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FUNDAMENTALS OF TAXATION A. Meaning and Nature of Taxes 1. Taxation and tax defined Proportionate in character Tax is laid by some rule of apportionment according to which persons share the public burden. It is ordinarily based on ability to pay Generally payable in money Unless qualified by law, tax is usually understood to be a pecuniary burden. Levied on persons or property A tax may also be imposed on acts, transactions, rights or privileges. In each case, it is only a person who pays the tax. The property is resorted to for the purpose of ascertaining the amount of tax to be paid. Levied by the state which has jurisdiction over the person or property The object to be taxed must be subject to the jurisdiction of the taxing state. This is necessary in order that a tax can be enforced. It cannot reach over into another jurisdiction to seize upon property or person for purposes of taxation. Levied by the law-making body of the state Power to tax is a legislative power which under the Constitution only Congress can exercise. However, our Constitution provides for exceptions and allows other government bodies to impose a tax with certain limits. (LGUs and President) Levied for public purposes Taxation involves, and a tax constitutes, a charge or burden imposed to provide for the support of the government, the administration of the law or the payment of public expenses. Revenues derived from taxation cannot be used for purely private purposes or for the exclusive benefit of private persons. Liability is personal to the taxpayer Paid at regular periods or intervals 3. Tax distinguished from other forms of impositions a. Definition Tax v. license and regulatory fees TAX Enforced contribution assessed by sovereign authority to defray public expenses Imposed for revenue purposes Imposed under the power of taxation LICENSE FEE Legal compensation or reward of an officer for specific services
Taxation The act of laying a tax, i.e., the process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses of government. (De Leon) As a power, it refers to the inherent power of the state to demand enforced contributions for public purpose or purposes (Mamalateo) power by which the sovereign raises revenue to defray the expenses of the government among those who in some measure are privileged to enjoy its benefits and must bear its burden (Mamalateo) the destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government Tax The enforced proportional and pecuniary contributions from persons and property levied by the law-making body of the state having jurisdiction over the subject of the burden for the support of the government and public needs CIR v. Algue tax delinquency Algue asked for deduction of promotional fees as it was a legitimate business expense. Allowed the deduction Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's 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. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. 2. Essential Characteristics
Purpose Basis
An enforced contribution Tax is not a voluntary payment or donation and its imposition is in no way dependent upon the will or assent, open or implied, of the person taxed
Imposed for regulatory purposes Imposed under the police power of the State
Normally paid after the start of a business Failure to pay the tax does not make the business illegal Taxes, being the lifeblood of the State, cannot be surrendered except for lawful consideration
License fee is in the nature of a special privilege, permission or authority to do what is within its terms. Makes lawful an act which would otherwise be unlawful. It is always revocable. Importance of distinction: 1. Some limitations apply only to one and not to the other. Also, some exemptions apply to tax but not to license fee. 2. Power to exercise police power does not include power to impose fees for purposes of revenue. 3. An exaction may be considered both a tax and a license fee. (E.g. car registration fees) 4. Tax may have only a regulatory purpose. Osmena v Orbos OPSF PD 1956 created the OPSF to reimburse the oil companies for cost increased in crude oil and imported petrol products. This fund was reclassified as trust liability account. Tax collected in exercise of police power The OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund." PAL v Edu Motor vehicle registration fees PAL claims exemption from MVRF Tax both for revenue and regulation If purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called tax. PAL is exempt from paying motor vehicle registrations fees except for the period between June 27, 1968 until April 9,1979. Any registration fees collected between June 27, 1968 and April 9,
b.
Sec. 240, RA 7160 (Local Government Code) Special Levy by Local Government Units. - A province, city or municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: PROVIDED, however, That the special levy shall not exceed sixty percent (60%) of the actual cost of such projects and improvements, including the costs of acquiring land and such other real property in connection therewith: PROVIDED, further, That the special levy shall not apply to: (1) lands exempt from basic real property tax and
Basis Subject
Based on necessity Levied on: Persons Property Acts Has general application It is a personal liability of the taxpayer
It is exceptional both as to the time and place Not a personal liability of the person assessed; his liability is limited only to the land involved
Sec. 155, RA 7160 (Local Government Code) Toll Fees or Charges. The Sanggunian concerned may prescribe the terms and conditionsand fix the rates for the imposition of toll fees or charges for the use of any public road, pier, or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: PROVIDED, That no such toll fees or charges shall be collected from: (1) officers and enlisted men of the Armed Forces of the Philippines AND members of the PNP on mission (2) post-office personnel delivering mail (3) physically-handicapped (4) disabled citizens who are sixty-five (65) years or older When public safety and welfare so requires, the Sanggunian concerned may discontinue the collection of the tolls, and thereafter the said facility shall be free and open for public use. TAX Enforced proportional contributions from persons and property TOLL A sum of money for the use of something, a consideration which is paid for the use of a property which is of a public nature; e.g road, bridge A demand of proprietorship Amount of toll depends upon the cost of construction or maintenance of the public improvement used May be imposed by the government or private individuals or entities
Definition
Exemption from taxation does not include exemption from special assessment The power to tax carries with it the power to levy a special assessment
Basis Amount
Republic v. Murcia Milling Philsugin fund Charter of Philsugin imposes a levy on annual sugar production of sugar cane planters. The funs was supposedly for research work. The venture, however, failed. The 3 sugar centrals now claims for a refund of the amount they contributed. No refund, Neither a special assessment nor a tax. As it is an exercise of the police power for the general welfare of the entire country which no private citizen may lawfully resist. From its financially unsuccessful venture, the Philsugin could very well have advanced in its appreciation of the problems of management faced by sugar centrals, could have understood more clearly the difficulties of marketing sugar products, and could have known with better intimacy the precise are of the industry in need of the more help from the government. Therefore, herein respondents are likewise benefited. Moreover, the field of research involved here is difficult to carry out without the actual operation of a refinery.
Authority
Toll sum of money for the use of something, generally applied to the consideration which is paid for the use of a road, bridge or the like of a public nature. d. Tax v. tariff and customs duties
Custom duties taxes imposed on goods exported from or imported into a country. The term taxes is broader in scope as it includescustom duties. Tariff Three senses: Book of rates drawn usually in alphabetical order containing the names of several kinds of merchandise with the correspondin duties to be paid for the same Duties payable on goods imported or exported (cf PD No. 230) System or principle of imposing duties on the importation (or exportation) of goods
New Civil Code Art. 1279. - In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. TAX Basis Effect of non payment Mode payment of Law May be imprisoned (except poll tax) Payable in money Not No interest unless delinquent Imposed by public authority Determined under the NIRC DEBT Contract of judgment No imprisonment for failure to pay a debt Payable in money, property or service Can be assigned Draws interest if stipulated or delayed Can be imposed by private individuals Governed by Civil Code
Francia v IAC tax delinquency and expropriation A portion of Francias property was expropriated. However, he also failed to pay real estate taxes so it was sold to satisfy tax delinquency. He now asks for a set-off of the amount the government owed him for the expropriation and the tax delinquency. Not allowed to offset The collection of taxes cant await results of a lawsuit. The obligation to pay taxes is not a contract but a duty a positive act of government wherein the consent of individuals is not required. There is no mutual creditor and debtor relationship between the government and the taxpayer. Furthermore, the tax being questioned was due to the city government but the expropriation was done by the national government - two different taxing bodies.
Assignability Interest
Authority
Republic v Mambulao Lumber Company Reforestation charges MLC failed to pay forest charges. It wants the reforestation charges paid before (which were not allegedly not used because forests are still denuded) to be applied to the forest charges it owed the government. Not allowed to offset. The amount paid by a licensee as reforestation charges is in the nature of a tax which forms a part of the Reforestation Fund, payable by him irrespective of whether the area covered by his license is reforested or not. Internal revenue taxes, such as the forest charges, cannot be the subject of set-off or compensation because axes are not in the nature of contracts between the party and party but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required.
Prescription
From mamalateo: 1. Revenue 2. Regulatory 3. Promotion of general welfare Republic v. Murcia Milling Phiilsugin funds SA imposed in the exercise of police power The purpose of the SA is to finance the improvement of particular properties, with the benefits of the improvement accruing or inuring to the owners thereof who, after all, pay the assessment. The purpose of an ordinary tax is to provide the Government with revenues needed for the financing of state affairs. While the refusal of a citizen to pay his ordinary taxes may not indeed by sanctioned because it would impair government functions, the same would not hold true in the case of a refusal to comply with a special assessment. Tio v VRB 30% tax on gross receipts PD 1987 (creating VRB) imposes tax on locally manufactured or imported blank video tapes to sales tax. Constitutional, hence a valid tax The Court will not invalidate a tax merely because it regulates, discourages or definitely deters the activities taxed. The power to tax is so unlimited in force and so reaching in extent. Tax imposed is both a regulatory and a revenue measure. Revenue measure: earnings of videogram establishments of around P600M p.a. have not been subjected to tax, thereby depriving the Government of an additional source of revenue. Regulatory measure: for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. Caltex v COA OPSF The claims arising from the OPSF is a tax. Taxation is no longer envisioned as merely to raise revenue to support the existence of government; taxes may be levied with a regulatory purpose to provide means for rehabilitation and stabilization of a threatened industry which is imbued with public interest as to be within the police power of the State. The stabilization of oil prices is one of prime concern which the state, via its police power, may properly address. Esso Standard Eastern v CIR Margin fees paid to CB for remittances Not a tax It is an exaction designed to curb the excessive demands upon our international reserve. It was imposed by state in the exercise of police power.
The existence of governemtn is a necessity, it cannot exist nor endure without the means to pay its expenses and for those means, the government has the right to compel all its citizens and property within its limit to contribute in the form of taxes. Phil Guaranty v CIR Withgolding tax on Reinsurance contracts ceded to foreign Companies Taxable Where the reinsurance contracts show that the activities that constituted the undertaking to reinsure a domestic insurer against losses arising from the original insurances in the Philippines were performed in the Philippines, the reinsurance premiums are considered as coming from sources within the Philippines and are subject to Philippines Income Tax. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the States sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvements designed for the enjoyment of the citizenry and those which come within the States territory, and facilities and protection which a government is supposed to provide. Considering the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the estate. CIR v Algue Deduction for promotional fees Allowed to deduct Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of ones hard-earned money to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government, for it 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. Marcos II v CA Estate and income tax Authority of the Bureau of Internal Revenue to collect by the summary remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate over the supposed will of the deceased is being challenged.
Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's 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. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power Gomez v Palomar Postage stamp tax The constitutionality of RA 1635, as amended by RA 2631,imposing a tax on postage stamps for the benefit of the Philippine Tuberculosis Society, is assailed for being unconstitutional Constitutional The Anti-TB stamp tax is in the nature of an excise tax, laid upon the exercise of a privilege, namely, the privilege of using the mails. The legislature has the inherent power of selecting the subjects of taxation and has the greatest freedom in classification. The classification of mail users is not without any reason. It is based on the ability
From Mamalateo: a. Levy enactment of a law by Congress b. Assessment and collection administration and implementation of the tax law by the Executive through admin agencies c. Payment act of compliance by the taxpayer Pay as you earn/pay as you go Most efficient for government Person paying you acts as BIR agent Pay as you are assessed BIR founds out that you have a deficiency so they send you an assessment Pay as you file Easiest
Purpose
Amount of Imposition
The property (generally in the form of money) is taken for the support of the government Operates upon a: (1) Community (2) Class of individuals The money contributed becomes part of the public funds It is assumed that the individual receives the equivalent of the tax in the form of protection and benefits he receives from the government Generally, there is no limit on the amount of tax that may be imposed to Is subject to certain constitutional limitations Including the prohibition against impairment of obligation of contracts
The use of the property is regulated for the purpose of promoting the general welfare; it is not compensable Operates upon a: (1) Community (2) Class of individuals There is no transfer of title. At most, there is restraint on the injurious use of property The person affected receives indirect benefits as may arise from the maintenance of a healthy economic standard of society Amount imposed should not be more than sufficient to cover the cost of the license and necessary expenses Relatively free from constitutional limitations Is superior to the impairment of contract provision
Relationship Constitution
No amount imposed but rather the owner is paid the market value of property taken Inferior to the impairment prohibition; government cannot expropriate private property which under a contract it had previously bound itself to purchase from the other contracting party
Power of eminent domain power of the state or those to whom the power has been delegated to take private property for public use upon paying to the owner a just compensation to be ascertained according to law. Police power power of the state to enact laws in relation to persons and property as may promote public health, morals, safety and general prosperity and welfare to its inhabitants. It springs from obligation of the State to protect its citizens. 2. Essential characteristic of taxation
power, no sovereign State can exist or endure. The power to tax is an essential and inherent attribute of sovereignty, belonging as a matter of right to every State. b. Exclusively legislative in nature
a. Inherent in sovereignty The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people It is inherent in a sovereign because it is a necessary attribute of sovereignty. Without this
Power to tax includes authority to: a. Determine the nature, object, extent, coverage, apportionment, place and method b. Grant tax exemptions or condonations c. Specify/provide for admin/judicial remedies It cannot be delegated either to exec/jud dept without infringing on separation of powers When delegation is allowed: a. Local governments local concern b. Allowed by constitution President c. Merely administrative implementation
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Roxas v CTA Real estate dealers tax Roxas brothers were asked by the government to sell their land for agrarian reform by letting the farmers pay for the land in installment. Not taxable The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the hen that lays the golden egg. And in order to maintain the general publics trust and confidence in the government, this power must be used justly and not treacherously. It does not conform with our sense of justice in this case for the government to persuade the taxpayer to lend it a helping hand and later on penalize him for duly answering the urgent call. Thus, the partnership of the brothers, Roxas y Cia, cannot be considered as a real estate dealer for the sale in question. 3. Inherent Limitations a. Purpose must be public in nature
Public purpose governmental purpose, purpose affecting the inhabitants of the state or taxing district as a community and not merely as individuals It must 1. 2. 3. be used for: Support of government Recognized objects of government Promote welfare of community
Reason: if for private = taking of property without due process of law as it is beyond the power of the government to impose Although private individuals are benefited, still valid tax if benefit is only incidental Taxpayer may question the purpose of tax but is not relieved from the duty of paying it Pascual v. Sec. of Public Works Appropriation for feeder roads on a land owned by Senator Zulueta. Unconstitutional The legislature has no power to appropriate public revenue for anything but public purpose. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interests, as opposed to the furtherance of the advantage, of individuals, although each advantage to individuals might incidentally serve the public. In this case, the property was private at the time the law was passed. The donation which gave the law a semblance of legality cannot cure the defect
b.
Prohibition against delegation of taxing power i. Extent of the legislative power to tax
General Rule: Congress may not delegate to others. The power of taxation is purely legislative. Basis: separation of powers
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ii.
Basis: 1.
2.
Necessary implication power to create municipal corporations for purpose of local self-government carries with it the power to confer the power to tax, they are instrumentalities of the state Constitution
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CIR v. CA, Fortune tobacco (1996) BIR issued an RMC which reclassified the cigarettes of Respondent subject to excise tax. Not valid, quasi-legislative power Two kinds of administrative issuances: a legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof, which must have the benefit of public hearing; and an interpretative rule is designed to provide guidelines to the law which the administrative agency is in charge of enforcing. When the administrative rule substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard before that new issuance is given the force and effect of law.
c.
Reason: if not exempt, government would be taxing itself to raise money to pay over to itself - fundamental principles of government necessary in order that the functions of government not be impeded Who are exempted: those entities through which the government immediately and directly exercise sovereign powers (AFP, etc.) Not exempt: GOCCs performing proprietary functions (in the absence of tax exemption in their charters) Exempt: Public Corporations local government units NIRC SEC. 24. Income Tax Rates. (C) Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange. - The provisions of Section 39(B) notwithstanding, a final tax at the rates prescribed below is hereby imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange. Not over P100,000.................. 5% On any amount in excess of P100,000 10% See: EO 93 and PD 1931
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Reason: state may not tax property laying outside its borders or lay an excise or privilege tax upon the exercise of enjoyment of a right or privilege derived from the laws of another state and therein exercised Not mean that person outside Philippines is exempt May be taxed if there exist between him and the taxing state, a PRIVITY OF RELATIONSHIP justifying the levy Philippines still has PERSONAL JURISDICTION over Filipinos abroad basis is the relation as a citizen to the state entitled to protection from government wherever he may be CIR v. British Airways Sales agent of a International Carrier with no landing rights in the Philippines but only sells tickets here. Taxable The sale of tickets in the Philippines is the activity that produced the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The situs of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine Government. In consideration of such protection, the flow of wealth should share the burden of supporting the government
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Basis: Constitution Due process: 1. Substantive under authority of the valid law ( not violate the constitution) 2. Procedural after compliance with fair and reasonable method of procedure prescribed by law 87 Constitution Art III Sec. 1 No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws Tan v. Del Rosario when a tax measure becomes so unconscionable and unjust as to amount to confiscation of property, courts will not hesitate to strike it down, for despite all its plenitude, the power to tax cannot override constitutional proscriptions. In this case, this stage has not been demonstrated to have been reached within any appreciable distance. The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power. Sison v. Ancheta It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. Where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on the due process grounds A mere allegation of arbitrariness will not suffice. There must be factual foundation of such unconstitutional taint. Where the DP and EP clauses are invoked, considering they are not fixed rules, but rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity prevails.
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b.
Basis: Constitution Equal protection all persons under jurisdiction must be treated alike under like circumstances and conditions in the privileges conferred and liabilities imposed Sison v. Ancheta The Constitution does not require things which are different to be treated in law as though they were the same. Classification if rational in character is allowable. With regard to the kindred concept of uniformity, it does not call for perfect uniformity or perfect equality. Equality and uniformity in taxation that all taxable means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. It is enough that the classification must rest upon substantial distinctions that make real differences. Here, taxpayers who are recipients of compensation income are set apart as a class Villegas v. Hiu Chiong Tsai Pao Ordinance No. 6537 was passed by the Municipal Board of Manila prohibiting aliens from being employed or to engage or participate in any position or occupation or business enumerated in the ordinance without first securing an employment permit from the Mayor of Manila and paying a permit fee of 50 pesos. Permit fee is not valid. But Emp. Permit is valid. . The ordinance is but a revenue measure under the guise of a regulatory measure. The fee imposed is unreasonable because it is excessive and it fails to consider valid substantial differences in situation among individuals. It does not take into consideration whether the employed alien is a
Basis: Constitution Uniformity all taxable articles or property of same class shall be taxed at same rate, effected through apportionment of the tax burden among tax payers which under the Constitution must be equitable a. Uniformity of operation throughout tax unit b. Equality in burden Equity apportionment be more or less just in light of the taxpayers ability to shoulder the tax burden, must not be excessive or unreasonable - cornerstone is ability to pay - usually measured in size of wealth and benefit he receives Progressive place emphasis on direct rather than indirect taxation with ability to pay as criterion 87 Constitution Art. VI Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a uniform system of taxation.
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Tolentino v. Secretary of Finance VAT valid The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that direct taxes are to be preferred and as much as possible, indirect taxes should be minimized. Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions and granting exemptions to other transactions. Also, the transactions which are subject to the VAT are those which involve goods and services which are used or availed of mainly by higher income groups
ii.
Pepsi Cola v. Butuan Tax Ordinance passed by respondent city council imposing taxes on any agent and/or consignee of any dealer engaged in selling liquors, imported or local, in the city. Violates EPC If its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. Manila Racehorse v. Dela Fuente Ordinance No. 3065 a tax based on the number of race horses kept or maintained in the boarding stables to be paid by the maintainers at Php10.00 per year for each race horse and increased correspondingly to each additional race horse Valid There is no violation of equality and uniformity of taxation. It is not class legislation. The owners of boarding stables from race horses are a class by themselves compared to owners of stables for horses dedicated for other purposes. The tax is considered in terms of ability to pay in relation to benefits received race horses are devoted to gambling and owners derive fat income from them.
Basis: Constitution Application: 1. Only penalty for delinquency under LGC is payment of surcharge in the form of interest which shall be added to the unpaid amount from due date until it is paid at rate of 24%pa 2. May be imprisoned for falsification but not from non-payment Community tax vs. poll tax A capitation tax imposed on all persons of a certain age. At present it is the tax one pays for his/her residence certificate which generally serves as a personal identification instrument. (Bernas, 568) Under the LGC, the only penalty for delinquency is the payment of surcharge in the form of interest at the rate of 24% per annum which shall be added to the unpaid amount, from the due date until it is paid. However, imprisonment is possible when community tax law is violated other than for nonpayment of tax e.g.: o Falsification of community tax certificate
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87 Constitution Art. III, Sec. 20. No Person shall be imprisoned for debt or non-payment of poll tax. LGC Section 156. Community Tax. Cities or municipalities may levy a community tax in accordance with the provisions of this Article. Section 157. Individuals Liable to Community Tax. Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly employed on a wage or salary basis for at least thirty (30) consecutive working days during any calendar year, or who is engaged in business or occupation, or who owns real property with an aggregate assessed value of One thousand pesos (P1,000.00) or more, or who is required by law to file an income tax return shall pay an annual additional tax of Five pesos (P5.00) and an annual additional tax of One peso (P1.00) for every One thousand pesos (P1,000.00) of income regardless of whether from business, exercise of profession or from property which in no case shall exceed Five thousand pesos (P5,000.00). In the case of husband and wife, the additional tax herein imposed shall be based upon the total property owned by them and the total gross receipts or earnings derived by them. Section 158. Juridical Persons Liable to Community Tax. - Every corporation no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines shall pay an annual community tax of Five hundred pesos (P500.00) and an annual additional tax, which, in no case, shall exceed Ten thousand pesos (P10,000.00) in accordance with the following schedule: (1) For every Five thousand pesos (P5,000.00) worth of real property in the Philippines owned by it during the preceding year based on the valuation used for the payment of real property tax under existing laws, found in the assessment rolls of the city or municipality where the real property is situated - Two pesos (P2.00); and (2) For every Five thousand pesos (P5,000.00) of gross receipts or earnings derived by it from its business in the Philippines during the preceding year - Two pesos (P2.00). The dividends received by a corporation from another corporation however shall, for the purpose of the additional tax, be considered as part of the gross receipts or earnings of said corporation. Section 159. Exemptions. - The following are exempt from the community tax: (1) Diplomatic and consular representatives; and (2) Transient visitors when their stay in the Philippines does not exceed three (3) months.
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Application: 1. When tax exemption is revoked by a later taxing statute (Except: franchise) Taxing statute should not alter the relative rights of parties with each other. When does law impair contract? Only if the relative position of the parties to a contract (i.e. equality that is assumed when the contract was entered into) is disturbed by the operation of a taxing statute. However, mere fact that tax makes the conduct of a business more expensive or makes an activity more difficult does not result in the impairment of obligation of contracts. 87 Constitution Art III, Section 10. No law impairing the obligation of contracts shall be passed. Art XII, Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. Casanovas v Hord Taxes on mining claims Void Concessions granted by the government to the owner thereof constitute a contract between the parties and the taxes imposed impairs the obligation of these contracts and is therefore void as to them. Tolentino v. Secretary of Finance CREBA assails the VAT law as unconstitutional as its application to existing contracts of the sale of real property by installment or on deferred payment basis would result in substantial increases in the monthly amortizations to be paid because of the 10% VAT. Valid Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and
e.
impairment
of
Basis: Constitution Impairment of obligation of contracts when the terms of the contract are changed by law or by party without the consent of the other, thereby weakening the position or rights of the latter Includes contracts entered into by government
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Basis: Constitution Application: 1. Cannot appropriate for private purpose 2. Cannot lease public property for nominal rent to religious organizations 87 Constitution Art. VI Sec. 29. (1) No money shall be paid out of the Treasury except in pursuance of an appropriation made by law. (2) No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium. (3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. Osmena v Orbos Supra Gaston v, Republic Planters Bank Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, administered in trust for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general fund of the Government.
Basis: Constitution Application: 1. Imposition of license fees on distribution and sale of bibles is unconstitutional 2. Not prohibit imposing a generally applicable tax on the sale of religious materials by religious organizations 87 Constitution Art. III, Sec. 5. No law shall be made respecting an establishment of religion or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination of preference, shall forever be allowed. No religious test shall be required for the exercise of civil and political rights. American Bible Society v. City of Manila The City of Manila claims that ABS is conducting the business of general merchandise and required ABS to pay for and secure the necessary Mayors permit and municipal license. ABS questions the legality of the ordinances under which the fees were being collected. Exempt from license taxes The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. Any restraint of such right can only be justified on the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent.
h.
Basis: Constitution Application: only property taxes not other taxes 1. Nature of use: actually, directly and exclusively for the purpose mentioned 2. Scope: not limited to property actually indispensable for religious, charitable or educational purposes but extends to facilities
21
i.
Basis: constitution Application: 1. Covers income, property, donor taxes and custom duties 2. Must be exclusively for that purpose 3. Congress is authorized to grant similar exemptions to proprietary educational institutions subject to limitations provided by law including restrictions on dividends and provisions for reinvestment. 4. Lands, buildings and improvements actually, directly and exclusively used for educational purposes are exempt from property tax whether the educational institution is proprietary or nonprofit. 87 Constitution Art. XIV Sec. 4 (3). All revenues and assets of nonstock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution of cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such exemptions subject to the limitations provided by law including restrictions on dividends and provisions for reinvestment.
22
j.
87 Constitution Art. VI Section 28(4). (4) No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress. requirement is intended to prevent indiscriminate grant of tax exemption. at least + 1 impliedly limited by rule on uniformity and equal protection ii. Veto of Appropriation, revenue, tariff bills by the President
GR: President may veto a bill in part and approve it in part E: vetoed item shall simply be not given effect Gonzales v. Macaraig A house bill was presented to the President. It was signed into law except for 7 provisions which were vetoed. Provisions which vetoed relate to the authority of the department to augment the GAL for respective offices and budget for the said offices. Veto is constitutional The power given to the executive to disapprove any item or items in the Appropriations Bill does not grant the authority to veto a part of an item and to approve the remaining portion of the same item.
23
24
5.
Who may question the validity of tax measure of expenditure of taxes taxpayers suit
not only persons individually affected but also taxpayers have sufficient interest of preventing illegal expenditures of money raised by taxation and may therefore question in the prope court the constitutionality of statutes requiring expenditure of public funds Lozada v. Comelec action for mandamus in the hopes of compelling COMELEC to call a special election to fill up existing vacancies in the Interim Batasang Pambansa. No standing As taxpayers, petitioners may not file the instant petition, for nowhere therein is it alleged that tax money is being illegally spent. The act complained of is the inaction of the COMELEC to call a special election, as is allegedly its ministerial duty under the constitutional provision above cited, and therefore, involves no expenditure of public funds.
Maceda v. Macaraig NPCs exemption Petitioner instituted the suit in his capacity as a taxpayer and a duly-elected senator of the Philippines. has standing The suit may be filed by the petitioner as a taxpayer. Following the ruling in Lozada vs. Comelec, a taxpayer may file a petition when it involves illegal expenditure of public money. The petition questions the legality of the tax refund to NAPOCOR by way of tax credit certificate and the use of the assigned tax credit by the oil companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs.
25
87 Constitution Art. VI, Section 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. Progressive system v. Progressive rate of tax Progressive system tax laws shall place emphasis on direct taxes rather than indirect taxes with ability to pay as the principal criterion direct, progressive tax: income tax on compensation, business and professional taxes Progressive tax tax rate increases as the tax base or bracket increases Tolentino v. Secretary of Finance The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that "direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized." The mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, 17(1) of the 1973 Constitution from which the present Art. VI, 28(1) was taken. Sales taxes are also regressive. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactionswhile granting exemptions to other transactions. On the other hand, the transactions which are subject to the VAT are those which involve goods and services which are used or availed of mainly by higher income groups.
sources of revenue, taken as a whole, should be sufficient to meet the demands of public expenditure revenue should be elastic (capable of expanding or contracting annually in response to variation in public expenditure b. Equality and theoretical justice
distributed in proportion to taxpayers ability to pay similarly situated taxpayers should pay equal taxes those who have more should pay more c. Administrative feasibility
tax laws should be capable of convenient, just and effective administration Note: Non observance of these principles does not necessarily render tax imposed invalid except as to the extent that the specific constitutional limits are violated Chavez v. Ongpin Collection of real property taxes base on the 1984 valuation of property valid To continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue must be adequate to meet government expenditures and their variations
26
National imposed by national government NIRC taxes, custom duties, national taxes by special laws Local or Municipal by municipal corporations or LGUs real estate tax, professional tax Benguet Corporation v. CBAA real property taxes over the bunkhouses of Benguet Corporation which were used for the residence of its employees Taxable, its a national tax While the local government units fix the rates, they are merely agents of the national government in enforcing the provision of the Real Property Tax Code. Such realty tax is imposed throughout the Philippines, but the proceeds of the tax accrue to the province, city, municipality or barrio where the realty is situated.
2.
Direct demanded from person who also shoulders the burden of tax or tax for which the taxpayer is directly or primarily liable or which he cannot shif to another Indirect demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another another person absorbs or bears the burden of the tax other than the person on whom it was imposed SECTION 1. Section 99 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Sec. 99. Persons Liable. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be liable to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code. chan robles virtual law library "The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rules likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of this Act. chan robles virtual law library "The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or
Maceda v. Macaraig NPCs exemption NPC is exempt from direct and indirect tax. But the oil companies are not. By the very nature of indirect taxation, the economic burden of such taxation is expected to be passed on through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct and indirect taxation, the NPC must be held exempted from absorbing the economic
27
CIR v. Gotamco Contractor of WHO, a tax-exempt organization, claims refund of contractors tax Exempt The contractor's tax is payable by the contractor but in the last analysis it is the owner of the building that shoulders the burden of the tax because the same is shifted by the contractor to the owner as a matter of self-preservation. Thus, it is an indirect tax. And it is an indirect tax on the WHO because, although it is payable by the petitioner, the latter can shift its burden on the WHO. In the last analysis it is the WHO that will pay the tax indirectly through the contractor and it certainly cannot be said that this tax has no bearing upon the World Health Organization. Philippine Acetylene does not apply because that involves a sales tax, not a contractors tax.
CIR v. PLDT PLDTs VAT, advance sales tax, and compensating tax on the equipment and machinery it imported for its business Indirect taxes, not exempt. The liability to pay them is imposed on the seller, but the burden of the tax is ultimately shouldered by the buyer. Thus they cannot be included under PLDTs in lieu of all taxes exemption, because the clause refers only to direct taxes. The franchise tax to be paid in lieu of all taxes includes only direct taxes on PLDTs franchise or earnings thereof. Exxonmobil Petroleum v. CIR Excise tax paid for by Caltex and Petron but which ultimately shouldered by Exxon. Exxon buys petroleum from Caltex/Petron and then sell it to international carriers. Exxon asked for refund because petroleum products sold to international carriers of foreign registry on their use and consumption outside the Philippines are exempt from excise tax. Excise tax is an indirect tax. No refund. The proper party to ask for a refund is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shift the burden thereof to another.
3.
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Association of Customs brokers v. Municipal Board property tax on motor vehicles in the city License tax While as a rule an ad valorem tax is a property tax, the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed The main purpose of the tax is revenue for repair, maintenance and improvement of streets and bridges in the city. This is precisely what the Motor Vehicle law prohibits for it already impose fees for exactly the same purpose.
4.
As to manner of computing
a. Ad valorem tax of fixed proportion of the value of the property with respect to which the tax is assessed requires the intervention of assessors or appraisers to estimate the value of the property before the amount due from the taxpayer can be determined b. Specific tax of fixed amount imposed by the head or number or by some standard of weight or measurement requires no assessment or valuation other than the listing or classification of the objects to be taxed We Wa Yu v. City of Lipa tax on sale of gasoline, alcohol, gas and petroleum City of Lipa is given the power and authority to impose tax, fix license fee or regulate the business but not to impose tax on specific articles which takes the form of specific tax. Specific tax, Ultra vires A tax which impose a specific sum by the head or number or some standard of weight and which requires no assessment beyond a listing and classification of the objects to be taxed is a specific tax. 5. As to graduation or rate
a. Proportional tax based on fixed percentage of the amount of the property, receipts, or other basis to be taxed rate remains constant for all level of the tax base or any given income level flat or uniform tax real estate, VAT, other percentage taxes
29
Tolentino v. Sec. of Finance (Supra) Abakada v. Ermita the Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall evolve a progressive system of taxation. The imposition of a VAT is not unconstitutional. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers ability to pay. Chavez v. Ongpin to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance of a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations.
some
point
and
then
c. Regressive tax the rate of which decreases as the tax base or bracket increases no regressive tax in the Philippines Regressive system of taxation more indirect taxes than direct taxes progressive elements of the income and other direct taxes have not sufficiently offset the regressive effects of indirect taxes
30
literally means place of taxation Rule: state where the subject to be taxed has a situs may rightfully levy and collect the tax situs is necessarily in the state which has jurisdiction or which exercises dominion over the subject in question A person may be subject to taxation in several taxing jurisdiction (Multiplicity of situs) b. Situs of subjects of taxation
will depend upon various factors including: 1. Nature of the tax 2. Subject matter (person, property, activity) 3. Possible protection and benefit that may accrue both to government and taxpayer 4. Source of income 5. Residence or citizenship of the taxpayer 6. Source of income Examples: 1. Persons poll tax on inhabitants or residents of the State, citizen or not (LGC, Art. 50, CC) 2. Real Property real estate is subject to taxation in the state in which it is located whether owner is resident or not and is taxable only there (RULE OF LEX REI SITAE)
3.
Tangible personal property taxable in state where it has actual situs (where physically located) LEX REI SITAE RP and PP is subject to law of country where it is located 4. Intangible personal property credit, bills receivable, bank deposits, bonds, PNs, mortgage loans, judgments, stocks GR: domicile of owner (PRINCIPLE OF MOBILIA SEQUUNTUR PERSONAM) E: inconsistent with provisions of statute, justice does not demand that it should be >> Stocks of domestic corporation ALWAYS TAXABLE HERE! >> Bonds depends if estate or income tax 5. Income from residents or citizens in taxing jurisdiction or from those who are neither residents nor citizens provided the income is derived from sources within taxing state
c.
Multiplicity of suits
Factors: 1. variance in the concept of domicile 2. multiple distinct relationships that may arise with respect to intangible personal property 3. Use to which the property may have been devoted 4. Protection of the laws of jurisdiction other than the domicile of the owner Effect: Subject jurisdiction to taxation in several taxing
Remedy: Avoid or reduce consequent burden 1. Exemptions, allowance for deduction or tax credit 2. Enter into treaties with other states (Phil-Am Military Bases Agreements as to income tax) See: Sec. 42 NIRC
6. Business, occupation and transaction GR: power to levy excise tax depends upon the place where the business is done or the occupation engaged in or the transaction took place 7. Gratuitous transfer of property
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2.
Strict sense: direct duplicate taxation a. Taking twice b. Same taxing authority c. Same jurisdiction d. Same purpose e. Same year or taxing period f. Same property or subject matter Broad sense: indirect duplicate taxation double taxation other than direct duplicate extend to cases in which there is a burden of 2 more pecuniary impositions b. Instances of double taxation
Examples: 1. Tax on mortgage as personal property and as real estate property 2. Tax on corporation for its property and upon shareholders 3. Tax on corporation capital stock as whole and on shareholders for their shares 4. Tax on depositors in a bank on property and deposits 5. Excise tax use of property and property tax 6. Tax on property imposed by 2 different states Villanueva v. City of Iloilo license tax on tenement houses no double taxation "In order to constitute double taxation in the objectionable or prohibited sense the same
CIR v. Citytrust Investment Phils. Inc. FWT and GRT no double taxation Same ratio as solidbank case
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In narrow sense: unconstitutional In broader sense: constitutional General Rule: Our constitution does not prohibit double taxation Example; 1. By national government and by the city 2. Real estate tax and tax on engaging in business of leasing real estate 3. Tax on products and on privilege 4. Tax and license fees Exception: while not forbidden, it is not favored whenever possible, be avoided and prevented doubts as WON theres double taxation is resolved in favor of the taxpayer (avoid injustice or unfairness) may seek relief under uniformity rule or equal protection guarantee City of Baguio v. de Leon License fees No double taxation Argument of double taxation cannot avail where one tax is imposed by the State and the other is imposed by the City. Double taxation is not violative of due process. Due process clause no more forbids double taxation than it does doubling the amount of tax, as long as these are not confiscatory or unconstitutional on other grounds. Pepsi Cola Bottling Co. v. City of Butuan Tax on agents and consignees No double taxation Double taxation, in general, is not forbidden by our fundamental law. The injunction against double taxation found in the US Constitution. then, again, the general principle against delegation of legislative powers, in consequence of the theory of separation of powers, is subject to one well established exception, namely: legislative powers may be delegated to local governments to which said theory does not apply in respect to matters or local concern. CIR v. Manila Jockey Club contribution and amusement tax Double taxation
Sec. 105 NIRC Kinds of shifting 1. Forward transfer from factor of production through factors of distribution until it finally rests on the ultimate purchaser or consumer 2. Backward from consumer to the factor of production through the factors of distribution 3. Onward shifting tax is shifted 2 or more times either forward or backward Not shifted: 1. Direct tax 2. Those that are purely personal (estate and community tax) iii. Meaning of taxation impact and incidence of
Relations among impact, shifting and incidence of tax Shifting transfer of burden of a tax by the original payer or the one on whom the tax was assessed or imposed to another or someone else person on whom tax was imposed may not be the one who shoulders the burden of the tax (indirect tax) shifts the BURDEN not the PAYMENT of the tax Impact of taxation point on which the tax is originally imposed the statutory taxpayer
3. a.
Escape from taxation Shifting of tax burden i. Ways of shifting the tax burden
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use by the taxpayer of illegal means or fraudulent means to defeat or lessen the payment of tax tax dodging tantamount to absence of taxation, Elements of Tax evasion 1. The end achieved 2. Accompanying state of mind evil, bad faith, willful 3. A course of action (or failure of action which is unlawful Evidence to prove tax evasion since fraud is a state of mind, it need not be proved by direct evidence but may be inferred from the circumstances of the case Republic v. Gonzales deficiency income tax a furniture manufacturer, is a private concessionaire in the U.S. Military Base at Clark, Pampanga. He underdeclared his income returns for 1946 & 1947 by excluding sales garnered from the Clark Air Base. He refuses to pay the income tax corresponding to the said sales on that ground that as a concessionaire of Clark, he is not subject to Philippine tax laws pursuant to the United States-Philippine Military Bases Agreement. Guilty of tax evasion Since fraud is a state of mind, it need not be proved by direct evidence but may be inferred form the circumstances of the case. The failure of Gonzales to declare for taxation purposes his true and actual income derived form his furniture business at Clark Field Air Base for 2 consecutive years is an indication of his fraudulent intent to cheat the Government of its due tax. CIR v. Toda Toda sold the building to an individual for almost half the price of the subsequent sale to a corporation. guilty of tax evasion Tax avoidance and tax evasion are the two most common ways used by taxpayers in escaping from taxation. Tax avoidance is the tax saving device within the means sanctioned by law. This method should be used by the taxpayer in good faith and at arms length. Tax evasion, on the other hand, is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities
c.
Tax avoidance
tax planning or tax minimization use of taxpayer of legal permissible alternative rate or method of assessing taxable property in order to avoid or reduce tax liability not punishable by law Delpher v. IAC Property was leased to Hydropipes with right of first refusal. The said property is purportedly conveyed by the owners to their family corporation as their contribution to the said corporation. Hydro now claims that the property shouldve been conveyed to them first. No tax evasion, only tax avoidance The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted. Original owners are still in control of the property for they have majority shares in the family corporation. Yutivo Sons Hardware v. CTA Yutivo Sons were assessed deficiency sales tax on its sale of motor vehicles to the public through SM, another corporation said to be a subsidiary No tax evasion The intention to minimize taxes, when used in the context of fraud, must be proved to exist by clear and convincing evidence amounting to more than mere preponderance. Tax evasion is a term that connotes fraud and the transactions between Yutivo and SM have always been in the open and subject to the inspection by the tax authorities. The allegation of fraud cannot be sustained without the showing that Yutivo, in filing said returns, did so fully knowing that the taxes called therein were less than what were legally due. Yutivo merely continued the scheme it had before with GM in the honest belief that it only had to pay the tax on the first sale. Furthermore, if SM was only for a tax saving device, it would not have continued to exist despite the passage of RA 594 which made the selling price immaterial to the amount of the sales tax. Also, the sales tax stated that it shall be collected once only and the taxpayer had the legal right to decrease the amount due on taxes by any legal means necessary
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ii.
grant of immunity to particular persons or corporations from tax immunity or privilege, freedom from financial charge or burden to which others are subjected
Greenfield v. Meer Greenfield was engaged in the embroidery business. In 1935 he engaged in selling and buying of mining stocks and securities. He is not a dealer and he has no established place of business and was never a member of any stock exchange entitled to refund, should be deducted from net income Because "Exception is an immunity or privilege; it is freedom from a charge or burden to which others are subjected." If the amounts of personal and additional exemptions fixed in section 23 are exempt from taxation, they should not be included as part of the net income, which is taxable. There is nothing in said section 23 to justify the contention that the tax on personal exemptions (which are exempt from taxation) should first be fixed, and then deducted from the tax on the net income.
Juan Luna v. M. Sarmiento Taxpayer paid the land taxes in form of checks. The checks were lost. Taxpayer claims refund by virtue of CA 703 which provides for remission of taxes paid during 1942 to 1943. Note that taxpayer paid the taxes (via check) prior to the enactment of the law. apply only to taxes which are not paid at the time To remit is to desist or refrain from exacting, inflicting or enforcing something as well as to restore what has already been taken. The remission of taxes due and payable to the exclusion of taxes already collected does not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open to attack as class legislation only if all taxpayers belonging to one class were not treated alike. They are not. The taxpayers who had been in arrears in their obligation would have to satisfy their liability with genuine currency, while the taxes paid during the occupation had been satisfied in Japanese military notes, many of them at a time when those notes were well-nigh worthless. To refund those taxes with the restored currency, even if the Government could afford to do so, would be unduly to enrich many of the payers at a greater expense to the people at large Surigao Consolidated Mining v. Collector Petitioner claims for a refund by virtue of RA 81 stating that all taxes unpaid from mining claims are condoned. Note that petitioner already paid the its taxes. Not entitled to refund. The law invoked clearly refers to the condonation of unpaid taxes only. The condonation of a tax liability is equivalent and is in the nature of a tax exemption. Being so, it should be sustained only when expressed in explicit terms, and it cannot be extended beyond the plain meaning of those terms. He who claims an exemption from his share of the common burden of taxation must justify his claim b showing that the Legislature intended to exempt him by word too plain to be mistaken. Hence, the benefits of the said provision does not extend to it
CIR v. Magsaysay Lines sale of National Development Corporation of its shares in the National Marine Corporation and five (5) ships, wherein one of the stipulations of the sale was that the winning bidder was to pay VAT of 10% on the value of the vessels Not subject to VAT, not in the ordinary course of business VAT is ultimately a tax on consumption, even though it is assessed on many levels of transactions on the basis of a fixed percentage. It is the end user that ultimately shoulders the burden of the tax.
35
See: RA 9399 and RA 9480 general pardon or intentional overlooking of the state of its authority to impose penalties on persons otherwise guilty of tax evasion or violation of a revenue or tax law never favored or presumed in law CIR v. CTA R.O.H. Auto Products was assessed deficiency income and business taxes. E.O. 41 was enacted which granted a one-time tax amnesty on unpaid income taxes, later amended to include estate, donors and business taxes, for the taxable years 1981-1985. ROH applied for the amnesty and paid the amnesty taxes. Note that ROH was already assessed when the EO was issued. Entitled to tax amnesty EO 41 is a general grant. If the law had intended that tax liabilities assessed before 22 August 1986 be excluded, it could have simply provided in its exclusionary clauses
Republic v. IAC Couple availed of the tax amnesty. They were already assessed of tax at the time they applied for the amnesty which was accepted. Entitled to tax amnesty The Government is estopped from collecting the difference between the deficiency tax assessment and the amount already paid by them as amnesty tax. A tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by the government of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to reform a chance to do so and thereby become a part of the new society with a clean slate. People v. Castaneda Criminal complaint was filed against the accused for violations of Internal Revenue Code and they filed a motion to quash on the ground of entitlement to benefits of tax amnesty Not entitled. He did not voluntarily paid and amnesty cannot extend benefit to co-accused. The defense of the tax amnesty under PD 370 is, like insanity, a personal defense; for that defense relates to the circumstances of a particular accused and not to the character of the acts charged in the criminal information Pascual v. CIR sale of parcels of land, seller availed of amnesty Entitled to tax amnesty, not liable for corporate income tax on alleged partnership that was formed.
c.
Zero rating
iii. Kinds of tax exemption 1. As to manner of creation a. Express b. Implied tax levied on certain classes without mentioning the other classes As to scope or extent a. Total b. Partial
2.
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Atlas Fertilizer v. CIR compensating tax Exempt, entitled to tax credit but not to interest on said tax credit (CIR did not act arbitrarily) R. A. No. 901 grants partial exemption while R. A. 3050 grants total exemption. Once a manufacturer of fertilizer chose to come under R. A. 3050, his partial exemption under R. A. 901 ceased. In effect, he enjoyed only one exemption benefit, the full exemption under R. A. No. 3050. As correctly ruled by the respondent court, when AFC availed of the total exemption under R. A. No. 3050, it has in effect given up the partial exemption which it was enjoying under R. A. No. 901. UST v. CIR business printers percentage tax entitled to refund as to the sale by one department to another, but also liable for deficiency taxes for the same year = hence, a set off. Doctrine of equitable recoupment >> takes out of the field of limitation, tax adjustments where a charge or credit on one side would ordinarily be barred but equitably be allowed against a nonbarred liability asserted on the other. CIR v. Phil Ace line compensating tax on sale of 4 cargo vessels from reparations commission not taxable Every tax exemption implies a waiver of the right to collect what otherwise would be due to the government. Purpose is some public benefit or interest. There is no difference between the grant of exemption to end users who purchased after the approval of the RA 1789 (granting exemption) and those who purchased before its enactment.
v.
public policy public benefit or interest Tolentino v. SOF An enumeration of some of the transactions will suffice to show that by and large the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and, in other cases, for the personal benefit of the end-user rather than for profit. Maceda v. Macaraig P.D. 1931 which enables NPC to ask for a total restoration of its tax exemption privileges, was issued 9 months after the Philippines unilaterally declared a moratorium on its foreign debt payments as a result of the economic crisis triggered by loss of confidence in the government brought about by the Aquino assassination. The Philippines was then trying to reschedule its debt payments. One of the big borrowers was the NPC which had a US$2.1 Billion white elephant of a Bataan Nuclear Power Plant on its back. From all indications, it must have been this grave emergency of a debt rescheduling which compelled Marcos to issue P.D. 1931
Caltex v. COA claim from OPSF fund by oil companies cannot suspend payment of OPSF dues Though LOI 1416 may suspend the payment of taxes by copper mining companies, it does not give the petitioner the same privilege with respect to the payment of OPSF dues. iv. Nature of the power to grant tax exemption 1. National government like the inherent power to tax, the power to exempt from taxation is an attribute of sovereignty for the power to prescribe who or what property shall be taxed implies the power to prescribe who or what shall NOT be taxed
37
Phil Acetylene v. Commissioner of Customs tax exemption must be strictly construed and that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties. Hence, in so far as the circular of the Bureau of Internal Revenue would give the tax exemptions in the Agreement an expansive construction it is void Wonder Mechanical Engineering v CTA corporation was granted tax exemption privilege under Republic Act 35 in respect to the "manufacture of machines for making cigarette paper, pails, lead washers, rivets, nails, candies. chairs, etc.". exempt only those portion expressly provided The cardinal rule in taxation is that exemptions therefrom are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right thereto by the dearest grant of organic or statute law. Tax exemption must be clearly expressed and cannot be established by implication. Exemption from a common burden cannot be permitted to exist upon vague implication
PLDT v. City of Davao PLDT claims exemption because its competitors, Smart and Globe were granted an exemption. Not exempt. The law sought to promote gradual deregulation of entry, pricing and operation of all public telecommunication entities, thus helping to level the playing field. The in lieu of all taxes provision in the franchises of Smart and Globe cannot be applicable to PLDT, who had virtual monopoly of the industry before, without defeating the very policy of leveling the playing field.
38
87 Constitution Article VI, Sec. 28(3). - Charitable institutions, churches and personages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. Article XIV, Sec4(3). - All revenues and assets of nonstock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to such exemptions, subject to the limitations provided by law, including restrictions on dividends and provisions for reinvestment. Article XIV, Sec4(4). Subject to conditions prescribed by law, all grants, endowments, donations, or contributions used actually, directly, and exclusively for educational purposes shall be exempt from tax.
b. c. d.
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Internal Revenue laws are NOT POLITICAL in nature. They are deemed to be the laws of the occupied territory and not of the occupying enemy. Tax laws are CIVIL and not penal in nature although there are penalties provided for their violation. The purpose of tax laws in imposing penalties for the delinquencies is to compel the timely payment of taxes or to punish evasion or neglect of duty in respect thereof.
2.
Hilado v. CIR Petitioners contention that during the last war and as a consequence of enemy occupation in the Philippines there was no taxable year within the meaning of our internal revenue laws because during that period they were unenforceable Tax laws were enforceable Our internal revenue laws are not political in nature and as such were continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. As a matter of fact, income tax returns were filed during that period and income tax payment were effected and considered valid and legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy
3.
Supreme Court Decision of SC interpreting existing tax laws are binding on all subordinate courts and have the force and effect of law SC decisions forms part of the legal system of the Philippines, they are evidence of what law means Court of appeals By nature of its jurisdiction, the decisions of this court are still appealable to the Supreme Court by PFR on certiorari i. Revenue rules and regulations administrative rulings and opinions and
Republic v. Vda de Fernandez War Profits Tax Laws Taxable, not ex-post facto The war profits tax law is both a property tax and a tax on income: it is a property tax in relation to the properties that he had in December 1941, and it is an income tax in relation to the properties which he purchased during the Japanese occupation. The doctrine raised herein is based on the prohibition against ex post facto laws. But this prohibition applies only to criminal or penal matters, and not to laws which concern civil matters or proceedings generally, or which affect or regulate civil or private rights. *tax law is civil and not political
See: Sec. 245 NIRC Sec. 511 and 519 Tariff and Customs Code SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. - The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code. Revenue Regulations most formal pronouncement of DOF prescribe or define rules for the effective enforcement of Tax code and related statutes The power to recommend the promulgation of internal revenue rules and regulations by the SOF is given only to CIR. He is NOT allowed by law to delegate such power to his subordinates.
2.
Others: 1. Legislation and statutes (PDs, EOs) 2. Admin rules and regulations and rulings or opinions of tax officials (CIR, SOJ) 3. Judicial decisions
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Tan v. Del Rosario Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing rule as now so modified by Republic Act No. 7496 on basically the extent of allowable deductions applicable to all individual income taxpayers on their non-compensation income. There is no evident intention of the law, either before or after the amendatory legislation, to place in an unequal footing or in significant variance the income tax treatment of professionals who practice their respective professions individually and of those who do it through a general professional partnership CIR v. CA, fortune tobacco BIR ruling is issued in exercise of quasi-legislative function. Hence, there should have been notice and hearing before it can be effective.
Misamis Oriental v. DOF Sec. 103 (b) of the NIRC classified copra as an agricultural food product and therefore exempt from VAT at all stages of production. However, the abovementioned RMC reclasiffied copra as an agricutltural non-food product, and therefore, only exempt from VAT if the sale is made by the primary producer. Reclassification is valid As the government agency charged with the enforcement of the law, the opinion of the Commissioner of Internal Revenue, in the absence of any showing that it is plainly wrong, is entitled to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in the exercise of his power under 245 of the NIRC to "make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes i. Validity of regulations revenue rules and
Phil. Petroleum Corp. v. Mun. of Pililia Pililla passed its own Tax Code (ordinance) imposing taxes but its effectivity has been suspended because of the Provincial Circulars. cannot be suspended Administrative regulations must be in harmony with the provisions of the law. In case of discrepancy between the basic law and an implementing rule or regulation, the former prevails.
Requisites: 1. must not be contrary to law 2. must be published in the OG Effectivity: file with the UP law center 3 certified copies effective 15 days from date of filing, unless a different date is fixed by law or specified in rule in cases of imminent danger to public health, safety and welfare (must be expressed) Note: RRs of SOF may take effect even before publication in the OG Force and effect: once established and found to be in consonance with the general purpose and objects of law have
Umali v. Estanislao A petition for mandamus to compel the Secretary of Finance and Commissioner of Internal Revenue to implement RA 7167, adjusting the personal and additional exemptions allowable to individuals for income tax purposes in regard to income earned or received in 1991 RR cannot postpone effectivity of a statute The personal exemptions as increased by the Act cannot be regarded as available with respect to the compensation income earned or received in 1990 as these have already accrued and presumably paid. To make the Act applicable to income received in 1990 would require language that is explicitly in purport and effect. However, the personal exemptions that were increased by the Act are not restricted to income received in 1992 as Revenue Regulation No. 1-92 would in effect postpone the effectivity of the Act to January 1, 1993 La Suerte Cigar v. CTA Memorandum Circular No. 30-67 was issued requiring the inspection of locally produced lead tobacco and partially manufactured tobacco for domestic sale and all manufactured tobacco Valid
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Tax statutes are to receive a reasonable construction or interpretation with a view to carrying out their purpose and intent They should NOT be construed as to permit evasion by the taxpayer Good faith of the taxpayer is NOT a sufficient justification for exemption from the payment of surcharges imposed by law for failing to pay within period required by law Umali v. Estanislao (supra) Lorenzo v. Posada Inheritance Tax Taxable at time of transfer to trustee It is easy for a taxpayer to claim good faith but difficult for the government to prove that he acted in bad faith. The disastrous effect on tax collection is not difficult to discern if such a defense were available. A tax statute should be construed to avoid possibilities of tax evasion. CIR v. Solidbank (supra)
b.
No person or property is subject to taxation unless within the terms or plain import of the taxing statute Rule: tax statutes are construed strictly against the government and liberally in favor of the taxpayer Exception: not applicable where the language of the tax statute is plain and there is no doubt as to the legislative intent. In such case, the words are to be given their ordinary meaning. Rationale: Taxes, being burdens, they are not to be presumed beyond what the statute expressly and clearly declares CIR v. La Tondena La Tondena is a manufacturer of wines and liquors. LT uses as basic material low test alcohol (purchased in crude form from the suppliers), which LT re-rectifies or subjects to further distillation. In this process, losses thru evaporation had necessarily been incurred, for which the Collector had given LT an allowance of not exceeding 7%. On May 1954, the Collector wrote a demand letter to LT for the payment of specific taxes on alcohol lost by evaporation Exempt
ii.
BIR rulings
Official position of BIR to queries raised by a taxpayer on certain specific issues of law or administration in relation to the provisions of the Tax code, relevant laws and other issuances of BIR, clarifying and interpreting them
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Provisions/laws granting exemption i. General Rule Rule: Exemption provisions are construed strictly not against the government but against the one who asserts the claim of exemption Tax exemption can only be given effect when the grant of the law is clear. Any doubt is reserved in favor of taxation. Rationale: taxation is the rule and exemption from tax is the exception. Tax refunds are in the nature of tax exemptions and are, therefore, strictly construed against the claimant who has the burden of proving the factual basis of his claim for refund. CIR v. CA Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest. and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken. Misamis Oriental v. Department of Finance copra as agricultural product BIR ruling upheld But as the government agency charged with the enforcement of the law, the opinion of the Commissioner of Internal Revenue, in the absence of any showing that it is plainly wrong, is entitled to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in the exercise of his power under 245 of the NIRC to "make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes." Philacetylene v. CIR tax exemption must be strictly construed and that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties. Hence, in so far as the circular of the Bureau of Internal Revenue would give the tax exemptions in the Agreement an expansive construction it is void
c.
Maceda v. Macaraig It is recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of government political subdivision or instrumentality. In the case of property owned by the state or a city or other public corporations, the express exception should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state, since as to such property exception is the rule and taxation the exception.
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Art. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. This Code shall take effect one year after such publication. Rule: Prospective Reason: nature and amount of the tax could not be foreseen and understood by the taxpayer at the time of transaction which the law seeks to tax was completed Exception: When expressly declared or when legislative intent clearly provides for retroactive application as provided by tax treaties entered into by the Philippines with other countries
Umali v. Estanislao (supra) Lorenzo v. Posadas (supra) Hijo Plantation v. Central Bank Banana Exports reached the aggregate annual F.O.B. value of US $5 million in August 1971, bringing it within R.A. 6125 (An Act imposing Stabilization Tax) petitioners sought authoritative pronouncement from Central Bank and in the reply letter, Central Bank called attention to Monetary Board Resolution 1995, providing that the stabilization tax would start to accrue January 1972, and at the rate of 6%. Ultra vires Monetary Board Resolution No. 1995 cannot be said to be the product of grave abuse of discretion, it is the result of an overzealous desire to carry into effect the provisions of RA 6125, it is evident that the Board acted beyond its authority under the law and the Constitution. Hence, the petition for certiorari and prohibition in the case at bar, is proper.
CIR v. Filipinas Compania de Seguros annual tax on real estate dealers should not be retroactive As a rule, a statute should be considered as prospective in its operation, whether it enacts, amends or repeals a tax, unless the language of the statute, clearly demands or expresses that it shall have a retroactive effect. The rule applies in greater force here considering that RA 1612, which imposes new and higher rates, expressly provides in Sec. 21 thereof that it shall take effect upon its approval on Aug. 24, 1956
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See: RMC Memo Circluar 20-86 SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases: (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) Where the taxpayer acted in bad faith. Power to interpret the provisions of the Tax code and other tax laws is under the exclusive and original jurisdiction of the CIR subject to review by SOF. Revenue regulation formal interpretation Ruling less general interpretation of tax laws which are issued by tax officials in the performance of their assessment functions rendered by CIR on request of taxpayer to clarify certain provisions may be revoked by SOF Commissioner has the sole authority to issue rulings but can also delegate said authority but not those of first impression (ie question involved is new and important) SOJ may also give rulings in the form of opinions on tax questions as chief legal officer of the government. Weight given to administrative interpretation a principle widely accepted that the contemporaneous construction placed upon the statute by the executive officers whose duty is to enforce it is entitled with great respect by the courts NOT conclusive and will be ignored if judicially found to be erroneous Power of SOF to revoke rulings of predecessor SOF has the power to revoke, repeal or abrogate the acts or previous rulings of his predecessor in office Construction of statute by those administering it is not binding on their successors if thereafter the latter becomes satisfied that a different construction should be given Tuzon v. CA Resolution No. 9 requires payment of 1% of palay threshed out as donation for construction of sports and nutrition center. Mayors permit was
45
CIR v. Benguet Corp. Benguet Corporation, relying on petitioners VAT Ruling No. 3788-88, which declared that Benguets sale of gold to the Central Bank is an export sale subject to zero rate, entered into transactions that resulted in input VAT incurred in relation to the subject sales of gold. It then filed applications for tax refunds/credits. The applications were expressly disallowed by CIR on the strength of VAT Ruling No. 008-92 issued subsequent to the sales of gold to the Central Bank which provides that sales of gold to the Central Bank shall not be considered as export sales and thus, shall be subject to 10% VAT. Not retroactive, still subject to 0% rate BIR issuances have the force and effect of law. However, rulings, circulars, rules and regulations promulgated by the CIR would have no retroactive application if to so apply them would be prejudicial to the taxpayers. The change in the VAT rating of respondents transactions with the Central Bank resulted in the twin loss of its exemption from payment of output VAT and its opportunity to recover input VAT, and at the same time subjected it to the 10% VAT minus the option to pass on this cost to the Central Bank, with the total prejudice in money terms being equivalent to the 10% VAT levied on its sales of gold to the Central Bank. CIR v. Michel Lhuillier Pawnshop CIR issued RMO 15-91 imposing a 5% lending investor's tax on pawnshops pursuant to Section 116 of the Tax Code on the ground that the pawnshop business is akin to lending investor's business activity which is broad enough to encompass the business of lending money at interest by any person whether natural or juridicial. Not liable to investors tax, RMOs are not valid. The power of CIR to issue rulings and opinions in connection with the implementation of internal
Hagonoy market Vendors v. Municipality of Hagonoy Kautusan Blg. 2 which increase stall rentals Time barred It is apropos to state that the timeframe fixed by law for parties to avail of their legal remedies before competent courts is not a mere technicality that can be easily brushed aside. It is essential that validity of revenue measures is not left uncertain for a considerable length of time. Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue measures and tax ordinances. >> failure to attach to its appeal certified true copies of the assailed Resolutions of the SOJ not fatal theres due diligence. Jardine Davies v. Aliposa Makati revenue Code. Opposed by PRCI and was granted a favorable decision by RTC. Jardine Davies paid without protest and then asked for credit after learning of the decision of RTC Action prescribed for failure to appeal with SOJ within 30 days Delay in implementing tax measures would be detrimental to the public. Hence, tax protests are required to be done within certain time frames.
5.
Provisions intended for the security of citizens Example: 2. Those requiring previous notice to taxpayer for notice to taxpayer of public sale of his property for tax delinquency 3. Designed to ensure equality of taxation or certainty as to nature and amount of each
46
Importance of making a distinction omission to follow mandatory provisions renders the invalid act or proceeding to which it relates Omission to follow directory provisions does not involve invalidity of the act
Provisions designed merely for the information or direction of officers or to secure methodical and systematic modes of proceedings Example: 1. Submission of report of distraint of personal property within 10 days of receipt Roxas v. Rafferty Tax on building and improvements prior to completion of said improvements. Not taxable no notice given by assessor after the completion It is a general rule that those provisions of a statute relating to the assessment of taxes, which are intended for the security of the citizen, or to insure the equality of taxation, or certainty as to the nature and amount of each person's tax, are mandatory; but those designed merely for the information or direction of officers or to secure methodical and systematic modes of proceedings are merely directory. Aragon v. Jorge Notice of public auction not made Public auction is void Notice of the sale to the delinquent taxpayers and landowners and to the public in general is an essential and indispensable requirement of the law, and the non-fulfillment of which vitiates and nullifies the sale. The sale being void for lack of due notice, the treasurer cannot be compelled to issue the final bills of sale.