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Tax_notes

Tax_notes

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Published by cmv mendoza
Assorted tax stuff for the 2011 Bar examinations. Copyright to the owners. Just sharing.
Assorted tax stuff for the 2011 Bar examinations. Copyright to the owners. Just sharing.

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Published by: cmv mendoza on Jan 02, 2012
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04/17/2015

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1
st
exam: General Principles2
nd
exam: Income Tax
Tax law: procedure is diff 
X need to recite the procedure
o
Just basic facts & ruling
o
X dissents, sep opinion = unless maam says
Procedure isn’t usually followed
Have consti, read cases
Grading sys: 33% recit, 33% 1
st
exam, 33% 2
nd
examJune 30Overview: Tax has diff sourcesTAX 1:
General Principles
o
Not a lot of provs in the tax code
o
Source: consti & jurisprudence
o
Other issuances of BIR
Meant to clarify
Rules issued by BIR wc includes several topics (genregulations, etc)
A) revenue regulations: most impt
Ex) you have a business, take a loan wc has interest,to expand the business, this is allowed to bededucted (an item of deduction) called interestexpenses = revenue regs explain the details, unlikethe tax code wc is just general
B) BIR rulings
Dnt know if a particular tax is applicable to you
o
So you go to the BIR & ask for a ruling
You confirm is a transaxn falls/is subj to certain law
Request of a taxpayer, issued by BIR
But this is more of in remedies
C) Revenue Memorandum order/circular
RMO:
o
Addressed more to BIR examiners
o
Its an issuance by BIR to the examiners forguidance
RMC:
o
For the information of the pub
o
Circularizes whats in the RMO
D) Customs AO (CAO), CMO
CAO: by the bureau of customs (in customs duties)
Income Tax
o
Main source: tax code, revenue issuances & jurisprudence
o
Items in gross income
Sme taxpayers are taxed on their gross income, others ontheir net income
Net income: Need to know what items are included in yourgross income
Ex) 13
th
mo isn’t included
o
Deductions
Certain expenses (business, interest)
Once deducted, you come up w your tax income
Will also talk about:
o
Kinds of taxpayers
o
Treatment of taxpayers
o
Subjs of income taxTAX 2:
Local Taxation
o
LGC, bk2
o
Ex) 2 basic divisions
Real prop tax
Business tax
You have a business & tax is imposed by thecity/municipality
o
Other local taxes:
Ex) cedula: P5
Professional tax
Ex) PTR # for lawyers (P300/500)
Tax on billboards
o
More of licenses, fees
Estate & donor’s tax
o
NIRC
o
Estate: used to have estate (privilege of transferring prop to heirs) & inheritance taxes
No more inheritance tax
o
Donor: taxed depending on who you’ll be donating it to
o
Revenue regulation: 02-03
Tariff & Customs
o
Tariff & customs code: amended several times
o
Issuances of the Bureau of customs
Remedies
o
LGC
Ex) you have pc of land, city says pay this, argue bec highertaxes bec market value supposedly went up
Remedy/way of protesting is in the LGC
o
TCC
Ex) import cellphones, collector of customs says pay, youargue bec you got it cheap & the tax shld be lower, collectorholds the goods & you need to sell it alrdy
Theres a remedy/procedure even if you’ve gotten thegoods out, when 2 yrs later collector says theymade a mistake and you have to pay a higher amnt
o
NIRC
Deadliest bec talks abt 2 basic remedies:
Refund: provs grant this
o
A) Internal revenue tax
o
B) VAT refund
Assessment
o
Pay, filed ITR, BIR discovers you weren’table to declare your entire income so theyassess you
 
o
Procedure of how to protest this is in theprov
o
DP reqs are stated here, when BIR doesaudit, time frames to file protest letters,submission of supporting docums, etc*docket fees: based on the amnts stated in the complaint/claim,thus have the amnt go down while still in the BIR
Other internal Revenue Taxes
o
A) DST
o
B) excise: alcohol, cigarettes, etc
o
C) percentage tax: races, etc
o
D) VAT
Since 1996 not asked in the bar, last yr it was asked
Long provs, but revenue regs are more difficult
I.General Principles of Taxation
Meaning of tax:
o
Power by wc the sovereign, thru the law making body, to raiserevenue
It’s the legis who makes the tax laws
Distinguish it from other terms:
License feeTaxes
Emanates from police powerLevied in the exer of the taxing powerRegulatory To generate revenuesAmng of charge must only be sufficientto include expenses of issuing thelicense & the cost of necessaryinspection or police surveillance
o
License Fee:
Limit in the amnt: only that reqd to cover the license & costof inspection
Ex) have a business, don’t pay tax, is it an illegal business?
No, just subj to certain penalties
o
Tax:
Amnt depends on what you earn
Operated for revenues (purpose)
Gen principle
But there are sme regulatory purposes on whythey’re imposed
PAL v Ebro Progressive Devt:
if the exaction is really to raise revenue & regulatorypurposes are incidental = TAX
if regulatory purposes is the primary purpose =License (to regulate conduct)
Special assessment Taxes
Levied only on landImposed on persons, prop & excisesCant be made a personal liab of theperson assessedCan be made suchBased wholly on benefit NotExceptional bth as to time & locality
o
spcl assessment:
shld inure to the benefit of the land
cant be made a personal liab
ex) pub improvement
construction wc wld improve the value of the prop
ex) highway created near a farm
LGU will assess you bec you’ve benefited from iteven if its for the benefit of the entire community
Cant charge more than 50% of the cost
An imposition/exaction on the prop, not on the person
TollTax
Demand of ownership Demand of sovereignty for the purposeof raising revenueAmnt charged for the cost maintenance of the prop used
o
Toll:
For cost & maintenance of pub works
Not only the govt wc can impose, so can a priv entity
Penalty Tax
Punishment for the commission of acrimeciv liabilityPerson criminally liable in taxation onlybec he fails to satisfy his civ oblig topay taxes
o
Penalty:
Can be liable to this for non-payment of taxes
Ex) can be charged surcharge & interest for failure topay
o
Tax:
Dsnt arise necessarily from a crime
Tariff/customs dutiesTax
Duties charged upon commodities ontheir being imported into or exportedfrom a countryBroader term wc includes customduties & other taxesAre regulatory imposts on goodsAre taxes
o
T/C duties:
Imposed on goods imported/exported
Tariff: can mean the rate itself or the book/list of amnts youneed to pay
Diff from tax but similar = governed by diff provs/law
But they have the same purpose = revenue
Oblig to pay tax:
o
Taxpayer is obliged to pay
o
Consent isn’t necessary
o
No offsetting bec no creditor-debtor rel
o
Consequence: surcharge & interest, imprisoned for tax evasion
Oblig to pay a debt:
o
Existing C-D rel
o
Consent is given
o
Can offset
 
o
Consequence: interest, cant be imprisoned (consti)
Gen rule: No offsetting under the law
o
But in practice, you can
o
Exception: Domingo v Garlitos
Only exception
When the claim of the taxpayer & whats due to the govt isalrdy overdue, demandable & liquidated = compensationtakes place by operation of lawPhilex
Not subj to compensation bec not creditor & debtor of each other
Debts: due to the govt in their corp capacity
Taxes: due to the govt in their sovereign capacity
Contention of Philex here is always the contention of taxpayersEssential Characteristics:
Forced charged
o
Oblig by law
o
Not dependent on the will or consent
Generally payable in money
o
2 kinds of refund:
Money or tax credit certificates
o
Tax credit cert:
Once this is given, can be used for tax liabilities as payments
Usually if you don’t need the TCC, you sell it to some1 on adiscount
2002 scandal: bec of this BIR issued a reg wherein the sale of the TCC became difficult (stricter reqs)
o
What if theres a civ war, money loses its value
Sm1 says instead of paying money, just pay me rice – is thisconstitutional? Can congress enact a law wc says just paytaxes w rice? Valid?
Basic principles of a sound tax sys
Administrative feasibility: 1 of the hallmarks of asound tax sys is that its capable of beingimplemented
o
Its not the law wc will allow payment of riceinstead of money, but itll run counter to thebasic principle of admin feasibility
Legislative in charac
o
Created by the legis body
o
Oblig created by law
Assessed on all w reasonable rule of apportionment
o
Taxes are based on one’s ability to pay
Imposed on subjs w/in jurisdiction
For a pub purpose
o
The pub purpose shld exist when the law is enacted
Not at the time of disbursementTheory & basis
Necessity theory
o
Operations of the govt needs funds, thus need taxes as contributions
o
CIR v Algue:
Taxes are what we pay for a civilized society bec wo taxesgovt wont have nay motive power to operate = paralyzed
Benefit-received theory
o
Foundation to pay taxes isn’t the privileges enjoyed or protection given
o
Cant object to paying bec no personal benefit can be pointed out*Q: is it necessary to have a govt to impose taxes?Purpose
Gen: to raise revenue & provide funds for the govt to meet its mandate of promoting welfare & protection of citizens
Non-revenue purpose:
o
To enhance the exer of police power
o
To rehabilitate & stabilize threatened industries of pub interest
o
Control the exchange
importations: how ds taxation paly a role so that the loc industries areprotected?
o
Added price on imported goods to encourage buying loc products
Spcl laws passed:
o
To regulate certain industries
o
Has spcl incentives
Ex) call centers: located in an eco zone so granted spclprivileges (lower taxes for a certain yr or given an income taxholiday)ClassificationA.scope
Natl taxes:
o
Imposed by the natl govt
o
Those implemented by BIR
o
Ex) income tax, excise tax, percentage tax
Loc taxes:
o
Imposed by the loc govt
o
Ex) real prop tax, cedula, business taxB. who shoulders the burden
Direct
o
Incidence & liability falls on 1 person
Indirect
o
Incidence & liability falls on 1 person but the impact/burden falls onanthr
o
Ex) VAT
Memorize: incidence, liability v impact or burden
o
Incidence, liability = statutory taxpayer
NPC: no longer an issue bec new VAT law says they aren’t subj to 12 % VAT
Commissioner v Gotamco -
o
Contractors tax: indirect tax
No more today, just VAT
Q: what if you entered into a contract & lease a prop wc is subj to taxes. Whatif you dnt what to shoulder the DST & say the renter shld pay for it bec theygot the place cheap – direct or indirect tax?

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