TAXES, TAX LAWS AND TAX ADMINISTRATION
Tax- an enforced proportionate contribution imposed upon persons, properties, businesses,
rights, interests, privileges, transactions and acts within the territorial jurisdiction of the taxing
authority exercise by the legislature for a public purpose and generally payable in money.
Elements of a Valid Tax
1. Must not violate the constitutional, inherent and/or contractual limitation of the power of
taxation
2. Must be uniform and equitable, not unjust, excessive, oppressive, confiscatory or discriminatory
3. Must be for public purpose
4. Must be levied by the taxing power (legislature) having jurisdiction over the object of taxation
5. Must be proportionate in character
6. Generally payable in money, at regular interval (not regular in payment)
Classification of Taxes
A. As to purpose
a) Fiscal- general, fiscal or revenue tax- imposed for the general purpose of the
government or to raise revenue for government needs (ex. income tax)
b) Regulatory- special or sumptuary tax- imposed for a special purpose or to achieve
some social or economic ends (ex. Tariff or customs duties)
B. As to subject matter
a) Personal, poll or capitation- tax of a fixed amount imposed on individuals residing
within a specified territory without regard to their property or occupation in which they
be engaged in. (ex. Community tax certificate)
b) Property tax- tax imposed on property, whether real or personal, in proportion, either
to its value or in accordance with some other reasonable method of apportionment (ex.
Real estate tax)
c) Privilege tax- tax imposed upon the performance of an act, the enjoyment of a privilege
or the engaging to an occupation. (Ex. Income tax, value added tax, privilege tax on
business or occupation)
C. As to incidence
a) Direct- the tax is demanded from one person in who is intended to pay for it. (ex.
Income tax and personal tax)
b) Indirect- the tax is demanded from one person in the expectation and intention that he
shall indemnify himself at the expense of another by shifting the tax to another taxpayer.
(ex. VAT, Customs Duties and some percentage taxes)
D. As to amount
a) Specific tax- a tax of a fixed amount imposed by the head or number. (ex. Tax on
distilled spirits, cigars and wines- P xx/piece)
b) Ad valorem tax-tax imposed for a fixed proportion of the amount or value of the
property to which the tax is assessed. (ex. Excise taxes on cigarettes and gasoline, real
property taxes and certain customs duties- X% of selling price)
E. As to rate
a) Proportional or flat rate- the tax is based on a fixed percentage of the amount of the
property, income or other basis to be taxed. (ex. Real estate tax, VAT and percentage
taxes)
b) Progressive or graduated tax- the tax rate increases as the tax base increases.
Progressive rate is preferred in achieving vertical equity. (ex. Income Tax, estate tax and
donor’s tax)
c) Regressive tax- the tax rate of which decreases as the tax base increases. The
Philippines has no regressive tax, but some indirect taxes manifest a regressive effect.
d) Mixed taxF. As to imposing authority
a) National tax- imposed by the National Government (Percentage taxes, Documentary
stamp tax, Income tax, Value added tax, Estate and donors tax, Excise Tax)
b) Local tax- tax imposed by municipal or local governments. (Real property tax,
Professional Tax, Business taxes, fees and charges, Community tax and Tax on banks
and other financial institutions)
DISTINCTION OF TAX WITH SIMILAR ITEMS
TAX VS. REVENUE
TAX
REVENUE
Refers to the amount imposed
Refers to the amount collected
Only one of the sources of government
The product of taxation. It refers to all the
revenues
funds derived by the government whether
from tax or from other sources.
POINT OF DISTINCTION
Purpose
Amount
Subject of Imposition
Effect of non- compliance
Revocability
Scope
When imposed
Basis of imposition
Sources of Power
TAX VS. LICENSE
TAX
Revenue
No Limit
Persons, properties, business
rights, interests, privilege, acts
and transactions
Does not necessarily make the
act, business or profession
illegal
Has a nature of permanence
The power to tax includes the
power to license
Post-activity
Current data
Taxing power of the
government
LICENSE
Regulation
Limited to the cost of
regulation
Required for the
commencement of a
business or profession
Makes the business illegal
Always revocable
Power to license does not
include the power to tax
Pre-activity
Preceding year or quarter
date, If new business,
based on capitalization
Police power of the
government
TAX VS. TOLL
TAX
Demand of sovereignty
One’s support for the government
TOLL
Demand of ownership
Compensation for the use of somebody else’s
property
May be imposed by the government or
private individuals
Determined by the cost of the property or by
private individuals
Imposed only by the government
Based on government needs
POINT OF DISTINCTION
Basis
Effect of non- compliance
Assignable
Mode of settlement
Can be set-off?
Interest
TAX VS. DEBT
TAX
Law
May involve imprisonment,
except for poll tax
No
Generally money
Generally not subject to set-off
Does not earn interest except
when delinquent
DEBT
Contract
No imprisonment
Yes
Cash or in kind
Can be subject to set-off
Draws interest when
stipulated or when in
default
TAX VS. SPECIAL ASSESSMENT
POINT OF DISTINCTION
TAX
SPECIAL ASSESSMENT
Subject of imposition
Businesses, interests,
Land
transactions, rights, properties
or privileges
Effect on the person owning
May be made a personal
Cannot be made the
the subject
liability of the person assessed personal liability of the
person assessed, because
it is the land that answers
for the liability
Basis of imposition
Necessity with no hope of
Entirely on benefits
direct or immediate benefit to
received
the taxpayer
Coverage of application
General application
Exceptional in application
POINT OF DISTINCTION
Purpose
TAX VS. PENALTY
TAX
To raise revenue
Exercising authority
Government
Source
Law
PENALTY
To regulate conduct
through punishment and
suppression of injurious
acts
Government and private
individuals
Law or contract
Mode of settlement
Money
Money or in kind
TAX VS. TARIFF
Tariff refers to a book of rates containing names of merchandises with corresponding duties to
be paid for the same. Tariff refers to the duties payable on goods imported or exported. It is a
system or principle of imposing duties on the importation or exportation of goods. *Customs
duties and tariffs are used interchangeably.
NOTE:
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Payment of tax is compulsory to those who are covered by the imposition
Taxes are important because they are the lifeblood of the government.
Taxes are personal. The burden of taxation cannot be transferred from one person to the
other by private agreement as this is determined by law.
While the power of taxation includes the power to destroy, it is not absolute. It is subject to
limitation or restrictions.
TAX LAW
Any law that provides for the assessment and collection of taxes for the support of the
government and other public purposes.
Sources of Tax Laws:
1. Constitution
2. Statutes and Presidential Decrees
3. Executive Orders and Batas Pambansa
4. Tax Treaties and conventions with foreign countries
5. Administrative Issuances or BIR Rulings
6. Judicial Decisions
7. Local Ordinances
8. Revenue Regulation of by the Department of Finance
Revenue Regulation
Formal pronouncement intended to clarify or explain the tax law and carry into effect its general
provisions by providing details of administration and procedure. They have the force and effect
of law.
Administrative issuances or BIR Rulings- these are the less general interpretations of the
tax laws at the administrative levels, being issued from time to time by the CIR, to clarify certain
provisions of the tax law. They are merely advisory or sort of an information service to the
taxpayer such that, none of them are binding except to the addressee and may be reversed by
the BIR at any time. (cannot overshadow RR)
NATURE OF PHILIPPINES TAX LAWS
Philippine Tax Laws are civil in nature and character. They remain effective even in times of war.
They are not penal in nature although penalties are provided for their violation because they do
not define crimes and provide for their punishment.
FUNDAMENTAL DOCTRINES IN TAXATION
1. MARSHALL DOCTRINE: “The power to tax involves the power to destroy”
2. HOLME'S DOCTRINE: Taxation power is not the power to destroy while the
court sits.
3. PROSPECTIVITY OF TAX LAWS: An ex post facto law is prohibited by the
Constitution
4. NON-COMPENSATION OR SET-OFF
XPN: 1. When the taxpayer claim has already become due and demandable
2. Cases of obvious overpayment of taxes
3. Local taxes
5. NON-ASSIGNMENT OF TAXES
6. IMPRESCRIPTIBILITY IN TAXATION
7. DOCTRINE OF ESTOPPEL
8. JUDICIAL NON-INTERFERENCE
9. STRICT CONSTRUCTION OF TAX LAWS
a. VAGUE TAX LAWS- construed against the government and in favor of the
taxpayer
b. VAGUE EXEMPTION LAWS- construed against the taxpayer and in favor of
the government.
TAX ADMINISTRATION
- refers to the management of the tax system. Tax administration of the national tax system is
entrusted to the Bureau of Internal Revenue.
Chief Officials of the BIR
1. 1 Commissioner
2. 4 Deputy Commissioners
a. Operations Group
b. Legal Enforcement Group
c. Information Systems Group
d. Resource Management Group
POWERS OF THE BUREAU OF INTERNAL REVENUE
1. Assessment and Collection of Taxes
2. enforcement of all forfeitures, penalties and fines and judgments in all cases decided in its
favor by the courts.
3. Giving effect to and administering the supervisory and police powers conferred to it by the
NIRC and other laws
4. Assignment of internal revenue officers and other employees to other duties.
5. Provision and distribution of forms, receipts, certificates, stamps, etc. to proper officials
6. Issuances of receipts and clearances
7. Submission of annual report, pertinent information to Congress and reports to the
Congressional Oversight Committee in matters of taxation
POWERS OF THE COMMISSIONER OF INTERNAL REVENUE
1. To interpret the provisions of the NIRC subject to the review of the Secretary of Finance
2. To decide tax cases subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
3. To obtain information and to summon, examine, and take testimony of persons to effect tax
collection
4. To make assessment and prescribe additional requirement for tax administration and
enforcement
5. To examine tax returns and determine tax due thereon
6. To conduct inventory taking or surveillance
7. To prescribe presumptive gross sales or receipts when: (a) the taxpayer fails to issue receipts
or (b) The CIR believes that the books and other records of the taxpayer do not correctly reflect
the
declaration in the return.
8. To terminate tax period- taxes becomes due and demandable immediately.
- retiring from business, intending to leave the Philippines, intending to remove, hide or conceal
his property, intending to perform any act tending to obstruct the proceedings for the collection
of tax
9. To prescribe real property values
10. To compromise tax liabilities of taxpayers
11. To inquire into bank deposits, only under the following cases:
a. Determination of gross estate of a decedent
b. To substantiate taxpayers claim of financial incapacity to pay tax in an application for
tax compromise.
12. To accredit tax agents
13. To refund or credit internal revenue taxes
14. To abate or cancel tax liabilities in certain cases
15. To prescribe additional procedures or documentary requirements
16. To delegate his powers to any subordinate officer with rank equivalent to a division chief of
an
office
NON- DELEGATED POWERS OF THE COMMISSIONER OF INTERNAL REVENUE
1. The power to recommend the promulgation of rules and regulations to the Secretary of
Finance.
2. The power to issue rulings of first impression or to reverse, revoke or modify any existing
rulings of the BIR.
3. The power to compromise or abate tax liabilities
4. The power to assign and reassign internal revenue officers to establishments where articles
subject to excise taxes are produced or kept.
RULES IN ASSIGNMENTS OF REVENUE OFFICERS
1. Internal revenue officers assigned to establishments where articles subject to excise taxes are
produced or kept shall in no case stay there for more than 3 years.
2. Revenue officers assigned to perform assessment and collection- 3 years
3. Internal revenue officers assigned to do special duties- 1 year
AGENTS AND DEPUTIES FOR THE COLLECTION OF NATIONAL INTERNAL REVENUE
TAX
1. The Commissioner of Customs and his subordinates with respect to collection of national
internal revenue taxes on imported goods.
2. The head of appropriate government offices and his subordinates with respect to the collection
of energy tax
3. Authorized Government Depository Banks