemptions of corporations (including electric power franchise grantees3 except those exempt under Sec. 2 (now, Sec. >B, 12 o. -5!-, % #ept. !*)%& 8. In the case of failure to make and file a return or list within the time prescribed by law, not due to willful neglect, where such return or list is voluntarily filed by the taxpayer without notice from the I) or other officers, and it is shown that the failure to file it in due time was due to a reasonable cause,
TAX ATION San Beda College of LAW – ALABANG
no surcharge will be added to the amount of tax due on the return. In such case, in order to avoid the imposition of the surcharge, the taxpayer must make a statement showing all the facts alleged as reasonable causes for failure to file the return on time in the form of an affidavit, which should be attached to the return.
fails to pay the tax or any installment thereof, or any part of such amount or installment on or before the date prescribed for its payment, or where the ommissioner has authori#ed an extension of time within which to pay a tax or a deficiency tax or any part thereof. (#ec. *JK, !**$ >IC& Ad*#n#st!at#-e Offenses
1. 0ailure to 0ile ertain Information )eturns Inte!est
This is an increment on any unpaid amount of tax, assessed at the rate of twenty percent (BN3 per annum, or such higher rate as may be prescribed y rules and regulations, from the date prescribed for payment until the amount is fully paid. (#ec. * JAK, !**$ >IC& Interest is classified into! 0. %ef#c#enc) #nte!est *ny deficiency in the tax due, as the term is defined in this code, shall be subject to the interest of BN per annum, or such higher rate as may be prescribed by rules and regulations, which shall be assessed and collected from the date prescribed for its payment until the full payment thereof (#ec. * J8K, !**$ >IC&
. 0ailure of a $ithholding *gent to ollect and )emit Taxes >. 0ailure of a $ithholding *gent to )efund 6xcess $ithholding Tax So!ces of !e-enes& 1.Income tax . 6state Tax and dono&r tax >. H*T 8. 9ther percentage taxes ?. 6xcise tax /. ocumentary stamp taxes 2.9ther as imposed and provided by JI)
)6=6I6S 90 T%6 ;9H6)<=6. Tax +ien 8. ompromise ?. 0orfeiture /. 9ther *dministrative )emedies
1. %el#nenc) #nte!est This kind of interest is imposed in case of failure to pay!
(13 The amount of the tax due on any return reAuired to be filed, or (3 The amount of the tax due for which no return is reAuired, or (>3 * deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the ommissioner.
3. Inte!est on E$tended Pa)*ent
Imposed when a person reAuired to pay the tax is Aualified and elects to pay the tax on installment under the provisions of the ode, but
6numeration of the )emedies
II. Eudicial 1. ivil *ction . riminal *ction •
istraint of 5ersonal 5roperty
istraint- Sei#ure by the government of personal property, tangible or intangible, to enforce the payment of faces, to be followed by its public sale, if the taxes are not voluntarily paid. DI<S
TAX ATION San Beda College of LAW – ALABANG
a. *ctual @ There is taking of possession of personal property out of the taxpayer into that of the government. In case of intangible property. Taxpayer is also diverted of the power of control over the property b. onstructive @ The owner is merely prohibited from disposing of his personal property.
1. Service of warrant of distraint upon taxpayer or upon person in possession of taxpayer&s personal property. . 5osting of notice is not less than two places in the municipality or city and notice to the taxpayer specifying time and place of sale and the articles distrained. >. Sale at public auction to highest bidder 8. isposition of proceeds of the sale. $ho may effect distraint
*ctual vs. =ade on the property only of a delinAuent taxpayer. There is actual taking or possession of the property. 6ffected by having a list of the distraint property or by service or warrant of distraint or garnishment. *n immediate step for collection of taxes where amount due is definite.
onstructive istraint =ay be made on the property of any taxpayer whether delinAuent or not Taxpayer is merely prohibited from disposing of his property. 6ffected by reAuiring the taxpayer to sign a receipt of the property or by leaving a list of same Such immediate step is not necessaryC tax due may not be definite or it is being Auestioned.
)eAuisites! 1. Taxpayer is delinAuent in the payment of tax. . SubseAuent demand for its payment. >. Taxpayer must fail to pay delinAuent tax at time reAuired. 8. 5eriod with in to assess or collect has not yet prescribed. In case of constructive distraint, • reAuisite no. 1 is not essential (see Sec. B/ T3 $hen remedy not available! $here amount involved does not exceed 51BB (Sec. B? T3. In keeping with the provision on the abatement of the collection of tax as the cost of same might even be more than 51BB. 5rocedure!
1. commissioner or his due authori#ed representative . )9
*mount Involved In excess of 51,BBB,BBB.BB 51,BBB,BBB.BB or less
%ow *ctual istraint 6ffected 1. In case of Tangible 5roperty! a. opy of an account of the property distrained, signed by the officer, left either with the owner or person from whom property was taken, at the dwelling or place of business and with someone of suitable age and discretion b. Statement of the sum demanded. c. Time and place of sale. . In case of intangible property! a. Stocks and other securities Serving a copy of the warrant upon taxpayer and upon president, manager, treasurer or other responsible officer of the issuing corporation, company or association. b. ebts and credits 1. +eaving a copy of the warrant with the person owing the debts or having in his possession such credits or his agent. . $arrant shall be sufficient authority for such person to pay I) his credits or debts. c. Jank *ccounts @ garnishment 1. Serve warrant upon taxpayer and president, manager, treasurer or responsible officer of the bank.
TAX ATION San Beda College of LAW – ALABANG
. Jank shall turn over to I) so much of the bank accounts as may be sufficient. %ow constructive istraint 6ffected 1. )eAuire taxpayer or person in possession to a. Sign a receipt covering property distrained b. 9bligate him to preserve the same properties. c. 5rohibit him from disposing the property from disposing the property in any manner, with out the authority of the I). . $here Taxpayer or person in possession refuses to sign! a. 9fficer shall prepare list of the property distrained. b. In the presence of two witnesses of sufficient age and discretion, leave a copy in the premises where property is located. ;rounds of onstructive istraint 1. Taxpayer is retiring from any business subject to tax. . Taxpayer is intending to leave the 5hilippinesC or >. To remove his property there from. 8. Taxpayer hides or conceals his property. ?. Taxpayer acts tending to obstruct collection proceedings. . $hen the amount of the bid for the property under distraint is not eAual to the amount of the tax or is very much less than the actual market value of articles, the I) or his deputy may purchase the distrained property on behalf of the national government.
•
+evy of )eal 5roperty +evy @ *ct of sei#ure of real property in order to enforce the payment of taxes. The property may be sold at public sale, if after sei#ureC the taxes are not voluntarily paid. The reAuisites are the same as that of • distraint.
5rocedure! 1. International )evenue officer shall prepare a duly authenticated certificate showing a. . Service of written notice to! a. The taxpayer, and b. ) where property is located. 8. *dvertisement of the time and place of sale. ?. Sale at public auction to highest bidder. /. isposition of proceeds of sale. The excess shall be turned over to owner. )edemption of property sold or forfeited a. 5erson entitled! Taxpayer or anyone for him b. Time to redeem! one year from date of sale or forfeiture Jegins from registration of the deed of sale or declaration of forfeiture. annot be extended by the courts. c. 5ossession pending redemption @ owner not deprived of possession d. 5rice! *mount of taxes, penalties and interest thereon from date of delinAuency to the date of sale together with interest on said purchase price at 1?N per annum from date of purchase to date of redemption.
istraint and +evy compared 1. Joth are summary remedies for collection of taxes. . Joth cannot be availed of where amount involved is not more than 51BB.
TAX ATION San Beda College of LAW – ALABANG
>. istraint @ personal property +evy @ real property 8. istraint @ forfeiture by government, not provided +evy @ forfeiture by government authori#ed where there is no bidder or the highest bid is not sufficient to pay the taxes, penalties and costs. ?. istraint @ Taxpayer no given the right of redemption +evy @ Taxpayer can redeem properties levied upon and soldKforfeited to the government. . 6xtent! Mpon all property and rights to property belonging to the taxpayer. 8. 6ffectivity against third persons! 9nly when notice of such lien is filed by the I) in the )egister of eeds concerned. 6xtinguishment of Tax +ien 1. 5ayment or remission of the tax . 5rescription of the right of the government to assess or collect. >. 0ailure to file notice of such lien in the office of register of eeds, purchases or judgment creditor. 8. estruction of the property subject to the lien.
In case and 8, the taxpayer is still liable.
6nforcement of Tax +ien vs. istraint * tax lien is distinguished from disttraint in that, in distraint the property sei#ed must be that of the taxpayer, although it need not be the property in respect to the tax is assessed. Tax lien is directed to the property subject to the tax, regardless of its owner. . There must be acceptance of the offer in settlement of the original claim. $hen taxes may be compromised! 1. * reasonable doubt as to the validity if the claim against the taxpayer existsC . The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. >. riminal violations, except! a. Those already filed in court b. Those involving fraud. +imitations! 1. =inimum compromise rate! a. 1BN of the basic tax assessed @ in case of financial incapacity. b. 8BN of basic tax assessed @ other cases. . Subject to approval of 6valuation Joard a. $hen basic tax involved exceeds 51,BBB,BBB.BB or b. $here settlement offered is less than the prescribed minimum rates.
TAX ATION San Beda College of LAW – ALABANG
elegation of 5ower to ompromise ;)! The power to compromise or abate shall not be delegated by the commissioner. 6! The )egional 6valuation Joard may compromise the assessment issued by the regional offices involving basic taxes of 5 ?BB D or less. )emedy in case of failure to comply! The I) may either! 1. enforce the compromise, or . )egard it as rescinded and insists upon the original demand. ompromise 5enalty 1. It is a certain amount of money which the taxpayer pays to compromise a tax violation. . It is pain in lieu of a criminal prosecution. >. Since it is voluntary in character, the same may be collected only if the taxpayer is willing to pay them.
6nforcement of forfeiture
0orfeiture! Implies a divestiture of property with out compensation, in conseAuence of a default or offense. Includes the idea of not only losing but also having the property transferred to another with out the consent of the owner and wrongdoer. 1. 6ffect! Transfer the title to the specific thing from the owner to the government. . $hen available! a. . %ow enforced! a. In case of personal property @ by sei#ure and sale or destruction of the specific forfeited property. b. In case of real property @ by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may reAuire. 8. $hen forfeited property to be destroyed or sold! a. To be destroyed @ by order of the I) when the sale for consumption or use of the following would be
injurious to the public health or prejudicial to the enforcement of the law! (at least B days after sei#ure3 1. distilled spirits . liAuors >. cigars 8. cigarettes, and other manufactured products of tobacco ?. playing cards /. *ll apparatus used in or about the illicit production of such articles. b. To be sold or destroyed @ depends upon the discretion of I) 1. *ll other articles subject to exercise tax, (wine, automobile, mineral products, manufactured oils, miscellaneous products, non-essential items a petroleum products3 manufactured or removed in violation of the Tax ode. . ies for printing or making I) stamps, labels and tags, in imitation of or purport to be lawful stamps, labels or tags. ?. $here to be sole! a. 5ublic sale! provided, there is notice of not less than B days. b. 5rivate sale! provided, it is with the approval of the Secretary of 0inance. /. )ight of )edemption! a. 5ersonal entitled @ taxpayer or anyone for him b. Time to redeem @ with in one (13 year from forfeiture c. *mount to be paid @ full amount of the taxes and penalties, plus interest and cost of the sale d. To whom paid @ ommissioner or the )evenue ollection 9fficer e. 6ffect of failure to redeem @ forfeiture shall become absolute. 2. . ;iving reward to informers @ Sum eAuivalent to 1BN of revenues, surcharges or fees recovered andKor fine or penalty imposed and collected or 51, BBB,BBB.BB per case, whichever is lower. 8. Imposition of surcharge and interest. ?. =aking arrest, search and sei#ure +imited to violations of any penal law or regulation administered by the JI), committed with in the view of the Internal )evenue 9fficer or 66. /. eportation in case of aliens @ on the following grounds a. Dnowingly and fraudulently evades payment of I) taxes. b. $illfully refuses to pay such tax and its accessory penalties, after decision on his tax liability shall have become final and executory. 2. Inspection of books Jooks of accounts and other accounting records of taxpayer must be preserved, generally within three years after date the tax return was due or was filed whichever is later. . Mse of . InAuiring into bank deposit accounts of
a. * deceased person to determine gross estate b. *ny taxpayer who filed application for compromise by reasons of financial incapacity his tax liability. 18. )egistration of Taxpayers. •
Eudicial )emedies
ivil and riminal *ctions! 1. Jrought in the name of the ;overnment of the 5hilippines. . onducted by +egal 9fficer of JI) >. =ust be with the approval of the I), in case of action, for recovery of taxes, or enforcement of a fine, penalty or forfeiture. *. ivil *ction *ctions instituted by the government to collect internal revenue taxes in regular courts ()T or =Ts, depending on the amount involved3 $hen assessment made has become final and executory for failure or taxpayer to! a. ispute same by filing protest with I) b. *ppeal adverse decision of I) to T* J. riminal *ction * direct mode of collection of taxes, the judgment of which shall not only impose the penalty but also order payment of taxes. *n assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion, provided there is a prima facie showing of willful attempt to evade. 6ffect of *cAuittal on Tax +iability! oes not exonerate taxpayer his civil liability to pay the tax due. Thus, the government may still collect the tax in the same action. )eason! Tax is an obligation, does not arise from a criminal act. 6ffect of Satisfaction of Tax +iability on riminal +iability $ill not operate to extinguish taxpayer&s criminal liability since the duty to pay the tax is imposed by statute, independent of any attempt on past of taxpayers to evade payment.
TAX ATION San Beda College of LAW – ALABANG
This is true in case the criminal action is based on the act to taxpayer of filing a false and fraudulent tax return and failure to pay the tax. 3 years after the last day prescribed by law for the filing of the return or from the day the return was filed, in case it is filed beyond the period prescribed thereof. (Section B> of the Tax ode3
•
•
•
•
•
B, 123 *n affidavit executed by a revenue office indicating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment. ( I) vs. 5ascoi )ealty orp. Eune , 13 * transcript sheets are not returns, because they do not contain information
necessary and reAuired to permit the computation and assessment of taxes (Sinforo *lca vs. ommissioner, ec. , 1/83 J.3 6xceptions! (Sec. ic3 1. $here no return was filed - within ten (1B3 years after the date of discovery of the omission. . $here a return was filed but the same was false or fraudulent @ within ten (1B3 years from the discovery of falsity or fraud. B, 1//3 b. The fraud contemplated by law is actual and not constructive. It must amount to intentional wrongdoing with the sole object of avoiding the tax. * mere mistake is not a fraudulent intent. (*#nar case, *ug. >, 1283 c. * fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cogni#ance of in the civil or criminal action for the collection thereof. (Sec. paragraph (a33 0raud may be established by the following ! (Jadges of 0raud3 a. Intentional and substantial understatement of tax liability of the taxpayer. b. Intentional and substantial overstatement of deductions of exemption c. )ecurrence of the foregoing circumstances. InstancesKircumstances negating fraud! a. $hen the ommissioner fails impute fraud in the assessment noticeKdemand for payment.
TAX ATION San Beda College of LAW – ALABANG
b. $hen the ommissioner failed to allege in his answer to the taxpayer&s petition for review when the case is appealed to the T*. c. $hen the ommissioner raised the Auestion of fraud only for the first time in his memorandum which was filed the T* after he had rested his case. d. $here the JI) itself appeared, "not sure' as to the real amount of the taxpayer&s net income. e. * mere understatement of income does not prove fraud, unless there is a sufficient evidence shaving fraudulent intent. >. $here the commissioner and the taxpayer, before the expiration of the three (>3 year period of limitation have agree in writing to the extension of said period.
(armen vs. *yala Securities orp., years after the return was due or was filed, whichever is later.
-year limitation signed by the taxpayer.
•
. *ssessment of unpaid taxes, where the bases of which is not reAuired by law to be reported in a return such as excise taxes.
years3 would apply ()ep. vs. )et., =arch >1, 1/3 . $hen the taxpayer omits to file a return @ a court proceeding for the collection of such tax may be filed without assessment, at anytime within 1B years after the discovery of the omission. >. $aiver of statute of limitations @ any internal revenue tax, which has been assessed within the period agreed upon, may be collected be distinct or levy of by a proceeding in court within the period agreed upon in writing before the expiration of ?-year period.
•
B, 1/>3
•
•
?. $here the assessment is revised because of an amended return @ the period for collection is counted from the last revised assessment. /. $here a tax obligation is secured by a surety bond @ the government may proceed thru a court action to forfeit a bond and enforce such contractual obligation within a period of ten years. 2. $here the action is brought to enforce a compromise entered into between the commission and the taxpayer @ the prescriptive period is ten years. .
$hen tax is deemed collected purposes of the prescriptive period.
for
1. ollection by summary remedies @ It is effected by summary methods when the government avail of distraint and levy procedure. . ollection by judicial action @ The collection begins by filing the complaint with the proper court. ()T3 >. $here assessment of the commissioner is protected Q appealed to the T* @ the collection begin when the government file its answer to taxpayer&s petition for review.
•
$hen it should commenceR ! The five (?3 year prescriptive period shall begin to run from the a. ay of the commission of the violation, if know. b. If not known, from the time of discovery and the institution of judicial proceeding for its investigation and punishment. $hen it is interrupted! a. $hen a proceeding is instituted against the guilty person b. $hen the offender is absent from the 5hilippines. $hen it should run again ! $hen the proceeding is dismissed for reason not onstituting jeopardy. $hen does the defense of prescription may be raised! a. In civil case @ If not raised in the lower court, it is bailed permanently. If can not be raised for the first time on appeal. b. In criminal case @ It can be raised even if the case has been decided by the lower court but pending decision on appeal.
IH. Interruption of the 5rescriptive 5eriod 1. $here before the expiration of the time prescribed for the assessment of the tax, both the commissioner and the taxpayer have consented in writing to its assessment after such time, the tax may be assessed prior to the expiration of the period agreed upon. . The running of statute of limitations on making an assessment and the beginning of distraintKlevy or a proceeding in court for collection shall be suspended for the period. a. uring which the ommissioner is prohibited from making the assessment or beginning distraintKlevy or
TAX ATION San Beda College of LAW – ALABANG
a proceeding in court and for /B days thereafterC e.g. 0iling a petition for review in the T* from the decision of the ommissioner. The commissioner is prevented from filing an ordinary action to collect the tax. $hen T* suspends the collection of tax liability of the taxpayer pursuant to Section 11 of )* 11? upon proof that its collection may jeopardi#es the government and Kor the taxpayer.
b. $hen the taxpayer reAuests for reinvestigation which is granted by commissioner. . The Auestion of prescription is not jurisdictional, and as defense it must be raised reasonably otherwise it is deemed waived. 8. The prescriptive provided in the tax code over ride the statute of non-claims in the settlement of the deceased&s estate. ?. In the event that the collection of the tax has already prescribed, the government cannot invoke the principle of 6Auitable recumbent by setting- off the prescribed tax against a tax refused to which the taxpayer is entitled.
c. $hen the taxpayer cannot be located in the address given by him in the return.
T*O5*6)&S )6=6I6S
. =ember of his household with sufficient discretion and no property could be located. e. $hen the taxpayer is out of the 5hilippines. >. In criminal cases for violation of tax code @ the period shall not run when
Ad*#n#st!at#-e
(13 Jefore 5ayment a. 0iling of a petition or reAuest for reconsideration or reinvestigation (*dministrative 5rotest3C b. 6ntering into compromise (3 *fter 5ayment a. 0iling of claim for tax refundC and b. 0iling of claim for tax credit 8d#c#al
(13 ivil action a. *ppeal to the ourt of Tax *ppeals
TAX ATION San Beda College of LAW – ALABANG
b. *ction to contest forfeiture of chattelC and c. *ction for amages (3 riminal *ction a. 0iling of complaint against erring Jureau of Internal )evenue officials and employees. A%;INISTRATIIC& Mnder Sec. of the 12 o. !4** ate #ept. -, !***&. Issuance of a 0ormal +etter of emand and *ssessment o. !4** ate #ept. -, !***&. %#spted Assess*ent
Taxpayer or his duly authori#ed representative may administratively protest against a 0ormal
TAX ATION San Beda College of LAW – ALABANG
+etter of emand and *ssessment notice within thirty (>B3 days from date of receipt thereof. If the protest is denied in whole or part, or is not acted upon within one hundred eighty (1B3 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the T* within >B days from receipt of the said decision, or from lapse of the one hundred (1B3-day period! otherwise, the decision shall become final and executory #everal issues in the assessment notice but taxpayer only isputesMprotests valiity of some of the issues
Taxpayer reAuired to pay the deficiency tax or taxes attributable to the undisputed issues. ollection letter to be issued calling for the payment of deficiency tax, including applicable surcharge andKor interest. o. !4)%, ate >ov. $, !*)%.& * reAuest for reconsideration or reinvestigation of an assessment shall be accompanied by a waiver of the Statute of +imitations in favor of the ;overnment. =ffect of taxpayer’s failure to file an aministrative protest or to appeal 8I’s ecision to the C2A
*s provided in Sec. of the Tax ode, if the taxpayer fails to file an administrative protest within the reglementary >B-day from receipt of the assessment notice, assessment becomes final. *fter the lapse of the >B-day period, the assessment can no longer be disputed either administratively or judicially through an appeal in the T*. *ssessed already tax collectible.
+e3al 8asis
+egal 5rinciple of Auasi-contracts or solutio inebiti (see *rt. 18 Q 1?8 of the ivil ode3. The ;overnment is within the scope of the principle of solutio inebiti (I) vs. 0ireman&s 0und Insurance o3 #cope of Claims
Mnder Sec. B8 and B of the 12 IC&.
(a3 6rroneously or illegally assessed or collected internal revenue taxes Taxpayer pays under the mistake of fact, as for instance in a case where he is not aware of the existing exemption in his favor at the time payments were made * tax is illegally collected if payments are made under duress. (b3 5enalties imposed without authority (c3 *ny sum alleged to have been excessive or in any manner wrongfully collected The value of internal revenue stamps when they are returned in good condition by the purchaser may also be redeemed. >ecessity of Proof for efun Claims
)efund claim partakes of the nature of an exemption which cannot be allowed unless granted in the most explicit and categorical language. (CI vs. 6ohnson an #ons 0ailure to discharge burden of giving proof is fatal to claim It must be shown that payment was an independent single act of voluntary payment of a tax believed to be due, collectible and accepted by the government, and which therefore, become part of the state moneys subject to expenditure and perhaps already spent or appropriated (CI vs. +i ao, +4!!)$%, 9ec. ), !*-"&.
#tatutory euirements for efun Claims a. W!#tten cla#* fo! !efnd o! ta$ c!ed#t f#led +) t"e ta$pa)e! '#t" t"e Co**#ss#one!
This reAuirement is *andato!). )easons& (a3 to afford the commissioner an opportunity to correct the action of subordinate officer and (b3 to notify the government that the taxes sought to be refunded are under Auestion and that, therefore, such notice should then be borne in mind in estimating the revenue available for expenditure (8ermeBo vs. CI )$ Phil *-&. 6xcept! Tax credit or tax refund where on the face of the return upon which payment
+. Catego!#cal de*and fo! !e#*+!se*ent c. Cla#* fo! !efnd o! ta$ c!ed#t *st +e f#led o! t"e s#t p!oceed#ng t"e!eof *st +e co**enced #n co!t '#t"#n t'o @1 )ea!s f!o* date of pa)*ent of ta$ o! penalt) !ega!dless of an) spe!-en#ng e-ent. (#ec. 5 (c& * !**$ >IC&
)eAuirement a condition precedent and non-compliance therewith bars recovery (Phil. Acetylene Co. Inc, vs. Commissioner, C2A Case >o. !"!, >ov. $, !*-&. )efers not only to the "administrative' claim that the taxpayer should file within years from date of payments with the JI), but also the judicial claim or the action for refund the taxpayer should commence with the T* (see Gibbs vs.. Collector of Internal evenue, !5$ Phil "&. Taxpayer may file an action for refund in the T* even before the ommissioner decides his pending claim in the JI) (Commissioner of Internal evenue vs. Palanca 6r., +4!---, Oct. *, !*--&. Suspension of the -yaer prescriptive period may be had when! (13 there is a pending litigation between the two parties (government and taxpayer3 as to the proper tax to be paid and of the proper interpretation of the taxpayer&s charter in relation to the disputed taxC and TAX RE9?N% TAX CRE%IT
There is actually a reimbursement of the tax
The government issues a tax credit memo covering the amount determined to be reimbursable which can be applied after proper verification, against any sum that may be due and collectible form the taxpayer (3 the commissioner in that litigated case agreed to abide by the decision of the Supreme ourt as to the collection of taxes relative thereto (Panay =lectric Co., Inc. vs. Collector of Internal evenue !5" Phil. )!*&
TAX ATION San Beda College of LAW – ALABANG
6ven if the -year period has lapsed the same is not jurisdictional and may be suspended for reasons of eAuity and other special circumstances. (CI vs. Phil. American +ife Ins. Co., G.. >o. !5%5), /ay *, !**%&. -year prescriptive period for filing of tax refund or credit claim computed from date of payment of tax of penalty except in the following!
orporations -year prescriptive period for overpaid Auarterly income tax is counted not from the date the corporation files its Auarterly income tax return, but from the date the final adjusted return is filed after the taxable year (Commissioner of Internal evenue vs. 2/? #ales, Inc., G.. >o. )"$"-, 6an. !%, !**&.
@ictorias /illin3 Corp., Inc. +4!*-5$, >ov. *, !*--&. 1. In case of Inco*e Ta$ '#t""eld on t"e 'ages of e*plo)ees.
*ny excess of the taxes withheld over the tax due from the taxpayer shall be returned or credited within > months from the fifteenth (1? th3 day of *pril. )efund or credit after such time earn interest at the rate of /N per annum, starting after the lapse of the >-month period to the date the reund or credit is made ( #ec $* (c& (& !**$ >IC& APPEAL to t"e CTA
Taxes payable in installment -year period is counted form the payment of the last installment (CI vs Palanca, 6r., supra&
$ithholding Taxes 5rescriptive period counted not from the date the tax is withheld and remitted to the JI), but from the end of the taxable year (Gibbs vs. Commissioner of Internal evenue, supra& H*T )egistered 5erson whose sales are #ero-rated or effectively #ero-rated -year period computed from the end of the taxable Auarter when the sales transactions were made (#ec. !! (A& !**$ >IC&. Interest on 2ax efun
The ;overnment cannot be reAuired to pay interest on taxes refunded to the taxpayer unless! 0. T"e Co**#ss#one! acted '#t" patent a!+#t!a!#ness
*rbitrariness presupposes inexcusable or obstinate disregard of legal provisions (CI vs.
*dverse decision or ruling rendered by the ommissioner of Internal )evenue in disputed assessment or claim for tax refund or credit, taxpayer may appeal the same within thirty (>B3 days after receipt. (Sec. 11, ).*. B days from notice. %ence, it could not become final and executory. ()epublic vs. e la )ama, 1 S)* /13 =otion for reconsideration suspends the running of the >B @day period of perfecting an appeal. =ust advance new grounds not previously alleged to toll the reglementary periodC otherwise, it would be merely pro forma. ()oman atholic *rchbishop vs. oll., +-1//>, Ean. >1, 1/3.
)eAuirements for *ppeal in isputed *ssessment a. Tax assessed has not been paidC b. Taxpayer has filed with the ommissioner of Internal )evenue a petition for the reconsideration or cancellation of the assessmentC c. 0inal decision or ruling has been rendered on such petitionC d. Suit or proceeding in the T* is made within >B days from receipt of the decision 6ffect of 0ailure to *ppeal *ssessment
TAX ATION San Beda College of LAW – ALABANG
a. Taxpayer barred, in an action for collection of the tax by the government, from using defense of excessive or illegal assessment. b. *ssessment is considered correct.
)evenue officer acting negligently or in bad faith or with willful oppression would be personally liable. %e ceases to be an officer of the law and becomes a private wrongdoer. 9ILING O9 CRI;INAL CO;PLAINT AGAINST RE1, 12 3 Dnowingly demanding or receiving sums or compensation not authori#ed or prescribed by lawC 83 $illfully neglecting to give receipts as by law reAuired or to perform any other duties enjoined by lawC ?3 9ffering or undertaking to accomplish, file or submit a report or assessment on a txpayer without the appropriate examination of the books of account or tax liability, or offering or undertaking to submit a report or assessment less than the amount due the government for any consideration or compensationC or conspiring or colluding with another or others to defraud the revenues or otherwise violate the provisions of the tax codeC /3 !es
;enerally applied when the penalty is fine or forfeiture which is imposed when the importation is unlawful and it may be exercised even where the articles are not or no longer in ustoms ustody, unless the importation is merely attempted. In the case of attempted importation, administrative fine or forfeiture may be affected onlyC
The tax liability of the importer constitutes a personal debt to the government, enforceable by action (Sec. 1B8, T3 This is availed of when the tax lien is lost by the release of the goods. B. Ta$pa)e!Ds Re*ed#es Ad*#n#st!at#-e Reco!se Claim for refunNa written claim for refund may be submitted by the importer!
a. while the goods are still within the customs jurisdiction, or 1. In abatement uses such as! b. in the hands or under the control of the importer or person who is aware thereof. 3. Sale of P!ope!t)
5roperty in the customs custody shall be subject to sale under the following conditionsC
a. on missing packagesC b. deficiencies in the contents of packages or shortage before arrival of the goods in the 5hilippinesC c. articles lost or destroyed after such arrival,
TAX ATION San Beda College of LAW – ALABANG
d. articles lost or destroyed Aministrative
e. dead or injured animalsC and 1. istraint of 5ersonal 5roperty f.
for manifest classical errorsC (see section 12B1-12B, T3
. Eudicial relief
. +evy of )eal 5roperty >. Tax +ien
In drawback cases where the goods are re-exported
8. ompromise ?. 0orfeiture
a. 5rotest /. 9ther *dministrative )emedies see the earlier discussions "ustoms 5rotest ases'
on 6uicial
b. In sei#ure cases see
earlier
discussion
2. ivil *ction on
the
. riminal *ction
subject %#st!a#nt of Pe!sonal P!ope!t)
c. Settlement of case by the payment of fine or redemption of forfeited property see earlier subject
discussions
on the
%#st!a#nt- Sei#ure by the personal property, tangible or enforce the payment of faces, to its public sale, if the taxes are paid.
government of intangible, to be followed by not voluntarily
. +eaving a copy of the warrant with the person owing the debts or having in his possession such credits or his agent. 8. $arrant shall be sufficient authority for such person to pay I) his credits or debts. c. Jank *ccounts @ garnishment >. Serve warrant upon taxpayer and president, manager, treasurer or responsible officer of the bank.
. isposition of proceeds of the sale. 8. Jank shall turn over to I) so much of the bank accounts as may be sufficient. $ho may effect distraint >. commissioner or his due authori#ed representative 8. )9
*mount Involved In excess of 51,BBB,BBB.BB 51,BBB,BBB.BB or less
Jo' Actal %#st!a#nt Effected
>. In case of Tangible 5roperty! a. opy of an account of the property distrained, signed by the officer, left either with the owner or person
Jo' const!ct#-e %#st!a#nt Effected
>. )eAuire taxpayer or person in possession to a. Sign a receipt distrained
covering
property
b. 9bligate him to preserve the same properties. c. 5rohibit him from disposing the property from disposing the property in any manner, with out the authority of the I).
TAX ATION San Beda College of LAW – ALABANG
8. $here Taxpayer or person in possession refuses to sign! a. 9fficer shall prepare property distrained.
list
of
the
P!oced!e&
2. International )evenue officer shall prepare a duly authenticated certificate showing a. and 8, the taxpayer is still liable.
. This is superior to judgment claim of private individuals or parties 8. *ttaches not only from time the warrant was served but from the time the tax was due and demandable.
1. Nat!e& Co*p!o*#se
* lien in favor of the government of the 5hilippines when a person liable to pay a tax neglects or fails to do so upon demand. 3. %!at#on&
6xists from time assessment is made by the I) until paid, with interests, penalties and costs.
ompromiseUa contract whereby the parties, by reciprocal concessions, avoid litigation or put an end to one already commenced. Re#s#tes&
8. Taxpayer must have a tax liability. ?. There must be an offer by taxpayer or I), of an amount to be paid by taxpayer.
TAX ATION San Beda College of LAW – ALABANG
/. There must be acceptance of the offer in settlement of the original claim. W"en ta$es *a) +e co*p!o*#sed&
Co*p!o*#se Penalt)
8. It is a certain amount of money which the taxpayer pays to compromise a tax violation.
8. * reasonable doubt as to the validity if the claim against the taxpayer existsC
?. It is pain in lieu of a criminal prosecution.
?. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
/. Since it is voluntary in character, the same may be collected only if the taxpayer is willing to pay them.
/. riminal violations, except! a. Those already filed in court b. Those involving fraud. L#*#tat#ons&
>. =inimum compromise rate! a. 1BN of the basic tax assessed @ in case of financial incapacity. b. 8BN of basic tax assessed @ other cases.
Enfo!ce*ent of fo!fe#t!e
0orfeitureUimplies a divestiture of property with out compensation, in conseAuence of a default or offense. It includes the idea of not only losing but also having the property transferred to another with out the consent of the owner and wrongdoer. . 6ffect! Transfer the title to the specific thing from the owner to the government. . $hen available! a. . enforce the compromise, or 8. )egard it as rescinded and insists upon the original demand.
-
$ith in two days thereafter, a return of the proceeding is duly made.
1B. %ow enforced! c. In case of personal property @ by sei#ure and sale or destruction of the specific forfeited property. d. In case of real property @ by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may reAuire. 11. $hen forfeited property to be destroyed or sold! c. To be destroyed @ by order of the I) when the sale for consumption or use of the following would be injurious to the public health or prejudicial to the enforcement of
TAX ATION San Beda College of LAW – ALABANG
the law! sei#ure3
(at least B days after
1. distilled spirits
i.
To whom paid @ ommissioner or the )evenue ollection 9fficer
j.
6ffect of failure to redeem @ forfeiture shall become absolute.
. liAuors >. cigars 8. cigarettes, manufactured tobacco
and other products of
. *ll other articles subject to exercise tax, (wine, automobile, mineral products, manufactured oils, miscellaneous products, non-essential items a petroleum products3 manufactured or removed in violation of the Tax ode. 8. ies for printing or making I) stamps, labels and tags, in imitation of or purport to be lawful stamps, labels or tags. 1. $here to be sold! c. 5ublic sale! provided, there is notice of not less than B days. d. 5rivate sale! provided, it is with the approval of the Secretary of 0inance. 1>. )ight of )edemption! f.
5ersonal entitled @ taxpayer or anyone for him
g. Time to redeem @ with in one (13 year from forfeiture h. *mount to be paid @ full amount of the taxes and penalties, plus interest and cost of the sale
c. 6xporter&s bond d. =anufacturer&s and importer&s bond ?. )eAuiring proof of filing income tax returns Jefore a license to engage in trade, business or occupation or to practice a profession can be issued. /. ;iving reward to informers @ Sum eAuivalent to 1BN of revenues, surcharges or fees recovered andKor fine or penalty imposed and collected or 51, BBB,BBB.BB per case, whichever is lower. 2. Imposition of surcharge and interest. . =aking arrest, search and sei#ure +imited to violations of any penal law or regulation administered by the JI), committed with in the view of the Internal )evenue 9fficer or 66. . eportation in case of aliens @ on the following grounds c. Dnowingly and fraudulently evades payment of I) taxes. d. $illfully refuses to pay such tax and its accessory penalties, after decision on his tax liability shall have become final and executory. 1B. Inspection of books
TAX ATION San Beda College of LAW – ALABANG
Jooks of accounts and other accounting records of taxpayer must be preserved, generally within three years after date the tax return was due or was filed whichever is later.
courts ()T or =Ts, depending on the amount involved3 $hen assessment made has become final and executory for failure or taxpayer to! c. ispute same by filing protest with I)
11. Mse of . Inventory @ Taking of stock-in-trade and making surveillance. 18. 5rescribing presumptive gross sales or receipt! c. 5erson failed to issue receipts and invoices
%. C!#*#nal Act#on
* direct mode of collection of taxes, the judgment of which shall not only impose the penalty but also order payment of taxes. *n assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion, provided there is a prima facie showing of willful attempt to evade. Effect of Ac#ttal on Ta$ L#a+#l#t)&
d. )eason to believe that records do not correctly reflect declaration in return. 1?. 5rescribing real property values 1/. InAuiring into bank deposit accounts of c. * deceased person to determine gross estate d. *ny taxpayer who filed application for compromise by reasons of financial incapacity his tax liability. 12. )egistration of Taxpayers. 8d#c#al Re*ed#es Civil an Criminal ActionsF
1. Jrought in the name of the ;overnment of the 5hilippines.
oes not exonerate taxpayer his civil liability to pay the tax due. Thus, the government may still collect the tax in the same action. )eason! Tax is an obligation, does not arise from a criminal act. Effect of Sat#sfact#on of Ta$ L#a+#l#t) on C!#*#nal L#a+#l#t)
$ill not operate to extinguish taxpayer&s criminal liability since the duty to pay the tax is imposed by statute, independent of any attempt on past of taxpayers to evade payment. This is true in case the criminal action is based on the act to taxpayer of filing a false and fraudulent tax return and failure to pay the tax. . =ust be with the approval of the I), in case of action, for recovery of taxes, or enforcement of a fine, penalty or forfeiture. C. C#-#l Act#on
*ctions instituted by the government to collect internal revenue taxes in regular
P!esc!#pt#-e Pe!#ods : Statte Of L#*#tat#on P!pose&
0or purposes of Taxation, statue of limitation is primarily designed to protect the rights of the taxpayer&s against unreasonable investigation of
TAX ATION San Beda College of LAW – ALABANG
the taxing authority with respect to assessment and collection of Internal )evenue Taxes. P!esc!#pt#on of Assess Ta$es&
Go-e!n*entDs
R#g"t
to
/. $here a return was filed but the same was false or fraudulent @ within ten (1B3 years from the discovery of falsity or fraud. Nat!e of 9!ad&
General uleF Internal )evenue Taxes shall be assessed within three (>3 years after the last day prescribed by law for the filing of the return or from the day the return was filed, in case it is filed beyond the period prescribed thereof. (Section B> of the Tax ode3
. In computing the prescriptive period for assessment, the latter is deemed made when notice to this effect is released, mailed or sent by the ommissioner to the correct address of the taxpayer. %owever, the law does not reAuire that the demandKnotice be received within the prescriptive period. (Jasilan 6states, Inc. vs. ommissioner 1, S)* 12C )epublic vs. * *pril >B, 123 8. *n affidavit executed by a revenue office indicating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be deemed an assessment. ( I) vs. 5ascoi )ealty orp. Eune , 13 ?. * transcript sheets are not returns, because they do not contain information necessary and reAuired to permit the computation and assessment of taxes (Sinforo *lca vs. ommissioner, ec. , 1/83
a. 0raud is never presumed and the circumstances consisting it must be alleged and proved to exist by clear Q convincing evidence ()epublic vs. Deir, Sept. >B, 1//3 b. The fraud contemplated by law is actual and not constructive. It must amount to intentional wrongdoing with the sole object of avoiding the tax. * mere mistake is not a fraudulent intent. (*#nar case, *ug. >, 1283 c. * fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cogni#ance of in the civil or criminal action for the collection thereof. (Sec. paragraph (a33 9!ad *a) +e esta+l#s"ed +) t"e follo'#ng & @Badges of 9!ad
d. Intentional and substantial understatement of tax liability of the taxpayer. e. Intentional overstatement exemption f.
and substantial of deductions of
)ecurrence of circumstances.
the
Instances:C#!c*stances f!ad&
foregoing negat#ng
a. $hen the ommissioner fails impute fraud in the assessment noticeKdemand for payment. b. $hen the ommissioner failed to allege in his answer to the taxpayer&s petition for review when the case is appealed to the T*.
E$cept#ons& @Sec. 111 #c
?. $here no return was filed - within ten (1B3 years after the date of discovery of the omission.
c. $hen the ommissioner raised the Auestion of fraud only for the first time in his memorandum which was filed the T* after he had rested his case.
TAX ATION San Beda College of LAW – ALABANG
d. $here the JI) itself appeared, "not sure' as to the real amount of the taxpayer&s net income. e. * mere understatement of income does not prove fraud, unless there is a sufficient evidence shaving fraudulent intent. 2. $here the commissioner and the taxpayer, before the expiration of the three (>3 year period of limitation have agreed in writing to the extension of said period. Note& L#*#tat#ons&
c. The agreement extending the period of prescription should be in writing and duly signed by the taxpayer and the commissioner. d. The agreement to extend the same should be mode before the expiration of the period previously agreed upon. . $here there is a written waiver or renunciation of the original >-year limitation signed by the taxpayer. Note& L#*#tat#ons&
d. The waiver to be valid must be executed by the parties before the lapse of the prescriptive period. e. * waiver is inefficient I it is executed beyond the original three year. f.
The commissioner can not valid agree to reduce the prescriptive period to less than that granted by law.
I*p!esc!#pt#+le Assess*ents&
1. $here the law does not provide for any particular period of assessment, the tax sought to be assessed becomes imprescriptible.
reported in a return such as excise taxes. (armen vs. *yala Securities orp., years after the return was due or was filed, whichever is later. 6. 6xceptions! . $here a fraudulentKfalse return with intent to evade taxes was filed a proceeding in court for the collection of the tax may be filed without assessment, at anytime within ten years after the discovery of the falsity or fraud. years3 would apply ()ep. vs. )et., =arch >1, 1/3
. $here no return is reAuired by law, the tax is imprescriptible.
. $hen the taxpayer omits to file a return @ a court proceeding for the collection of such tax may be filed without assessment, at anytime within 1B years after the discovery of the omission.
>. *ssessment of unpaid taxes, where the bases of which is not reAuired by law to be
1B. $aiver of statute of limitations @ any internal revenue tax, which has been assessed within the period agreed
TAX ATION San Beda College of LAW – ALABANG
upon, may be collected be distinct or levy of by a proceeding in court within the period agreed upon in writing before the expiration of ?-year period. 11. $here the government makes another assessment on the basis of reinvestigation reAuested by the taxpayer @ the prescriptive period for collection should be counted from the last assessment. ()ep. vs. +ope#, =arch >B, 1/>3 1. $here the assessment is revised because of an amended return @ the period for collection is counted from the last revised assessment. 1>. $here a tax obligation is secured by a surety bond @ the government may proceed thru a court action to forfeit a bond and enforce such contractual obligation within a period of ten years. 18. $here the action is brought to enforce a compromise entered into between the commission and the taxpayer @ the prescriptive period is ten years. 0.
$hen tax is deemed collected purposes of the prescriptive period.
for
8. ollection by summary remedies @ It is effected by summary methods when the government avail of distraint and levy procedure.
The five (?3 year prescriptive period shall begin to run from the! c. ay of the commission of the violation, if know. d. If not known, from the time of discovery and the institution of judicial proceeding for its investigation and punishment. W"en #t #s #nte!!pted&
c. $hen a proceeding is instituted against the guilty person d. $hen the offender is absent from the 5hilippines. W"en #t s"old !n aga#n&
$hen the proceeding is dismissed for reason not onstituting jeopardy. W"en does t"e defense p!esc!#pt#on *a) +e !a#sed&
of
c. In civil case @ If not raised in the lower court, it is bailed permanentlyC if can not be raised for the first time on appeal. d. In criminal case @ It can be raised even if the case has been decided by the lower court but pending decision on appeal. Inte!!pt#on of t"e P!esc!#pt#-e Pe!#od
?. ollection by judicial action @ The collection begins by filing the complaint with the proper court. ()T3 /. $here assessment of the commissioner is protected Q appealed to the T* @ the collection begin when the government file its answer to taxpayer&s petition for review.
Rles of P!esc!#pt#on #n C!#*#nal Cases
)ule! *ll violations of any provision of the tax code shall prescribe after five (?3 years. 3 years from the date of such filing, the same may be modified, changed, or amended! Provie, further, That no notice for audit or investigation of such return, statement or declaration has in the meantime been actually served upon the taxpayer. (J3 7ailure to #ubmit euire eturns, #tatements, eports an other 9ocuments. - $hen a report reAuired by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations or when there is reason to believe that any such report is false, incomplete or erroneous, the ommissioner shall assess the proper tax on the best evidence obtainable. In case a person fails to file a reAuired return or other document at the time prescribed by law, or willfully or otherwise files a false or fraudulent return or other document, the ommissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes. (3 Authority to Conuct Inventory4 taHin3, surveillance an to Prescribe Presumptive Gross #ales an The ommissioner may, eceipts. at any time during the taxable year, order inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities, or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sales or receipts for internal revenue tax purposes. The findings may be used as the basis for assessing the taxes for the other months or Auarters of the same or different taxable years
and such assessment shall be deemed prima facie correct. $hen it is found that a person has failed to issue receipts and invoices in violation of the reAuirements of Sections 11> and >2 of this ode, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return reAuired to be filed under the provisions of this ode, the ommissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances or after considering other relevant information may prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person. (3 Authority to 2erminate 2axable Perio. - $hen it shall come to the knowledge of the ommissioner that a taxpayer is retiring from business subject to tax, or is intending to leave the 5hilippines or to remove his property therefrom or to hide or conceal his property, or is performing any act tending to obstruct the proceedings for the collection of the tax for the past or current Auarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately, the ommissioner shall declare the tax period of such taxpayer terminated at any time and shall send the taxpayer a notice of such decision, together with a reAuest for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or Auarter, or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shall be subject to all the penalties hereafter prescribed, unless paid within the time fixed in the demand made by the ommissioner.
TAX ATION San Beda College of LAW – ALABANG
(63 Authority of the Commissioner to Prescribe eal Property @alues. - The ommissioner is hereby authori#ed to divide the 5hilippines into different #ones or areas and shall, upon consultation with competent appraisers both from the private and public sectors, determine the fair market value of real properties located in each #one or area. 0or purposes of computing any internal revenue tax, the value of the property shall be, whichever is the higher of! (13 the fair market value as determined by the ommissioner, or (3 the fair market value as shown in the schedule of values of the 5rovincial and ity *ssessors. (03 Authority of the Commissioner to inuire into 8anH 9eposit Accounts. - 3 years, and shall designate from among the senior officials of the Jureau, one (13 chairman and two (3 members for each board, subject to such rules and regulations as the Secretary of 0inance shall promulgate upon the recommendation of the ommissioner. Individuals and general professional partnerships and their representatives who are denied accreditation by the ommissioner andKor the national and regional accreditation boards may appeal such denial to the Secretary of 0inance, who shall rule on the appeal within sixty (/B3 days from receipt of such appeal. 0ailure of the Secretary of 0inance to rule on the *ppeal within the prescribed period shall be deemed as approval of the application for accreditation of the appellant. (%3 Authority of the Commissioner to Prescribe Aitional Proceural or 9ocumentary euirements. - The ommissioner may prescribe the manner of compliance with any documentary or procedural reAuirement in connection with the submission or preparation of financial statements accompanying the tax returns. SEC. . uthority of the Commissioner to 2ele!ate Power . The ommissioner may delegate the powers vested in him under the pertinent provisions of this ode to any or such subordinate officials with the rank eAuivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of finance, upon recommendation of the ommissioner! Provie, however , That the following
TAX ATION San Beda College of LAW – ALABANG
powers of the ommissioner shall not be delegated! (a3 The power to recommend the promulgation of rules and regulations by the Secretary of 0inanceC (b3 The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the JureauC (c3 The power to compromise or abate, under Sec. B8 (*3 and (J3 of this ode, any tax liability! That Provie, however, assessments issued by the regional offices involving basic deficiency taxes of 0ive hundred thousand pesos (5?BB,BBB3 or less, and minor criminal violations, as may be determined by rules and regulations to be promulgated by the Secretary of finance, upon recommendation of the ommissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the )egional irector as hairman, the *ssistant )egional irector, the heads of the +egal, *ssessment and ollection ivisions and the )evenue istrict 9fficer having jurisdiction over the taxpayer, as membersC and (d3 The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. SEC. 1H3. Period of 3imitation 4pon ssessment and Colle'tion* ( 6xcept as provided in Section , internal revenue taxes shall be assessed within three (>3 years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period! Provie, That in a case where a return is filed beyond the period prescribed by law, the three (>3-year period shall be counted from the day the return was filed. 0or purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. SEC. 1H4. uthority of the Commissioner to
Compromise) bate and Refund or Credit $axes* 1 The ommissioner may -
@A Co*p!o*#se t"e Pa)*ent Inte!nal Re-ene Ta$, '"en&
of
an)
(13 * reasonable doubt as to the validity of the claim against the taxpayer existsC or (3 The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts! 0or cases of financial incapacity, a minimum compromise rate eAuivalent to ten percent (1BN3 of the basic assessed taxC and 0or other cases, a minimum compromise rate eAuivalent to forty percent (8BN3 of the basic assessed tax. $here the basic tax involved exceeds 9ne million pesos (51,BBB.BBB3 or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the 6valuation Joard which shall be composed of the ommissioner and the four (83 eputy ommissioners. @B A+ate o! Cancel a Ta$ L#a+#l#t), '"en&
(13 The tax or any portion thereof appears to be unjustly or excessively assessedC or (3 The administration and collection costs involved do not justify the collection of the amount due. *ll criminal violations may be compromised except! (a3 those already filed in court, or (b3 those involving fraud. @C redit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. B of this ode! Provie, That the original copy of the Tax redit ertificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation! Provie, further, That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. The ommissioner shall submit to the hairmen of the ommittee on $ays and =eans of both the Senate and %ouse of )epresentatives, every six (/3 months, a report on the exercise of his powers under this Section, stating therein the following facts and information, among others! names and addresses of taxpayers whose cases have been the subject of abatement or compromiseC amount involvedC amount compromised or abatedC and reasons for the exercise of power! Provie, That the said report shall be presented to the 9versight ommittee in ongress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived of revenues. CJAPTER II CIB3 days after execution of the distraint, proceed with the levy on the taxpayerWs real property. $ithin ten (1B3 days after receipt of the warrant, a report on any levy shall be submitted by the levying officer to the ommissioner or his duly authori#ed representative! Provie, however, That a consolidated report by the )evenue )egional irector may be reAuired by the ommissioner as often as necessary! 5rovided, further, That the ommissioner or his duly authori#ed representative, subject to rules and regulations promulgated by the Secretary of 0inance, upon recommendation of the ommissioner, shall have the authority to lift warrants of levy issued in accordance with the provisions hereof. SEC. 1HF. Pro'edure for 2istraint and "arnishment* 1 The officer serving the warrant of distraint shall make or cause to be made an account of the goods, chattels, effects or other personal property distrained, a copy of which, signed by himself, shall be left either with the owner or person from whose possession such goods, chattels, or effects or other personal property were taken, or at the dwelling or place of business of such person and with someone of suitable age and discretion, to which list shall be added a statement of the sum demanded and note of the time and place of sale.
Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the corporation, company or association, which issued the said stocks or securities. ebts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits, or with his agent, a copy of the warrant of distraint. The warrant of distraint shall be sufficient authority to the person owning the debts or
TAX ATION San Beda College of LAW – ALABANG
having in his possession or under his control any credits belonging to the taxpayer to pay to the ommissioner the amount of such debts or credits.
and preservation of the property pending Cthe sale, and no charge shall be imposed for the services of the local internal revenue officer or his deputy.
Jank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the bank. Mpon receipt of the warrant of garnishment, the bank shall tun over to the ommissioner so much of the bank accounts as may be sufficient to satisfy the claim of the ;overnment.
SEC. 10H. Release of 2istrained Property 4pon Payment Prior to Sale* 1 If at any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale, the goods or effects distrained shall be restored to the owner.
SEC. 1H. Sale of Property 2istrained and 2isposition of Pro'eeds* 1 The )evenue istrict 9fficer or his duly authori#ed representative, other than the officer referred to in Section B of this ode shall, according to rules and regulations prescribed by the Secretary of 0inance, upon recommendation of the ommissioner, forthwith cause a notification to be exhibited in not less than two (3 public places in the municipality or city where the distraint is made, specifyingC the time and place of sale and the articles distrained. The time of sale shall not be less than twenty (B3 days after notice. 9ne place for the posting of such notice shall be at the 9ffice of the =ayor of the city or municipality in which the property is distrained.
*t the time and place fixed in such notice, the said revenue officer shall sell the goods, chattels, or effects, or other personal property, including stocks and other securities so distrained, at public auction, to the highest bidder for cash, or with the approval of the ommissioner, through duly licensed commodity or stock exchanges. In the case of Stocks and other securities, the officer making the sale shall execute a bill of sale which he shall deliver to the buyer, and a copy thereof furnished the corporation, company or association which issued the stocks or other securities. Mpon receipt of the copy of the bill of sale, the corporation, company or association shall make the corresponding entry in its books, transfer the stocks or other securities sold in the name of the buyer, and issue, if reAuired to do so, the corresponding certificates of stock or other securities. *ny residue over and above what is reAuired to pay the entire claim, including expenses, shall be returned to the owner of the property sold. The expenses chargeable upon each sei#ure and sale shall embrace only the actual expenses of sei#ure
SEC. 100. Report of Sale to -ureau of Internal Revenue* 1 $ithin two (3 days after the sale, the officer making the same shall make a report of his proceedings in writing to the ommissioner and shall himself preserve a copy of such report as an official record. SEC. 101. Pur'hase by "overnment at Sale 4pon 2istraint* 1 $hen the amount bid for the property under distraint is not eAual to the amount of the tax or is very much less than the actual market value of the articles offered for sale, the ommissioner or his deputy may purchase the same in behalf of the national ;overnment for the amount of taxes, penalties and costs due thereon.
5roperty so purchased may be resold by the ommissioner or his deputy, subject to the rules and regulations prescribed by the Secretary of 0inance, the net proceeds therefrom shall be remitted to the B3 days. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in public and conspicuous place in the barrio or district in which the real estate lies and Cby publication once a week for three (>3 weeks in a newspaper of general circulation in the municipality or city where the property is located. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale, the name of the taxpayer against whom taxes are levied, and a short description of the property to be sold. *t any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest. If he does not do so,
TAX ATION San Beda College of LAW – ALABANG
the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall, or on the premises to be sold, as the officer conducting the proceedings shall determine and as the notice of sale shall specify. $ithin five (?3 days after the sale, a return by the distraining or levying officer of the proceedings shall be entered upon the records of the )evenue ollection 9fficer, the )evenue istrict officer and the )evenue )egional irector. The )evenue ollection 9fficer, in consultation with the )evenue district 9fficer, shall then make out and deliver to the purchaser a certificate from his records, showing the proceedings of the sale, describing the property sold stating the name of the purchaser and setting out the exact amount of all taxes, penalties and interest! Provie, however, That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property. The )evenue ollection 9fficer, upon approval by the )evenue istrict 9fficer may, out of his collection, advance an amount sufficient to defray the costs of collection by means of the summary remedies provided for in this ode, including Cthe preservation or transportation in case of personal property, and the advertisement and subseAuent sale, both in cases of personal and real property including improvements found on the latter. In his monthly collection reports, such advances shall be reflected and supported by receipts. SEC. 104. Redemption of Property Sold* 1 $ithin one (13 year from the date of sale, the delinAuent taxpayer, or any one for him, shall have the right of paying to the )evenue istrict 9fficer the amount of the public taxes, penalties, and interest thereon from the date of delinAuency to the date of sale, together with interest on said purchase price at the rate of fifteen percent (1?N3 per annum from the date of purchase to the date of redemption, and such payment shall entitle the person paying to the delivery of the certificate issued to the purchaser and a certificate from the said )evenue istrict 9fficer that he has thus redeemed the property, and the )evenue istrict 9fficer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed, and said property thereafter shall be free form the lien of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the said property and shall be entitled to the rents and other income thereof
until the expiration of the time allowed for its redemption. SEC. 105. 5orfeiture to "overnment for 6ant of -idder* 1 In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes, penalties and costs, the Internal )evenue 9fficer conducting the sale shall declare the property forfeited to the ;overnment in satisfaction of the claim in Auestion and within two (3 days thereafter, shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. It shall be the duty of the )egister of eeds concerned, upon registration with his office of any such declaration of forfeiture, to transfer the title of the property forfeited to the ;overnment without the necessity of an order from a competent court.
$ithin one (13 year from the date of such forfeiture, the taxpayer, or any one for him may redeem said property by paying to the ommissioner or the latterWs )evenue ollection 9fficer the full amount of the taxes and penalties, together with interest thereon and the costs of sale, but if the property be not thus redeemed, the forfeiture shall become absolute. SEC. 106. Resale of Real Estate $a%en for $axes* 1 The ommissioner shall have charge of any real estate obtained by the ;overnment of the 5hilippines in payment or satisfaction of taxes, penalties or costs arising under this ode or in compromise or adjustment of any claim therefore, and said ommissioner may, upon the giving of not less than twenty (B3 days notice, sell and dispose of the same of public auction or with prior approval of the Secretary of 0inance, dispose of the same at private sale. In either case, the proceeds of the sale shall be deposited with the for the
assessment of the tax, both the ommissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subseAuent written agreement made before the expiration of the period previously agreed upon. (c3 *ny internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a3 hereof may be collected by distraint or levy or by a proceeding in court within five (?3 years following the assessment of the tax. (d3 *ny internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b3 hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the five (?3 -year period. The period so agreed upon may be extended by subseAuent written agreements made before the expiration of the period previously agreed upon. (e3 Provie, however, That nothing in the immediately preceding and paragraph (a3 hereof shall be construed to authori#e the examination and investigation or inAuiry into any tax return filed in accordance with the provisions of any tax amnesty law or decree. SEC. 113. Suspension of Runnin! of Statute of 3imitations* 1 The running of the Statute of +imitations provided in Sections B> and on the making of assessment and the beginning of distraint or levy a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the ommissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (/B3 days thereafterC when the taxpayer reAuests for a reinvestigation which is granted by the ommissionerC when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected! Provie, that, if the taxpayer informs the ommissioner of any change in address, the running of the Statute of +imitations will not be suspendedC when the warrant of distraint or levy is duly served upon the taxpayer, his authori#ed representative, or a member of his household with sufficient discretion, and no property could be locatedC and when the taxpayer is out of the 5hilippines.
TAX ATION San Beda College of LAW – ALABANG SEC. 114. Remedy for Enfor'ement of 5orfeitures* ( The forfeiture of chattels and removable fixtures of any sort shall be enforced by the sei#ure and sale, or destruction, of the specific forfeited property. The forfeiture of real property shall be enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may reAuire. SEC. 115. 6hen Property to be Sold or 2estroyed* 1 Sales of forfeited chattels and removable fixtures shall be effected, so far as practicable, in the same manner and under the same conditions as the public notice and the time and manner of sale as are prescribed for sales of personal property distrained for the non-payment of taxes.
istilled spirits, liAuors, cigars, cigarettes, other manufactured products of tobacco, and all apparatus used I or about the illicit production of such articles may, upon forfeiture, be destroyed by order of the ommissioner, when the sale of the same for consumption or use would be injurious to public health or prejudicial to the enforcement of the law. *ll other articles subject to excise tax, which have been manufactured or removed in violation of this ode, as well as dies for the printing or making of internal revenue stamps and labels which are in imitation of or purport to be lawful stamps, or labels may, upon forfeiture, be sold or destroyed in the discretion of the ommissioner. 0orfeited property shall not be destroyed until at least twenty (B3 days after sei#ure. SEC. 116. 2isposition of funds Re'overed in 3e!al Pro'eedin!s or 0btained from 5orfeitures* 1 all judgments and monies recovered and received for taxes, costs, forfeitures, fines and penalties shall be paid to the ommissioner or his authori#ed deputies as the taxes themselves are reAuired to be paid, and except as specially provided, shall be accounted for and dealt with the same way. Satisfa'tion of 7ud!ment SEC. 11. Re'overed !ainst any Internal Revenue 0ffi'er* 1 $hen an action is brought against any Internal )evenue officer to recover damages by reason of any act done in the performance of official duty, and the ommissioner is notified of such action in time to make defense against the same, through the Solicitor ;eneral, any
judgment, damages or costs recovered in such action shall be satisfied by the ommissioner, upon approval of the Secretary of 0inance, or if the same be paid by the person used shall be repaid or reimbursed to him. 3 0ailure to pay the deficiency tax within the time prescribed for its payment in the notice of assessmentC or (83 0ailure to pay the full or part of the amount of tax shown on any return reAuired to be filed under the provisions of this ode or rules and regulations, or the full amount of tax due for which no return is reAuired to be filed, on or before the date prescribed for its payment. (J3 In case of willful neglect to file the return within the period prescribed by this ode or by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (?BN3 of the tax or of the deficiency tax, in case, any payment has been made on the basis of such return before the discovery of the falsity or fraud! That a substantial Provie, underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the ommissioner pursuant to the rules and regulations to be promulgated by the Secretary of 0inance, shall constitute prima facie evidence of a false or fraudulent return! Provie, further, That failure to report sales, receipts or income in an amount exceeding thirty percent (>BN3 of that declared per return, and a claim of deductions in an amount exceeding (>BN3 of actual deductions, shall render the taxpayer liable for substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as mentioned herein. SEC. 14. Interest* 1 @A In "eneral* 1 There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (BN3 per annum, or such higher rate as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully paid. @B 2efi'ien'y Interest* 1 *ny deficiency in the tax due, as the term is defined in this ode, shall be subject to the interest prescribed in Subsection (*3 hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. @C 2elinquen'y Interest* 1 In case of failure to pay!
(13 The amount of the tax due on any return to be filed, or (3 The amount of the tax due for which no return is reAuired, or (>3 * deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the ommissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (*3 hereof until the amount is fully paid, which interest shall form part of the tax. @% Interest on Extended Payment* 1 If any person reAuired to pay the tax is Aualified and elects to pay the tax on installment under the provisions of this ode, but fails to pay the tax or any installment hereof, or any part of such amount or installment on or before the date prescribed for its payment, or where the ommissioner has authori#ed an extension of time within which to pay a tax or a deficiency tax or any part thereof, there shall be assessed and collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any part thereof unpaid from the date of notice and demand until it is paid. SEC. 15H. 5ailure to 5ile Certain Information Returns* 1 In the case of each failure to file an information return, statement or list, or keep any record, or supply any information reAuired by this ode or by the ommissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the ommissioner, be paid by the person failing to file, keep or supply the same, 9ne thousand pesos (1,BBB3 for each failure! Provie, however , That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five thousand pesos (5?,BBB3. SEC. 150. 5ailure of a 6ithholdin! !ent to Colle't and Remit $ax* 1 *ny person reAuired to withhold, account for, and remit any tax imposed by this ode or who willfully fails to withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this hapter, be liable upon conviction to a penalty eAual to the total amount of the tax not withheld, or not accounted for and remitted. SEC. 151. 5ailure of a 6ithholdin! !ent to refund Ex'ess 6ithholdin! $ax* 1 *ny
TAX ATION San Beda College of LAW – ALABANG
employerKwithholding agent who fails or refuses to refund excess withholding tax shall, in addition to the penalties provided in this Title, be liable to a penalty to the total amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on their return CASES and %OCTRINES ,3ut8 vs raneta 9: Phil ;<:.
If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. 2axation may be mae the implement of the states police power . It is inherent in the power to tax that a State be free to select the subjects of taxation and it has been repeatedly held that "irregularities which result from a singling out of one particular class for taxation or exemption infringe no onstitutional limitation.' The sugar industry&s promotion, protection and advancement therefore redound greatly to the general welfare. Thus, the contention of plaintiff that the *ct was promulgated not for public purpose cannot be upheld. ,CIR vs l!ue ;=: SCR 9.
It is sai that taxes are what we pay for civili'e society. Eithout taxes, the 3overnment woul be paraly'e for lacH of the motive power to activate an operate it . %ence, despite the natural reluctance to surrender part of oneWs hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. 2his symbiotic relationship is the rationale of taxation an shoul ispel the erroneous notion that it is an arbitrary metho of exaction by those in the seat of power .
,meri'an -ible So'iety vs* City of Manila ;>; P/I3 ?:@.
It was contended that said ordinances imposing license fee on the distribution and sale of bibles and other religious literature, impair the free exercise of religion, specifically the right to disseminate religious information. As between taxation an reli3ion, the latter prevails . ,3lado' vs* Commissioner of Internal Revenue ;< SCR A9A.
The exemption under Sec. (>3 *rt. HI of the onstitution only covers taxes assessed on cemeteries, churches, and parsonages or convents, appurtenant thereto and all lands, buildings and improvements used exclusively for religious purposes. These taxes are property taxes as contra-distinguished from excise taxes. In the case at bar, what&s being assessed was a donee&s gift tax not on the properties themselves. 2he 3ift tax was an excise tax upon the use mae of the properties, upon the exercise of the privile3e of receivin3 the properties. 2his Hin of tax is not within the exemptin3 provision of the constitution. Therefore, the petitioner as substituted by the %ead of the iocese, is liable to pay the said gift tax. The exemption under Sec. (>3 *rt. HI of the onstitution only covers property taxes assessed on cemeteries, churches, and parsonages or convents, appurtenant thereto and all lands, buildings and improvements used exclusively for religious purposes. ,bra Balley Colle!e vs* quino ;@A SCR ;>@.
2he phrase 0use exclusively for eucational purposes1 is not limite to property actually inispensable therefor but extens to facilities, which are inciental to an reasonably necessary to the accomplishment of sai purposes
,-ishop of Nueva Se!ovia vs* Provin'e of Ilo'os Norte =; P/I3 ?=A
6xemption from payment of land tax, which refers to lots used as home of the priest who preside over the church must include not only the lot actually occupied by the church but also the adjacent ground destined to meet the ordinary incidental uses of man.
TAX ATION San Beda College of LAW – ALABANG ,San Mi!uel -rewery) In'* vs* City of CebuCebu Portland Cement Co* vs* Na!a) Cebu 5ebruary A>) ;9D?.
This is because ouble taxation is not prohibite by the Constitution. 0urthermore, there is double taxation only when the same person is taxed by the same jurisdiction for the same purpose. In the first case, the annual business tax is a license tax to engage in the business of wholesale liAuor in ebu ity. Such license tax constitutes a regulatory measure in the exercise of police power, whereas that which is imposed by the ordinance is a typical tax or revenue measure.
S+ect ;atte!& *ssessment
riminal
*ctionC
Tax
CIR < PASCOR REALTM %E8./? and 5>,B1?,>/.>? for 1/ and 12, respectively. 9n =arch 1, 1?, ommissioner filed a criminal complaint for tax evasion against 5), its president and treasurer before the 9E. 5rivate respondents filed immediately an urgent reAuest for reconsideration on reinvestigation disputing the tax assessment and tax liability. 9n =arch >, 1?, private respondents received a subpoena from the 9E in connection with the criminal complaint. In a letter dated, =ay 12, 1?, the ommissioner denied private respondent&s reAuest for reconsideration (reinvestigation on the ground that no formal assessment has been issued which the latter elevated to the T* on a petition for review. The ommissioner&s motion to dismiss on the ground of the T*&s lack of jurisdiction inasmuch as no formal assessment was issued against private respondent was denied by T* and ordered the ommissioner to file an answer but did not instead filed a petition with the * alleging grave abuse of discretion and lack of jurisdiction on the part of T* for considering the affidavitKreport of the revenue officers and the endorsement of said report as assessment which may be appealed to
he T*. The * sustained the T* decision and dismissed the petition. Isses&
1. $hether or not the criminal complaint for tax evasion can be construed as an assessment. . $hether or not an assessment is necessary before criminal charges for tax evasion may be instituted. Jeld& 2he filin3 of the criminal complaint with the 9O6 cannot be construe as a formal assessment. to investigate tax liabilities of manufacturers engaged in tax evasion schemes. 9n Euly 1, 1>, the I) issued )ev. =emo irc. 2-> which reclassified certain cigarette brands manufactured by private respondent 0ortune Tobacco orp. (0ortune3 as foreign brands subject to a higher tax rate. 9n *ugust >, 1>, 0ortune
TAX ATION San Beda College of LAW – ALABANG
Auestioned the validity of said reclassification as being violative of the right to due process and eAual protection of laws. The T*, on September , 1> resolved that said reclassification was of doubtful legality and enjoined its enforcement. In the meantime, on *ugust >, 1>, 0ortune was assessed deficiency income, ad valorem and H*T for 1 with payment due within >B days from receipt. 9n September 1, 1>, private respondent moved for reconsideration of said assessment. =eanwhile on September 2, 1>, the ommissioner filed a complaint with the 9E against private respondent 0ortune, its corporate officers and other corporations and their respective corporate officers for alleged fraudulent tax evasion for non-payment of the correct income, ad valorem and H*T for 1. The complaint was referred to the 9E Task 0orce on revenue cases which found sufficient basis to further investigate the charges against 0ortune. * subpoena was issued on September , 1> directing private respondent to submit their counter-affidavits. Jut it filed a verified motion to dismiss or alternatively, a motion to suspend but was denied and thus treated as their counteraffidavit. *ll motions filed thereafter were denied. Eanuary 8, 18, private respondents filed a petition for certiorari and prohibition with prayer for preliminary injunction praying the I)&s complaint and prosecutor&s orders be dismissedKset aside or alternatively, that the preliminary investigation be suspended pending determination by I) of 0ortune&s motion for reconsiderationKreinvestigation of the *ugust 1>, 1> assessment of taxes due. The trial court granted the petition for a writ of preliminary injunction to enjoin the preliminary investigation on the complaint for tax evasion pending before the 9E, ruling that the tax liability of private respondents first be settled before any complaint for fraudulent tax evasion can be initiated.
correct taxes were paid. Jut there is no allegation, much less evidence, of JI) personnel&s malfeasance at the very least, there is the presumption that JI) personnel performed their duties in the regular course in ensuring that the correct taxes were paid by 0ortune. Jefore the tax liabilities of 0ortune are finally determined, it cannot be correctly asserted that private respondents have willfully attempted to evade or defeat any tax under Secs. ?8 and ?/, 12 ,B>.// which was later reduced to 5>1,B/.B2 upon reinvestigation. 9n 0ebruary B, 1?>, *X<*)&s properties were placed under distraint and levy. 9n *pril 1, 1??, *X<*) appealed to the T*. The T* found that *X<*) made substantial under-declarations of his income as follows! he under-declared his income for 18/ by 2NC ?/8N for 182C ?N for 18C 8/N for 18C 8/N 1?BC 8BN 1?1. Isses& $hether or not the right of the ommissioner to assess *X<*)&s deficiency income taxes for 18/, 182 and 18 had prescribed at the time the assessment was made. Jeld&
Isse&
$hether the basis of private respondent&s tax liability first be settled before any complaint for fraudulent tax evasion can be initiated. Jeld& 7rau cannot be presume. If there was fraud on willful attempt to evade payment of ad valorem taxes by private respondent through the manipulation of the registered wholesale price of the cigarettes, it must have been with the connivance of cooperation of certain JI) officials and employees who supervised and monitored 0ortune&s production activities to see to it that the
9n the issue of prescription the count applied the 1B-year prescriptive period and ruled that prescription had not set in. the court opined that *X<*)&s returns were false because the under-declaration of income constituted a deviation from the truth. The court stated that the ordinary prescriptive period of ? years (now > years3 would apply under normal circumstances but whenever the 3overnment is place at a isavanta3e as to prevent its lawful a3ent from maHin3 a proper assessment of tax liabilities ue to false or frauulent returns intene to evae payment of taxes or failure to the returns, the perio of !5 years provie for in the law from
