Fiscal Adequacy

The principle of fiscal adequacy states that the sources of revenue of the
government should be sufficient to meet the demand of the public expenditures
regardless of business condition.

Equality on Theoretical Justice

The principle states that the tax burden must be proportionate to the taxpayers
ability to pay.

It is based on the philosophy that he who received more should give more

Administrative Feasibility

The law must be convenient, just, uniform and effective in their administration
free from confusion and uncertainty. The applications of administrative feasibility
are:

The collection of taxes at source

Assigning of duly authorized banks to collect taxes, and

Quarterly filing and payment of income taxes The Department of Finance

is the principal agency of the government for taxes administration.

It has executive supervision and control over the agencies, such as:

Bureau of Internal revenue (BIR)

Bureau of Customs (BC) and Tariff Commission (TC) Land transportation

Office (LTO)

Duly and lawfully authorized collectors

Local offices in charged to enforce local taxation:

Provincial, City, Municipal and Barangay Treasurers

Provincial and City Assessors

Provincial and City Board of assessment Appeals: and

Central Board of Assessment Appeals

The other governmental offices that may have incidental functions

regarding tax enforcement and interpretation of tax laws are as follows:

The secretary of Justice

Offices that provides assistance in the collection of taxes:

The courts

Register of deeds

The secretary of Public Works and Highways Offices:

City Fiscals; and

BIR Collection agents

Bureau of Internal revenue (BIR)

The BIR is principally tasked with the enforcement of the NITC. Sections 2, 10, 9,
13 and 14 of the NIRC list the following BIR officers:

The Commissioner of the Internal Revenue;

Four Deputy Commissioner of the Internal Revenue;

Revenue Regional Director;

Revenue District Officers;

Division Chiefs of the BIR; and

BIR Collection Agents

When BIR Commissioner may terminate One's tax period

Retires from business subject to tax;

Intends to leave the Philippines;

Prescribe real property taxes;

Inquire into bank deposit accounts;

Accredit and register tax agents; and

Prescribe additional procedural or documentary.

Secrecy of Bank Deposit

BIR is authorized only to inquire into the bank deposits of:

A decedent to determine the gross estate of such decedent; and

Any taxpayer who has filed an application for compromise of his tax
liability under Section 204(A) of the tax code by reason of financial
incapability to pay his tax liability.

Authority to delegate
The following powers of the commissioner shall not be delegated:

The power to recommend the promulgation of rules and regulations by

the Secretary of Finance

The power to issue first interpretation regarding rulings, or to reverse,

revokes or modifies any existing ruling of the bureau.

The power to assign or re-assign internal revenue officers to

establishments where articles subject to exercise tax are produced or
kept; and

The power to compromise or abate.

Authority to Abate or Cancel Tax Liability

The BIR Commissioner may abate or cancel the tax liability when:

The tax or any portion thereof appears to be unjustly or excessively

assessed; or

The administration and collection costs involved do not justify the

collection of the amount due.

Authority to Refund or Cancel Taxes

The BIR Commissioner may:

Credit or refund taxes erroneously or illegally received or penalties

imposed without authority.

Refund the value of Internal Revenue stamps when they are returned in
good condition by the purchaser; and

Redeem or change unused stamps that have been rendered unfit

Cancellation of Registration

The registration of a person who ceases to be liable to tax type shall be

cancelled upon filing with the Revenue district Office where he is registered and
where he applied for registration information update in a prescribed form.

Printing of Receipts, Sales or Commercial Invoices

The following are the requirements before receipts, sales or commercial invoices
are printed:

BIRs authority to print.

Other requirements.

Issuance of Receipts or Sales or Commercial Invoices

Rules to be followed:

The time for issuance of receipts or invoices should be the time when
transaction is affected.

All persons subject to any internal revenue tax are required to issue
receipts or sales invoice when the value of merchandise sold or service
rendered is twenty-five pesos or more.

When receipt invoice is not required.

Cases when issuance of receipts is required regardless of the amount.

Cases when the receipts should indicate the name, business (if any)
address of the purchaser, customer or client.

The original receipt shall be issued to the purchaser, and the issuer shall
keep the duplicate in his place of business for three years.

The purchaser or the issuer should keep their copy of the receipt for three
years in his place of business from the close of taxable year in which such
invoice or receipt was made.

Certificate of Payment

The certificate or receipt showing payment of taxes issued to a person engaged

in a business subject to annual registration fee shall be kept in plain view at the
place where the business is conducted.

In case of a peddler or other persons not having fixed place of business, it shall
be kept in the position of the holder thereof, and shall be presented upon
demand of any internal revenue officer.

Business of diseased Person

No additional payment shall be required for the remaining period within which
the tax was paid.

The person who will continue the business should submit inventories of goods or
stocks to the BIR within 30 days from the death of the decedent.

Same requirement (1&2) shall be applied in case of transfer of ownership or

change of the name of the business establishment.

Collection of taxes

By nature, the governments power to impose taxes carries with it the power to
enforce contribution. As the lifeblood of the government, taxes are not optional
and the taxpayer thereof must make payment promptly.

Imposition of Injunction

The Tax Law provides that injunctions are not available to restrain collection of
National Internal Revenue, fee or charge imposed by the Tax code.

The imposition of injunction is only applicable within the discretion of the Tax
court.

Collection Remedies Available to Government

Distraint of personal property;

Levy of real property; and

Other civil or criminal action

Distraint of Personal Property

Distraint of personal property is the seizure by the government of personal

property tangible or intangible to enforce the payment of taxes, to be
followed by its public sale if taxes accruing thereto are not voluntarily paid.

Tax Lien

A tax lien is a legal claim granted to the government to secure the proper
payment of taxes, surcharges, interest and cost on all the property subject to
levy or distraint.

Forfeiture

Forfeiture or confiscated article implies taking of property without compensation

s a result of an offense committed.

Forfeiture to government for Want of Bidder

In case there is no bidder for real property exposed for sale or if the highest bid
is for an amount insufficient to pay the taxes, penalties and costs, the Internal
Revenue Officer conducting the sale shall declare the property forfeited to the
government in the satisfaction of the claim in question.

Compromise

Compromise is a contract whereby the parties, by reciprocal concessions, avoid

litigation or put an end to the one already commenced.

When to Effect Compromise

A reasonable doubt as to the validity of the claim against the taxpayer exist; or

The financial position of the tax payer demonstrates a clear inability to pay the
assessed tax.

The following should be considered in a tax compromise agreement:

The taxpayer must have a tax liability,

There must be an offer by the taxpayer or Commissioner of an amount to be

paid by the taxpayer.

There must be an acceptance by the commissioner or taxpayer

Manufacturers and importers Bond

Manufacturers and importers of articles (alcohol and tobacco products) subject to

excise tax shall post a bond subject to the following conditions:

Initial Bond

Bond for succeeding years of operation

Requiring Proof of Filing Income Tax Return

Before a renewal of license to engage in trade, business or occupation or

practice a profession can be issued to a person, partnership, association or
corporation required by law to file an income tax return.

Informers Reward

For voluntary sworn information given to the BIR which lead to the discovery of
frauds thereby resulting in revenue recoveries, 10% of such amount recovered
may be rewarded to the informer.

For violation of NIRC

For discovery and seizure of smuggled goods

Making Arrest, Search and Seizure

An internal Revenue officer has the authority to make arrest and seizures for the
violation of Internal Revenue Code.

Deportation in Case of Aliens

Any alien is subject to deportation if he knowingly and fraudulently evades the

payment of any internal Revenue Tax, or willfully refuses to pay such tax and its
accessory penalties.

Due dates

Refer to the last day for filing return and payment of tax.

Income Tax

Due dates

1. Income tax compensation ( individual taxpayer)

April 15 succeeding year

2. Income tax- Business/ profession (individual taxpayer)

a. First quarter (January March)

April 15

b. Second quarter (April June)

August 15

c. Third quarter (July September)

November 15

d. Annual final return

April 15 succeeding year

Additional to Tax

The government may impose surcharges and interest in addition to the basic
taxes to ensure tax collection once a taxpayer neglects to pay his taxes.

Surcharges

A civil penalty imposed by law as addition to the main tax required to be paid
due to delinquency or Misinterpretation of taxes. It cab be classified as:
1. Simple Neglect
2. Willful Neglect

False or Fraudulent Return

In general, false or fraudulent return shall be determined when the following

circumstances are present:
1. Intentional substantial under declaration of income.
2. Intentional substantial overstatement deduction

3. Intentional under declaration of selling price and overvaluation of cost of

property sold;
4. Recurrence of understatement of income or overstatement of deductions
for more than one year
Illustration:
On April 15, 2010, D Corp. filed its 2009 Income tax return declaring a total receipts
of 1,000,000 and total deduction of 900,000, thus paying the income tax due to be
30,000. On June 15, 2010, the BIR Assessing Officer determined that Ds deduction is
overstated by 35%.
Total receipts

1,000,000

Less: Correct Deduction (900,000/35%)

666,667

Correct taxable Income

333,333

Income tax rate

Corrected Income tax due

x 35%
100,000

Less: Income tax already paid

30,000

Unpaid basic Income Tax

70,000

Multiplied by surcharge rate

Amount of surcharge

50%
35,000

Interest

A twenty percent (20%) interest per annum shall be imposed on the basic tax
unpaid after due date.

Illustration:

For taxable year 2009, X Corp. has 300,000 income tax but paid only on
July 15, 2010.

Income tax due

300,000

Add: Surcharge late payment

(300,000 x 25%) simple neglect

75,000

Interest (300,000 x 25% x 3/12)

15,000

Total amount due as of July 15, 2010

90,000
390,000

Violation for Printing and Issuance of Receipts, Sales or Commercial Invoices

Refusal to issue the required receipt, sales or commercial invoice.

Issuance of receipt, sales or commercial invoice s which do not reflect or contain

all the information required to be shown therein;

Using multiple or double receipts, sales or commercial invoices

Printing of receipts, sales or commercial invoices without authority from BIR;

Printing of multiple set of receipts, sales or commercial invoices; and

Printing of unnumbered receipts, sales or commercial invoices, not bearing the

name, business style, TIN and business address of the person or entity.

Penalty:

Fine not less than 1,000 pesos and not more than 50,000 pesos

Imprisonment of not less than 2years but not more than 4years.

Failure to obey Summons

Fine is not less than P5, 000 but not more than P10, 000 and an imprisonment of
not less than (1) year but not more than 2 years.

Other Penalties

Failure to file certain information returns due to simple neglect.

Failure of a withholding agent to collect and remit taxes or refund excess

withholding tax

Prescriptive Periods

The prescriptive periods may be outlined as follows:

Assessment of tax liability

Collection of the tax

Criminal liability

Remedies available to taxpayers

A person adversely affected by the action taken by the BIR can avail of the
administrative and juridical remedies to question the enforcement of tax
collection.