You are on page 1of 44

TAX LAW REVIEWER

Part I - General Principles 1. Taxation Defined Taxation is the power by which the sovereign raises revenue to defray the necessary expenses of the government. It is the means of apportioning the costs of governance among those who in some measure enjoy the privilege of its benefits and must bear its burden. 2. o!rce Constitution Statutes Jurisprudence Revenue regulations

". #at!re $ILL% 1. Inherent attribute of sovereignty It belongs to the State as a matter of right. It does not need of constitutional conferment. Constitutional provisions do not give rise to the power to tax but merely impose limitations on what would otherwise be an invincible power. Taxation being an attribute of sovereignty its relin!uishment is never presumed.

2. Legislative in character The power cannot be exercised by other branches of the government except upon valid delegation. This is based upon the principle that "taxes are a grant of the people who are taxed and the grant must be made by the immediate representatives of the people. #nd where the people have laid the power there it must remain and be exercised. Courts have no power to power to in!uire into or interfere in the wisdom objective motive or expediency in the passage of a tax law as this is p!rel& le'islati(e in character. cope of t)e le'islati(e po*er to tax a. $iscretion as to p!rposes for which taxes shall be levied

Courts may review the levy to determine whether the purpose is a public one but once determined that the purpose is a public one courts can ma%e no other in!uiry as to the purpose of the tax as such in!uiry affects the power to impose it. Lutz v. Araneta: &rotection and promotion of sugar industry is a matter of public concern. 'egislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Such legislative discretion must be allowed full play subject only to the test of reasonableness.

b. $iscretion as to the s!+,ects of taxation Ine!ualities which result from singling out of one particular class infringe no constitutional limitation. Punsalan v. City of Manila: It is not for the courts to judge what particular cities or municipalities should be empowered to impose occupation taxes in addition to those imposed by the (ational )overnment. The matter is peculiarly within the domain of the political departments and the courts would do well not to encroach upon it. c. $iscretion as to the a-o!nt or rate of tax The power may be carried out even to the extent of exhaustion or destruction thus becoming in its exercise a power to destroy. d. $iscretion as to the -anner. -eans and a'encies of collection of taxes McCulloch v. Maryland (Marshall): The power to tax involves the power to estroy. It means that the power to tax includes the power to regulate even to the extent of prohibition or destruction since the inherent power to tax vested in the legislature includes the power to determine who to tax what to tax and how much tax is to be imposed. Such maxim is used to describe not the purposes for which the taxing power may be used but the de'ree of (i'or with which the taxing power may be employed in order to raise revenue. The power to tax includes the power to destroy if it is used validly as an i-ple-ent of police po*er in discouraging and in effect ultimately prohibiting certain things or enterprises inimical to the public welfare. *ut where the power to tax is used solely for the purpose of raising revenues the modern view is that it cannot be allowed to confiscate or

destroy. +therwise the tax statute may be successfully attac%ed as unconstitutional. The power to tax is not the power to destroy as long as the Supreme Court sits. The Constitution as the fundamental law overrides any legislative or executive act that runs counter to it. Thus where it can be demonstrated that the challenged statutory provision fails to abide by its command then the court must so declare and adjudge it null. #s regards inferior courts the power of judicial review should be exercised with due care and circumspection considering not only the presumption of validity but also the relatively modest ran% of a city court in the judicial hierarchy. !. "ub#ect to inherent an constitutional li$itations /. 0ases Life+lood doctrine. )overnment can neither exist nor endure without taxation. Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. The collection of taxes must be without hindrance if the state is to maintain its orderly existence. The government,s ability to serve and protect the people depends largely upon taxes. Taxes are what we pay for a civili-ed society. CIR v. Pineda (196 !: The eldest son of the deceased who is an heir and holder. transferee of property belonging to the estate/taxpayer is to be treated0 12 #s an 34IR he is individually answerable for the part of the tax proportionate to the share he received from the inheritance. 3is liability cannot exceed the amount of his share. 52 #s a 3+'$4R of property belonging to the estate he is liable for the tax up to the amount of the property in his possession. R4#S+(0 The government has a lien on the value of the property received by him from the estate as his share in the inheritance for unpaid taxes for which the estate is liable pursuant to Sec. 516 (IRC. *y virtue of such lien the government has the right to subject the property in said heir,s possession to satisfy the income tax assessment. The second remedy 7tax lien2 is the avenue the government too% in this case to collect the tax. The *IR should be given in instances li%e the case at bar the necessary discretion to avail itself the most expeditious way to collect the tax because taxes are the lifebloo of the govern$ent an their pro$pt an certain availability is an i$perious nee . "era v. #ernandez (19 9!: The statute of non.claims under Sec. 8 Rules 9: of the Rules of Court does not apply to taxation. The reason for the more liberal treatment of claims for taxes against a decedent,s estate is because taxes are the lifeblood of

the government. ;pon taxation depends the government,s ability to serve the people for whose benefit taxes are collected. CIR v. C$A and Citytrust (199%!: The )overnment is not bound by the errors committed by its agents. #lthough it may generally be estopped through the affirmative acts of public officers acting within their authority their neglect or omission of public duties will not and should not produce that effect. )overnment cannot and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State exercises its functions for the welfare of its constituents. CIR vs. Al&ue (19''!: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. %n the other han & such collection should be made in accordance with law as any arbitrariness will negate the very reason for the government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation which is the promotion of common good may be achieved. Reyes v. Al(anzor (196 )CRA *++!: <erily taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. 3owever such collection should be made in accordance with law as any arbitrariness will negate the very reason for the government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation which is the promotion of common good may be achieved. 1onse2!entl&. it stands to reason that those who are burdened by the government by its Rental =ree-ing 'aws under the same principle of social justice should not now be penali-ed by the same government by the imposition of excessive taxes as such would eventually result in the forfeiture of their properties. ,MCA v. CIR (+9' )CRA '*!: Since taxes are the lifeblood of the nation a claim of statutory exemption from taxation should be manifest and unmista%able from the language of the law on which it is based. The claimed exemption must expressly be granted in a statute stated in a language too clear to be mista%en. Tax exemptions cannot be merely implied from the provisions of the law. Marcos II v. CA (199 !: The approval of the court sitting in probate or as a settlement tribunal over the deceased,s estate is not a mandatory re!uirement in the collection of estate taxes. The enforcement of tax laws and the collection of taxes are of paramount importance for the sustenance of the government. Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. P-C.M v. CIR (1999!: Claims for refund or tax credit should be exercised within the time fixed by law. The *IR,s functions should not be unduly delayed or hampered by incidental matters. #ecessit& T)eor& Taxation is a power predicated upon necessity. It is a necessary burden to preserve the State,s sovereignty and a means to give the citi-enry an army to resist aggression a navy to defend its shores from invasion a corps of civil servant to

serve public improvements for the enjoyment of the citi-enry and those which come within the State,s territory and facilities and protection which a government is supposed to provide. 0enefits-Protection T)eor& The basis of the power of the State to demand and receive taxes is the reciprocal duties of support and protection. The citi-en supports the State by paying the portion from his property that is demanded in order that he may by means thereof be secured in the enjoyment of the benefits of an organi-ed society. The obligation to pay taxes is involuntary and compulsory in exchange for the protection and benefits one receives from the government. Doctrine of &-+iotic Relations)ip Taxes are what we pay for a civili-ed society. >ithout taxes the government would be paraly-ed for lac% of the motive power to activate and operate it. 3ence 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 burden of running 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 material and moral values. 3. P!rposes of Taxation
P!rposes of Taxation 1. Raise Revenue 5. Regulation ?. &romotion of )eneral >elfare @. 4ncourage 4conomic )rowth 8. Reduce Social Ine!uality :. &rotect 'ocal Industries

Pri(ary Pur/ose 1. To raise revenue To provide funds with which the State delivers the basic services to the people. The government cannot simply be operated without the funds to finance its multifarious functions including the delivery of basic services education etc. Thus& in case of eficit spen ing& the govern$ent resorts to borrowing& locally an internationally. )econdary Pur/oses (non'revenue purpose)

5. Regulation #s an implement of police power Taxation has a regulatory purpose as in the case of taxes levied on excises or privileges 7sin taxes2 li%e those imposed on tobacco and alcoholic products or amusement places li%e night clubs cabarets coc%pits etc. *ut the power to tax must be exercised with caution to minimi-e injury to the proprietary rights of taxpayers. It must be exercise fairly e!ually and uniformly lest the tax collector %ill the Ahen that lays the golden egg., %ther exa$ple: Improperly accumulated earnings tax B tax to regulate

?. &romotion of general welfare #s an implement of police power Lut( v. )raneta (*+ ,hil 1-+): SC upheld the validity of the Sugar #djustment #ct which imposed a tax on milled sugar since the purpose of the law was to strengthen an industry that is undeniably vital to the economy B the sugar industry. %s$ena v. +rbos 7Carch ?1 166?20 >hile the funds collected under the +&S= are referred to as taxes they are exacted in the exercise of the police power of the State. =rom such fund amounts are drawn to reimburse oil companies when appropriate situations arise li%e increases in as well as under.recovery of the cost of crude oil importation.

@. Reduction of social ine!uity This is made possible through the progressive system of taxation where the objective is to prevent the undue concentration of wealth in the hands of few individuals. Pro'ressi(it& is %eystoned on the principle that those who are able to pay should shoulder the bigger portion of the tax burden. .xa$ples: Income tax donor,s tax estate tax Taxes under (IRC are either proportionate or progressive. The latter is mandated by the Constitution 7to evolve2. &rogressive means the tax rate increases as the tax base increases.

8. 4ncourage economic growth The law at times grants incentives or exemptions in order to encourage investments and thereby promotes the country,s growth. a. Tax Sparing Rule b. Income tax holidays B to allow pioneer industries to prosperD to enable them to recover their investment before being taxed

c. &4E#.registered enterprises B given tax relief 7all forms2D only 8F of their gross income is being taxed the reason being that these are export. oriented industriesD so that their products will be competitive to the foreign mar%et :. &rotectionism It protects local industries from foreign competition i.e. protective tariffs and customs duties "outhern /ross /e$ent v. "ec. of finance (0uly +& 211-): The Safeguard Ceasures #ct allows the imposition of emergency measures including tariffs to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. The power to impose general safeguard measure is vested upon the $TI Secretary upon compliance with two conditions vi-0 12 there must be a positive final determination of the Tariff Commission that a product is being imported into the country in increased !uantities as to be a substantial cause of serious injury or threat to the domestic industry and 52 $TI Sec. must establish that the application of such safeguard measures is in the public interest. $estination.type <#T . . . local products consumed within B 1GF all products of the same %ind 7foreign2 B 1GF <#T on top of excise for export B -ero.rated

Taxes on supply and labor may be recovered in form of refund

4. 5+,ecti(es of Taxation Robust environment Sustainable economy 4!uitable relief

6. Taxation (s. 5t)er In)erent Po*ers of t)e tate


Po*er to Tax As to /ur/ose As to a(ount of e0action As to 1enefits To raise revenue 7regulation is incidental2 Contemplates no limits (o special or direct benefit Police Po*er To promote public welfare through regulation 7revenue is incidental2 4xaction limited to cost of regulation issuance of the license or surveillance Similarly no direct benefits Po*er of E-inent Do-ain To ta%e private property for public use

Just

compensation

is

received ta0/ayer

1y

As to su/eriority of Contracts As to transfer of /ro/erty ri&hts As to /ersons affected

other than the fact that the government secures to the citi-en that general benefit resulting from the protection of his person and the welfare of all. Recogni-es the obligations imposed by contracts Taxes paid form part of public funds #pplies to all persons property and excises that may be subject thereto

are received yet a healthy economic standard of society is maintain

given the owner of the expropriated property 7# particular person is affected2

$oes not apply #llows merely the restraint on the exercise of property rights +nly a particular property is comprehended

7. Extent of t)e Taxin' Po*er Co(/rehensive. It covers persons businesses activities professions rights and privileges. 2nli(ited. ;nlimited in force and so searching in extent that the courts scarcely venture to declare that it is subject to any restrictions whatever except such as rest in the discretion of the authority which exercises it. Plenary. It is complete. *IR may avail of certain remedies to ensure the collection of taxes. )u/re(e. Insofar as the selection of the subject of taxation is concerned.

8. 0asic Principles of a o!nd Tax &ste- $9AT% 1. #iscal Ade3uacy 4 the sources of government revenue must be sufficient to meet government expenditures and other public needs 7not excessive not deficient2. This is essential to avoid budgetary deficits and to minimi-e foreign and local borrowings. This is in consonance with the lifeblood doctrine. # violation of this principle will not render the tax law unconstitutional or invalid because there is no constitutional provision or statute which mandates the observance of this principle. Thus even if a tax law were enacted in violation of this principle the tax law would remain valid. It merely affects the S+;($(4SS of the system of taxation.

5. Ad(inistrative #easi1ility B Tax laws should be capable of being effectively and efficiently enforced. 3ence it must not lay down obstacles to business growth and development. This principle re!uires that each tax law should be B a. clear and plain to the taxpayers

b. capable of enforcement by an ade!uate and well.trained staff of public officials c. convenient as to the time and manner of payment d. not unduly burdensome upon or discouraging business activity. # violation of this principle will not render the tax law unconstitutional. It merely affects the S+;($(4SS of the system of taxation. 5a/atiran v. $an (16* )CRA * 1!: <#T law is principally aimed to rationali-e the system of taxes on goods and services SIC&'I=H tax administration and ma%e the system more e!uitable to enable the country to attain economic recovery. )overnment should come out with simple law/rules so the taxpayers can easily comply especially our tax system is based on self. assessment/voluntary compliance system.

?. $heoretical 6ustice B This is the principle behind the progressive system of taxation. It means that the stress on a set of revenue laws is on ability to pay which means that those in a better financial position to pay are taxed more than those who are not. 4!uitable tax systemD to comply with constitutional mandate. # violation of this principle will render the tax law unconstitutional. This principle calls for <4RTIC#' 4I;ITH B those who have more income should pay more. (versus 2%3I4%5T)L .67IT8 9 all taxpayers belonging to the sa$e class $ust be taxe ali:e) ------------@. 7cono(ic 7fficiency. The tax system must not distort the decision of businessmen as to what businesses to put up. 'i%ewise the system of taxation must not distort the decision of the consumers as to what to consume. 70a(/le: %riginal sales tax before ;)T 1GF . essential articles 5GF . semi.essential ?GF . luxury item Such system distorts the economic decisions of businessmen. If you were a tax.conscious businessman you would not want to manufacture luxury items because the tax is high. This system encourages people to manufacture low.end articles. +nly a unitary rate of tax will remove the distortion. >ith <#T there is a unitary rate. 4verything else being e!ual they can do whatever they want.

# unitary rate of tax will encourage competition. It will insure that the tax system will not have an inflammatory effect on prices. +nly the law on supply and demand will determine the prices. =iscal ade!uacy and #dministrative feasibility B #dam Smith. =iscal ade!uacy #dministrative feasibility economic inefficiency soundness if not followed will not render the tax law unconstitutional. B affects

Theoretical justice B if not followed will render the tax law unconstitutional. It is a constitutional limitation.

1:. TAXE Taxes It is the product of the exercise of the power. Taxes are enforced social contributions from persons and property levied by the state by virtue of its sovereignty for the support of the government and for all its public needs. 4xaction that is collected by the government from all persons property and privileges within its jurisdiction. 0asic 1)aracteristics

0asic 1)aracteristics of Tax 1).nforce contributions 2)/ollecte for public purpose !),ecuniary in nature<character -)/ollecte fro$ all persons& property& privilege within its #uris iction >)Must be collecte uring regular intervals

12 .nforce contributions B anybody within the taxing authority can be compelled to contribute 52 /ollecte for public purpose B ?2 ,ecuniary in nature<character ' capable of economic valuation 8: Is pay$ent of taxes in :in violative of the a $inistrative feasibility principle= A: (o. *ut there will be a never.ending dispute as to what value is to be given to the property 7T& B high priceD *IR B low price2. *;T the tax law will still be legal because administrative feasibility is not a re!uirement for

10

the validity of tax law. It is merely a principle to ensure the soundness of a tax system. Ar&u(ent: Constitutional constraints. (o money shall be ta%en from public funds without an appropriation law duly enacted.

-) /ollecte fro$ all persons& property& privilege within its #uris iction >) Must be collecte uring regular intervals

11. VI -;-VI T<E 5T<ER 95R= 59 EXA1TI5# a. $a0es vs. License #ees Tax
o!rce P!rpose A-o!nt !+,ect =atter Ti-e of pa&-ent &ower to tax &rimarily to raise revenue (ot so limited because of the enormous need of the government 'egal or illegal #fter income has been earned

License
&olice power Regulation Cinimal amounts just sufficient to defray cost of regulation legal (on.payment of license fee will ma%e the business illegal &aid at the commencement of business operation

Road user,s tax B environmental tax. 3igher registration fee for old models as they contribute to pollution. PAL vs. 7du: 7+biter2 Cotor vehicle registration fee is in the form of a tax and the nomenclature given to it is immaterial. 3eason: 'arge portion is for road maintenance and only a very minimal amount is used for regulation. ;nder Sec. ?5 7inco-e fro- *)ate(er so!rce2 Illegal activities are also taxable. To do otherwise would place illegal activities in a better position than legal ones. *;T because our taxing system is self.assessing nobody would declare his income from illegal activity. Thus a jueteng operator though not subject to a license fee should be subject to tax. Matali( Coconut v. Mun. of Mala1an& #n ordinance imposing a police inspection fee of J8 cents for every bag of cassava flour that is being shipped out from the Cunicipality of Calabang does not impose a license fee. The amount of exaction is huge enough to be considered as tax and there is actually no regulation involved. *ut whether a license fee or a tax the ordinance is unconstitutional for being excessive as the

11

shipper reali-es only &1/bag. This amounts to confiscation of property without due process of law. 1. $a0 v. $oll Tax is a demand of so(erei'nt& for the purpose of raising revenues. Toll is a demand of proprietors)ip. an amount charged for the cost and maintenance of the property used.

c. $a0 v. Penalty Tax is a civil liability. # person is criminally liable in taxation only when he fails to satisfy his civil obligation to pay taxes. ,enalty is a punishment for the commission of a crime. Tax may be allowed as deduction from gross income. ,enalty is not allowed to be deducted from gross income. It will defeat the purpose of the penalty.

d. $a0es vs. 9e1ts (ordinary (onetary o1li&ation! Tax


As to Prescription o!rce Interests )overned by tax statute 'awD positive acts of government (o interest upon delin!uency 4KC4&T as provided by law 7(IRC Sec. 560 once taxes become delin!uent 5GF per annum until fully paid2 &ayable in money (ot subject to set.offL Can,t be assigned $ue to the government in its sovereign capacity

De+t
(CC Contracts express or implied >ith interestsD once debtor becomes in default the obligation bears interest whether or not there is a stipulation &ayable in money property or services Can be set. off/ legal compensation Can be assigned $ue to the government in its corporate capacity

=ode of pa&-ent W># can +e setoff Assi'na+ilit&

:;hether of not ta0es can 1e su1<ect of set=off Re/u1lic v. Ma(1ulao Lu(1er ( #e1 196*!: Cambulao is liable to pay forest charges on account of having gathered forest products. *ut the government owes Cambulao certain amount of money for services rendered by Cambulao. >hen the government tried to collect from Cambulao the latter refused to pay. >eld: Taxes and debts are of different nature. Thus they can not be set off. Taxes are the lifeblood of the nation. Its availability is an imperious need. The government must collect first the tax due.

12

9o(in&o v. Garlitos $?!ne 184"%@ SC reconsidered Cambulao ruling. It held that if *+T3 obligations are o(erd!e de-anda+le as well as f!ll& li2!idated then compensation ta%es place and the obligations are extinguished as to their concurrent amount. I#C vs. =rancia Caltex v. C+# &hilex Cining v. CIR0 reverted to Cambulao #rancia: &roperty was expropriated by the government so the government is liable to pay just compensation. *ut property owner 7=rancia2 has delin!uent taxes. >eld: +bligations are of different nature. Taxes cannot be offset against an ordinary monetary obligation. *ut )arlitos case is not an exception to the general rule because there are re!uirements to be considered. *oth obligations must be due demandable and fully li!uidated. Phile0 Minin& case: &hilex owed the government mining taxes. &hilex refused to pay because it had a multi.million pending claims for refund of input tax. SC did not allow set off because &hilex,s claim was not yet fully li!uidated. (o final determination as yet as to how much the refund was. Its tax liability on the other hand had been fully li!uidated. Thus any offset is premature. Re: $emandable0 Taxes are demandable when not paid on the due date. >ith regard to assessed taxes the latter becomes due when the assessment has become final under sec. 559 (IRC. #ernandez .v Mun. of )M-0 $ebt when demandableM In this case the municipality owed certain private contractors an amount of money for services rendered. The private contractors demanded payment from the municipality but the latter refused. Judge =ernande- issued a favorable judgment. # writ of execution was issued. The judge issued a warrant of arrest against the Cun. Treasurer. The latter went to SC under Rule :8. <eld@ Treasurer is correct. There must be an appropriation ordinance. The remedy of the contractor is to file a petition for mandamus to compel the municipal council to enact an ordinance for the purpose of appropriating funds for the payment of the obligation.

In Garlitos. there was already an appropriation act for the purpose. remains to be done is the /hysical delivery of the (oney.

>hat

S4T +== only if0 712 $ue 752 $emandable 7?2 =ully li!uidated and 7@2 There,s an appropriation ordinance

e. $a0es vs. )/ecial levy # special assess-ent is in the nature of a tax upon a property levied according to the benefits conferred on the property.

13

&roperty against which it is levied derives some special benefit from the improvement. Distinctions@ Special assessment 'evied only on lands Cannot as a rule be made a personal liability of the persons assessed *ased wholly on benefits 4xceptional as to both time and locality The imposition of a c)ar'e on all propert& real or personal in a prescribed area is a tax not an assessment although the purpose is to ma%e a local improvement on a street or highway. # charge i-posed onl& on propert& o*ners +enefited is a special assessment rather than a tax.

The power to levy such assessments is undoubtedly an exercise of the taxing power but the exercise of the taxing power in imposing an assessment does not necessarily ma%e an assessment a tax. 12. 1LA I9I1ATI5# 59 TAXE $ 0AP AG -- subject matter burden amount purpose scope gradation2 #. Subject matter0 personal& capitation& poll& property& excise 1. Personal ta0. Tax on individuals whether citi-en or not residing within a specified territory without regard to their property and occupation. -asic co((unity ta0 4 &8 #dditional not to exceed &8T B &1 for every &1T Salaries from gross receipts or earnings from other occupation B &1/&1T The basic community tax of &8 is not based on income. If a tax is payable under a community tax certificate the tax is not necessarily a personal tax. The personal tax therein is only the basic community tax of &8 for which a person under the Constitution can not be imprisoned for nonpayment thereof. 3eason for the provision: =ramers of the Calolos Constitution considered it as an affront if one will be imprisoned for not paying a minimal amount. Thus if referring to income or property taxpayer may be imprisoned. Poll ta0?ca/itation?co((unity ta0es. *ased upon the residence of the taxpayer regardless of the source of income or location of the property of a tax payer. Community tax . basic

14

4xcise tax B tax on a privilege 7all (IRC taxes2D $ST is an excise taxD Income tax B tax on the privilege to earn #d <alorem B based on the value of the property +. Pro/erty ta0 4real property tax *. #S T+ *;R$4( += T34 T#K 1. 9irect ta0 B demanded from the person intended directly to pay it and that person cannot shift the burden to someone else 4xamples0 Real property tax income tax transfer tax residence tax +. Indirect ta0 4 demanded from one person but expected to shift it to someone not in form of tax but as part of the cost

"tatutory inci ence 7>ho is the taxpayer. who is re!uired to payM2 versus .cono$ic inci ence 7>ho bears the burdenM >ho in reality shoulders the burden of the taxM2 If statutory incidence and economic incidence fall on one person it is a $IR4CT T#K. <#T under Sec. 1G8 the statutory incidence is on the seller but the economic incidence is on buyer. Shifting is always presumed. There are 11 components in the invoice. In case of indirect tax and the tax is not paid the government can not go after the buyer.

C. #S T+ #C+;(T 1. )/ecific A based on the number or some other forms of weight and measurement 4xamples0 Tax on leaded gas B per liter Tax on distilled spirits B based on proof Tax on fermented li!uor B gauge liter Cigarette B per stic% 2. Ad "alore( 9 base on value Real property tax 4state tax . based on the value of the property left by the decedent

15

Income tax B based on the value of the income B: ?hich is easier to a $inister& specific or a valore$= A@ Specific tax. Hou do no go beyond counting. In ad valorem there is a tendency for the taxpayer to lower the prices as exemplified by =ortune Tobacco case. =ormerly cigarette is subject to ad valorem tax. It was taxed on original sale. =ortune Tobacco incorporated nine 762 mar%eting corporations. =ortune sells its tobacco to its mar%eting companies.
&1.GG 7taxed2 &8.GG 7not taxed2

=ortune

Car%eting co.

&ublic

Thus the government reverted to specific tax system. 3owever the problem with S&4CI=IC taxation is that it fails to capture the effects of inflation.
0efore 1: &ears later 1ost of ci'arette &1G/pac% &1GG/pac% pecific tax &1/pac% &1/pac% Tax 1GF 7&1 is 1GF of &1G2 1F 7&1 is 1F of &1GG2

4xcise tax indexation was designed to capture the effects of inflation. In an evolving economy ad valorem is preferred against purely specific.

$. #S T+ &;R&+S4 (@eneral or )/ecial! 1. @eneral B needed for general purposeD tax collected will accrue to the general fund 5. )/ecial . must be utili-ed for the special purpose alone. +therwise there would be technical malversation. If the purpose had already been accomplished or abandoned that is the only time that the amount collected can be used for other purposes. 4. #S T+ SC+&4 1. Aational 4 imposed by the (IRC Tariff and Customs Code 5. Local 4 imposed by the local taxing authority =. #S T+ )R#$#TI+( 1. Pro&ressive 4 the tax rate increases as the tax base increases

16

5. Re&ressive B tax rate increases as the tax base decreases ?. Mi0ed 4 at certain point progressive then regressive. The Constitution calls for ;(I=+RCITH. #ll indirect taxes are regressive taxes. Atty. A1ella: <#T is not really a regressive tax. The rate is ='#T. It is regressive only because of the impact of the tax burden on different taxpayers. Impact of the tax burden N amount paid by a consumer as a percentage of his disposable income. =or example a person earning &1G GGG.GG 7net of income tax2 a month eats a &1GG.meal O Jollibee. #t 1GF rate of <#T he pays &1G or .G1 percent of his disposable income 7&1G GGG.GG2 for that meal. >hilst a consumer earning &1GG GGG.GG 7net of income tax2 a month who also eats a &1GG.meal O Jollibee also pays &1G in <#T if the rate is 1GF. This amount is just .GG1 percent of his disposable income 7&1GG GGG.GG2. The impact is high on low income earner and negligible on high income earner. >e do not adhere to tax cascading at tax upon a tax situation.

1". LI=ITATI5# CP5# T<E P5WER T5 TAX #. I#<ERE#T LI=ITATI5# A proceed from the exercise of the power itself
In)erent Li-itations 1.Taxes must be levied for /u1lic /ur/ose. 5. Territorialit& 7Jurisdictional2 . most important0 SIT;S ?. #on-dele'a+ilit& of the power /.Exe-ption of Go(ern-ent to tax 3.International 1o-it&

If a tax measure violates an inherent limitation the tax statute is (+T valid. It is unconstitutional. #ll the inherent limitations of the power to tax have their basis on the d!e process cla!se. (,epsi /ola v. Mun. of Tanauan) Pu1lic /ur/ose

1.

17

This limitation re!uires that proceeds of taxation be used to support the existence of the government or the pursuit of governmental objectives. Should it be present in the following stages0 levy assessment and collectionM H4S up to the time the tax money is S&4(T. Pascual v. )ec. of Pu1lic ;orBs: Tax law invalid because the public purpose re!uirement was not present at the time the tax ordinance was passed. The appropriation of an amount for the construction of a feeder road owned by a private individual is not proper. The provision that the land shall thereafter be donated to the government does not cure the defect. Thus if the purpose is the construction of a public school building on a private lot the tax law is not valid. The government should first expropriate the property.

If the public advantage or benefit is merely incidental in the promotion of a particular enterprise such defect shall render the law invalid. +n the other hand if what is incidental is the promotion of a public enterprise the tax law shall be deemed Afor a public purpose., Le'islat!re determines public purpose. concern 7'ut- <. #raneta2 Sugar industry is a national

The eradication of a dreaded disease is a public purpose. It need not be a direct benefit or a return for what the taxpayer pays. The benefit may be that enjoyment of the privilege of living in an organi-ed society. -a&atsin& v. Ra(irez: The delegation of the collection of mar%et stall fees to a private corporation does not affect the public purpose of the imposition. The fees collected do not go directly to the private coffers of the corporation. The right to tax depends upon the ultimate use purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. >here an assailed tax measure is not for public purpose such an act is tantamount to confiscation of property. $irect and indirect public benefit. #s long as the ultimate result favors the welfare of the public in general.

5. Territorialit& 7Jurisdictional Sec. 5? B Resident (on.resident Citi-en #lien2 . most important0 SIT;S The taxing power of a country is limited to persons properties and privileges within its territory.

18

it!s is the place or state which has the power to impose a tax upon a person property or privilege. Congress by law determines situs. It depends on the nature and character of the tax and the object sought to be achieved. R!les on sit!s@ a. Real property tax B property located within b. &ersonal property B domicile of the owner following the principle of Mobilia se@uuntur persona$ 7Covables follow the person2. Mo1ilia se3uuntur /ersona( Covables follow the person. #lthough a mere fiction of law without any constitutional foundation it is nevertheless applied when convenient .. 712 provided it is not inconsistent with express provisions of the law or 752 when its application would result in injustice or 7?2 unless such property has ac!uired a situs elsewhere. To ac!uire a situs in a state other than the domicile of the owner tangible property must have a definite location here accompanied by some degree of permanencyD mere temporary or transient presence in the state is not sufficient. Thus in case of shares of stoc% its situs for purposes of taxation is the state in which they are permanently %ept regardless of the domicile of the owner or the state in which the corporation was organi-ed. Wells-9ar'o 0anD@ Shares of stoc% left by a non.resident alien decedent in an anonymous partnership in the &hilippines are subject to &hilippine inheritance tax notwithstanding the $obilia rule. The $obilia rule should yield to reason. The shares of stoc% are also taxable in the situs of their actual location i.e. the &hilippines. TRA# 9ER TAXE @ ec. 1G@ R# 9@5@0 &roperties which have ac!uired situs in R&0 a. =ranchise exercised in R& b. S/S obligations bonds issued by domestic corporations organi-ed and constituted in accordance with R& lawsD

19

c. S/S obligations bonds issued by a foreign corporation where 98F of its business is located in the &hilippines 7subject to donors and estate tax2D d. S/S obligations bonds issued by foreign corporations which has ac!uired business situs when such have been used in the furtherance of the business of the foreign corporationD e. Shares/rights in a partnership established in R& business or industry

These properties are considered situated thus taxed in R& the residence of their owners is immaterial. R;'40 Irrespective of the owner donor,s tax or estate tax can be imposed upon these properties 4KC4&T where the foreign country grants exemption or does not impose taxes on intangible properties of =ilipino citi-ens. 4xample0 donation of S/S made by a =C are not subject to tax. 3owever if the transaction falls under par. c or d the donation shall be subject to tax. The income of intangible properties li%e royalties and dividends are subject to taxes 7Secs. 5@P 58 5J 59 R# 9@5@2. c. Community Tax B taxable if resident for a period of at least six 7:2 months 719G days2. d. 4xcise Tax B imposed on the exercise of a right or privilege Income tax 7sec. 5?2 Criteria0 &lace (ationality Residence 12 Resident citi-ens and domestic corporations B taxable within and without 52 (RC R# (R# =C B taxable only within CIR v. -.AC: (+CCD -ar 70a( 4 Ruling no longer applies in view of the new provision in the Tax Code2 This case was iscusse receipts an origination rule. in inco$e taxation. Aross

20

Transfer tax 7Sec. 982 Criteria0 12 Residence of the transferor B RC/$C 52 (ationality of the transferor B RC/$C ?2 'ocation of the property B within R& (R# B property situated within taxable. .B/.,T: Section 1G@ 7reciprocity rule2 #ll others taxable wherever situated.

*usiness tax B taxed on conducted within <#T B place where the transaction is made

Do!+le taxation $efinition B >hen the same property is taxed twice when it should be taxed but onceD both taxes must be imposed B on the same property or subject matter for the same purpose by the same state government or taxing authority within the same jurisdiction or taxing district during the same taxable period and the same %ind or character of tax.

Qinds of $ouble Taxation 1. $irect double taxation 7prohibitive double taxation B taxing twice by the same authority for the same purpose in the same year some of the property in a given territory in which the tax is laid without taxing all of the$ the second time This type of double taxation is prohibited by the Constitution as it violates the rule on ;(I=+RCITH. 5. Indirect double taxation B This type of double taxation is (+T prohibited. Thus a lessor who derives rental income from his land may be re!uired to pay income tax on the net rentals real estate tax on the assessed value of the land and community tax also on the assessed value of the land. (;illanueva v. /ity of Iloilo& 2C "/3) >D+) International $ouble Taxation

21

Tax on the same S;*J4CT C#TT4R Tax on the same &4RI+$ Tax by $I==4R4(T T#KI() #;T3+RITH/J;RIS$ICTI+(

.xa$ple: Income of a resident citi-en from a foreign country adopting the source principle in imposing income tax Thus this is not a direct d!plicate taxation because it is being imposed by different taxing authorities. This does not constitute the prohibited type of double taxation. There is no law that prohibits double taxation what is violated is the ;(I=+RCITH R;'4 because Ataxed twice when it should be taxed only once., Tax situs for income tax purposes0 Sec. 5? Sources of income 7Sec. @52 Sale of shares of stoc%s of a domestic corporation is an income from within irrespective of the place of sale. Re-edies a'ainst International Do!+le Taxation@ Reciprocal tax exemption Tax deduction Tax credit Tax refund

12 Reciprocal tax exemption Sec. 1G@ (IRC B Rule on reciprocity in limited context 7only in cases of intan'i+le personal propert&2 Treaty provisions 52 Tax deduction B amount allowed by law in order to reduce tax due 4x. *usiness expenses B Sec. ?@ B@ #re inco-e taxes paid in foreign country allowed as deductionsM A@ Hes *;T the taxpayer must not have signified his intention to avail claim it as tax credit 7Sec. ?@2. ?2 Tax cre it B reduction of tax lia+ilit& 7vs. tax which is the reduction of the tax +ase2 e uction

22

Tax CR4$IT is better. reduced.

The liability itself is

Income taxes paid in foreign country B to avail of tax credit taxpayer must signify his intention to avail tax creditD otherwise will only be allowed as deduction

enior 1itiEensF Disco!nt>1entral L!Eon Dr!' 1ase $2::4%@ 1668 TR#(S#CTI+(S. +ld Senior Citi-ens 'aw provides that discounts given to senior citi-ens may be availed of as tax credit by the establishment. SC said in a 5GG: decision that there,s no room for interpretation. The law explicitly provides that discounts given may be availed of as tax credit. /o$$ent: 'ugi ang government. Tax CR4$IT reduces tax liability not tax base. If total discounts given amount to &8GGQ and total taxable income is &1GC tax due at ?8F is &?.8C. If discounts given 7&8GGQ2 is to be availed of as tax credit tax due is &?C only. >hereas if it will only be allowed as tax deduction discounts given in the amount of &8GGQ will be deducted from the tax base of &1GC so taxable income will be &6.8C. #t ?8F tax due is &?.?58C. Ta%e note Senior Citi-ens 'aw was enacted to favor senior citi-ens not the establishments giving discounts. The discounts given are income which should have been reali-ed were it not for the law mandating the giving of discounts to senior citi-ens. So it is but proper to deduct the discounts given from the gross income not from the tax base. +n Carch @ 5GG@ R# 658J otherwise %nown as the (ew Senior Citi-ens 'aw too% effect. ;nder said law discounts given should be treated as T#K $4$;CTI+( not as tax CR4$IT. *ut said law cannot be made to apply to Central 'u-on $rug Case because said case involves 1668 transactions.

1/. #on-dele'a+ilit& of the power General R!le@ &ower to tax is non.delegable.

23

&ower to fix the object purpose and rate Exceptions0


1. To the &resident 7tariff2 5. $elegation to &olitical subdivisions ?. $elegation to administrative bodies

12 to the &resident 7#rt. <I Sec. 59 7522 B flexible tariff rule 7Secs. 1G@ and @G1 of TCC2
The /ongress $ay& by law& authori(e the ,resi ent to fix within specifie li$its& an sub#ect to such li$itations an restrictions as it $ay i$pose& tariff rates& i$port an export @uotas& tonnage an wharfage ues& an other uties or i$posts within the fra$ewor: of the national evelop$ent progra$ of the Aovern$ent.

B@ Is the &resident empowered to fix the rate of internal revenue taxesM A@ (o. There is no provision on such power in the Constitution. Comment0 There,s this newspaper article which says that the &resident has the power to fix the rate of internal revenue taxes allegedly on the basis on #rt. <I Sec. 59 752 because of the phrase Aother other duties or imposts,. !c) is a *ron' interpretation follo*in' t)e principle of E?C DE= GE#ERI . G5t)erF -!st +e constr!ed in line of t)e en!-erated d!ties and i-posts. B@ Can Congress delegate the power to fix the rate of internal revenue tax to the &residentM A@ Two schools of thought0 The &resident has no power. Congress cannot delegate the power to fix the rate of IRT. #rt. <I Sec. 59752 refers only to T#RI== rates imposts 7only for TCC2 following the principle of e#us e$ generis. More liberal view. The power to fix the rate can be elegate provi e there are sufficient standards because in that case& the ,resi ent is $erely i(/le(entin&& 5%T legislating. B@ Suppose a law is passed by Congress allowing the &resident to raise the rate of <#T to 15F if any of the following conditions

24

has been satisfied0 12 <#T collection as a percentage of )$& of the previous year exceeds 5 @/8FD or 52 (ational )overnment deficit as a percentage of )$& for the previous year exceeds 1 RF. Is the delegation validM A@ HE . In such a case the &resident was not given discretion as to what rate of tax is to be imposed. (either was she given the absolute discretion to increase the rate. There are conditions that must be present before she could exercise her discretion to increase the rate. A0AIADA 1ase@ $T)e facts are si-ple. #e* VAT la* *as passed. Ala- n&o na &!n.% <ere are t)e iss!es +!t donFt for'et na dele'ation to t)e exec!ti(e depart-ent as an exception to non-dele'a+ilit& of t)e po*er to tax an' topic ditto. isina-a Do lan' &!n' i+an' iss!es sa 2::4 VAT case@ 1. +RI)I(#TI+( R;'40 >hat must originate exclusively from the 'ower 3ouse is not the law but only the revenue bill. Senate may propose or concur with amendments. The same Tolentino case on old <#T law. 5. $4'4TI+( += A(+ &#SS +(, &R+<ISI+(0 <#T is indirect tax. It must necessarily be passed on to consumers. +therwise it will cease to be an indirect tax. This matter 7whether to pass or not to pass2 is a political !uestionD this is not justiciable.

. ?. $4'4)#TI+(/ST#($.*H #;T3+RITH += T34 &R4SI$4(T - (othing is delegated to the &resident. The law provides for conditions and the Secretary of =inance in determining whether the conditions are present acts as #)4(T of the legislative department. @. 'ICIT += JGF CR4$IT0 Tax credit is not a matter of right. It is a matter of privilege. So credit could be limited up to a certain percentage.

52 to the local government units 7#rt. K Sec. 8 of the 169J ConstitutionD Sec. 1?5 R# J1:G2
"./TI%5 >. .ach local govern$ent unit shall have the power to create its own sources of revenues an to levy taxes& fees& an

25

charges sub#ect to such gui elines an li$itations as the /ongress $ay provi e& consistent with the basic policy of local autono$y. "uch taxes& fees& an charges shall accrue exclusively to the local govern$ents.

Pe/si Cola v. City of -utuan: The theory of non.delegation of legislative power does not apply to maters of local concern. .ld case: 4ven if no such Constitutional provision '); has the power to tax because the power to create '); by implication confers upon it the power to tax.

?2 to the administrative bodies Tax legislation 7covers Alevy, and Aimposition,2 B not delegable to administrative bodies. It refers to the elements that enter into the imposition of the tax. The scope of legislative taxing power 7power to tax2 extends to the following0 a. the subject 7person property or occupation to be taxed2 b. the amount or rate of the tax c. the purpose for which taxes shall be levied 7public purposes only2 d. the %ind of tax to be collected e. the apportionment of the tax 7general or limited to a particular locality2 f. the situs of taxation g. the method of collection Tax #dministration B delegable to 7assessment and collection functions2 administrative bodies

C4T3+$S of T#K C+''4CTI+(0 Tax 'egislative Scheme and <oluntary Compliance Scheme

13. Exe-ption of Go(ern-ent to tax Income of the government in exercising purely governmental functions is not subject to tax. 7unless expressly T#K4$2 7Sec. ?5*2 If what is involved is the exercise of the government of a &R+&RI4T#RH function its income is subject to tax. 7unless expressly 4K4C&T2 3eason: The government should not be allowed to compete with private individuals and get the advantage of not being subject to tax.
Sec. 5J 7C2 (IRC0 Aovern$ent'owne or /ontrolle '/orporations& )gencies or Instru$entalities. . The provisions of existing special or general laws to the contrary notwithstanding all corporations agencies or instrumentalities owned or controlled by the )overnment except the )overnment Service Insurance System 7)SIS2 the Social Security System 7SSS2 the &hilippine 3ealth Insurance Corporation 7&3IC2 the &hilippine

26

Charity Sweepsta%es +ffice 7&CS+2 and the &hilippine #musement and )aming Corporation 7&#)C+R2 shall /ay such rate of ta0 u/on their ta0a1le inco(e as are imposed by this Section upon corporations or associations engaged in s similar business industry or activity.

General Rule: Corporations exercising proprietary functions, income taxable. Exceptions:


GSIS SSS PHIC &CSO PAGCOR

&roperties of the national as well as the local government are not subject to tax otherwise it would result in the absurd situation of the government "ta%ing money from one poc%et and putting it in another.S

B@ May the national govern$ent i$pose a tax on local govern$ents= A@ There is no prohibition constitutional or inherent in taxation against the imposition of taxes by the State on its political subdivisions. #ccordingly although it would be unusual the national government can validly impose taxes on local governments. B@ May the local govern$ent i$pose a tax on the national govern$ent= A@ In Mc/ulloch v. Marylan & the doctrine that "the power to tax involves the power to destroyS was among other reasons used to support the holding that states of the union are prohibited from taxing the ;S =ederal government. If indeed taxation involves the power to destroy then it cannot be exercised on that which the taxing authority has the power to destroy. $espite then the absence of any explicit statutory or constitutional prohibition local governments may not impose any %ind of tax on the national government.

T)e 1881 Local Go(ern-ent 1ode expressl& pro(ides t)at local 'o(ern-ents cannot tax t)e #ational Go(ern-ent. 14. International 1o-it& &rinciple of reciprocity Respect of one sovereign in favor of another sovereignD a sovereign cannot exercise jurisdiction over another sovereign )enerally accepted principles of international law shall form part of the law of the land and policy of peace e!uality justice freedom cooperation and amity. Sovereign 4!uality #mong States 4x. ;S embassyD property of a foreign governmentD income taxes of foreign goverment

27

CIR v. ).C 6ohnson and )onsE Inc.E 6une 1999 : +n the application of the EMost favore nation clauseF the phrase "un er si$ilar circu$stancesF refers to the payment of the tax and not in the payment of royalties.

A. 15# TITCTI5#AL LI=ITATI5# 1. 5. ?. @. 8. :. J. 9. 6. 1G. 11. 15. 1?. 1@. 18. 1:. 1J. 19. $ue process clause 4!ual protection clause ;niformity &rogressive system of taxation non.impairment of contracts clause non.imprisonment for non.payment of poll tax +rigination rule 7initiation bill2 &residential veto &residential power to fix tariff rates =reedom of religion =reedom of the press 4xemption of religious educational and charitable institutions 4xemption of non.stoc% non.profit educational institutions (o public money or property used for a particular sect priest religious minister etc. except if assigne in the )G,& leprosariu$& etc. Tax exemption statute. majority vote of Congress )rant of tax power to '); Coney collected for special purpose shall be considered a special fund 4xclusive appellate J of SC 7M2

1. 9ue /rocess clause


S4CTI+( 1 #rt. III 169J Constitution. (o person shall be deprived of life liberty or property without due process of law nor shall any person be denied the e!ual protection of the laws. Reasonableness of the exaction #s a s!+stanti(e li-itation this means that the power to tax can be resorted to only for constitutionally valid public purpose and that the subject of taxation be within or has a situs in the taxing jurisdiction. >hen an inherent limitation is violated there is a violation of S;*ST#(TI<4 $;4 &R+C4SS 7"ta%ing of property without due process of lawS2 #s a proced!ral li-itation it prohibits the state from utili-ing any form of assessment or review which is arbitrary or unfair or which may deny a taxpayer a fair opportunity to assert his substantial rights before a competent tribunal. If procedures intended to protect taxpayers are not followed then there is a denial of &R+C4$;R#' due process. 7#ssessment etc.2

28

The following are illustrative of violations of due process clause0 If the tax amounts to a confiscation of propertyD If the subject of confiscation is outside the jurisdiction of the taxing authorityD If the law is imposed for a purpose other than a public purposeD If the law which is applied retroactively imposes unjust and oppressive taxesD #rbitrary or oppressive methods are usedD and >here the law is in violation of inherent limitations.

Reyes v. Al(anzor: The due process clause may be invo%ed where a taxing statute is so arbitrary that it finds no support in the Constitution as it can be shown to amount to a confiscation of property. *ut mere allegation is not enough. There must be a clear and une!uivocal breach of the Constitution and proof of arbitrariness. CIR vs. C$A and #ortune: >hen an administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but 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 and thereafter to be duly informed before that new issuance is given the force and effect of law.

+. 73ual /rotection clause (Rule on unifor(ity and e3uity!


"ec. 1& )rt. III ' .. nor shall any person be enie of the e@ual protection of the laws.F "./TI%5 2+. (1) The rule of taxation shall be unifor$ an e@uitable.

E2!alit& of taxation is accomplished when the burden of tax falls e!ually and impartially upon all persons and property subject to it so that no higher rate or greater levy in proportion to value is imposed upon one person or species or property than upon others similarly situated or of li%e character. The /onstitution re@uires 75IG%3MIT8& not e@uality in taxation. Cnifor-it& means that all properties or other taxable subjects belonging to the same class be taxed at the same rate or measure otherwise it is discriminatory. E2!it& means that the apportionment of the tax burden among the taxpayer be just or e!uitable ta%ing into account the taxpayer,s ability to pay the burden. A+ilit& to pa& means that the subjects of the state must contribute to government support as nearly as possible in proportion to the revenue/income which they respectively enjoy under the protection of the state.

29

City of -a&uio v. 9e Leon: 7nifor$ity an e@uality. 4!uality and uniformity in taxation means that all taxable articles or %ind of property of the same class be taxed at the same rate. # tax is considered uniform when it operates with the same force and effect in every place where the subject may be found. Pe/si Cola v. City of -utuan: ;niformity in taxation re!uiring all subjects or objects or objects of taxation similarly situated to be treated ali%e or on e!ual footing does not disallow a classification of such objects as long as the standards used therefore are not arbitrary and germane to the intendment of the law and are substantial. )hell v. "ano: Ine!ualities resulting from the singling out of one particular class from other classes do not infringe the Constitution. .r(oc )u&ar Central v. City of .r(oc: +rdinance in this case is unconstitutional. It taxes only the produce of +rmoc Sugar Co. It is true that at the time of its enactment +rmoc Sugar Co. was the only sugar central in the city. 3owever the ordinance as worded is not applicable to future conditions. PAL v. )ec. of #inance: Regressive taxes do not go against the constitutional mandate that Congress shall evolve a progressive system of taxation. The Constitution does not really prohibit the imposition of indirect taxes which li%e the <#T are regressive. >hat it imply provides is that congress shall evolve a progressive system of taxation. Resort to indirect taxes should be minimi-ed 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. 1lassification. *)en proper A *)en reasona+le. i.e.. -!st satisf& t)e follo*in'@ a. b. c. d. It must be based on substantial distinction It must apply both to present and future conditions It must be germane to the purposes of the law It must apply e!ually to all members of the same class.

*. Pro&ressive ta0ation
The /ongress shall evolve a progressive syste$ of taxation.

Taxation is progressive when its rate goes up depending on the resources of the person affected. The Constitution does (+T really prohibit the imposition of regressive taxes. >hat it simply provides is that /ongress shall evolve a progressive syste$ of taxation. This is a mere directive upon Congress not a justiciable right or a

30

legally enforceable one. >e cannot avoid regressive taxes but only minimi-e them. %. non=i(/air(ent of contracts clause
S4CTI+( 1G. (o law impairing the obligation of contracts shall be passed.

This applies only when the government 7taxing authority2 itself is a party to the contract. ;nilateral tax exemption may be withdrawn unilaterally. There is impairment if the new law ma%es it more burdensome for the other party to perform his part of the contract. 70a(/le: 4R#& bonds/peace bonds. The withdrawal of contractual tax exemptions thereof would amount to impairment because the impelling reason why they invested is the tax exemption

D. 70e(/tion of reli&iousE educational and charita1le institutions


"ec. 2+ (!)& )rt. ;I. /haritable institutions& churches an parsonages or convents appurtenant thereto& $os@ues& non'profit ce$eteries& an all lan s& buil ings& an i$prove$ents& actually& irectly& an exclusively use for religious& charitable& or e ucational purposes shall be exe$pt fro$ taxation.

4xemption from taxation of cemeteries churches parsonages or convents appurtenant thereto as well as lands buildings and improvements used exclusively for religious charitable and educational purposes. Real property taxes only Standard applied by the constitution is ;S4 of property not +>(4RS3I& Qind of use0 It should be actually directly and exclusively used A1ra "alley Colle&e v. A3uino (19''!: The term "exclusively usedS does not necessarily mean total or absolute use. 4ven if the property is used for incidental purposes the tax exemption will apply. >errera v. 8C -.AA: exclusively means Aprimarily, not Asolely,D property used as canteen and dormitory still exempt from real property taxes as long as they cater exclusively to the students of the school and not to the public. (on.stoc% non.profit educational institutions now enjoy o-ni+!s exe-ption or exemption from all taxes 7Sec. @ par. ? #rticle KI<2 as long as0 712 property being exclusively used for educational purposes and 752 no part of income inures to private persons.

31

Lun& Center v. 8C (+CC%!: &ortions of the land leased to private entities as well as those parts of the hospital leased to private individuals are (+T tax exempt. The portions of the land occupied by the hospital used for its patients whether paying or non.paying are exempt from real property taxes. >hat determines exemption is the Ause,D not ownership.

6. 70e(/tion of non=stocBE non=/rofit educational institutions


(!) )ll revenues an assets of non'stoc:& non'profit e ucational institutions use actually& irectly& an exclusively for e ucational purposes shall be exe$pt fro$ taxes an uties. 7pon the issolution or cessation of the corporate existence of such institutions& their assets shall be ispose of in the $anner provi e by law. Pro/rietary educational institutions & inclu ing those cooperatively owne & $ay li:ewise be entitle to such exe$ptions sub#ect to the li$itations provi e by law inclu ing restrictions on ivi en s an provisions for reinvest$ent.

+mnibus exemption B only for non-stocD. non-profit ed!cational instit!tionsD If it is a proprietary educational institution B exemption is on real property taxes only and it must satisfy the re!uirements for exemption i.e. actually directly and exclusively used for educational purposesD as regards its revenues the proprietary educational institution is not exempt but it is subject to preferential treatment i.e. 1GF tax rate if more than 8GF of its income is derived from educational purposes 7pre.dominance test2D if more than 8GF of its income is from other purposes the regular tax rate for corporation applies i.e. ?8F. This provision applies to re(en!es and assets of educational institutions only. (o similar exemption regarding the re(en!es of religious and charitable institutions. vs. #rt. <I Sec. 597?2 on reli'io!s ed!cational and c)arita+le institutions which covers /ro/erty ta0 only

Private inure(ent doctrine. (o private individual must benefit from the income of these institutions. *ut some institutions circumvent the law to avail the exemption. TTT "disguised dividendsS B salary :uno but in reality a distribution of dividends to stoc%holders. &roprietary educational institution0 Real property B exempt as long as being used for educational purposes Income 7revenue2 B 1GF or ?8F applying the pre.dominance test

. .ri&ination rule (initiation 1ill! 4 (ust ori&inate e0clusively fro( the >.RE and the senate (ay /ro/ose or concur Fith a(end(ents.

32

"./TI%5 2-. )ll appropriation& revenue or tariff bills& bills authori(ing increase of public ebt& bills of local application& an private bills shall originate exclusively in the 2ouse of 3epresentatives& but the "enate $ay propose or concur with a$en $ents.

Taxation must be by proper representation. representation.

(o taxation without proper

'. $a0 e0e(/tion statute= (a<ority vote of ALL Con&ress (1oth houses!
(-) 5o law granting any tax exe$ption shall be passe concurrence of a $a#ority of all the Me$bers of the /ongress. without the

9. Re3uire(ent of a//ro/riations laF 1efore ta0 (oney could 1e s/ent


"./TI%5 2*. (1) 5o $oney shall be pai out of the Treasury except in pursuance of an appropriation $a e by law. (2) 5o public $oney or property shall be appropriate & applie & pai & or e$ploye & irectly or in irectly& for the use& benefit& or support of any sect& church& eno$ination& sectarian institution& or syste$ of religion& or of any priest& preacher& $inister& or other religious teacher& or ignitary as such& except when such priest& preacher& $inister& or ignitary is assigne to the ar$e forces& or to any penal institution& or govern$ent orphanage or leprosariu$. (!) )ll $oney collecte on any tax levie for a special purpose shall be treate as a special fun an pai out for such purpose only. If the purpose for which a special fun was create has been fulfille or aban one & the balance& if any& shall be transferre to the general fun s of the Aovern$ent.

#ernandez v. Mun. of )M-: &ublic funds 7taxes2 can not be spent for paying the obligations of the government without an appropriation law/ordinance duly enacted. This is the rationale for non-a(aila+ilit& of set-off or le'al co-pensation between taxes and debts more pronounced. P v. Manalili: # *IR cashier is not allowed to deposit tax payments to a *IR account maintained to meet the operational expenses of the agency because to do so will violate the constitutional re!uirement.

1C. Aon=i(/rison(ent for non=/ay(ent of /oll ta0


"./TI%5 21. 5o person shall be i$prisone for ebt or non'pay$ent of a poll tax.

>hile a person may not be imprisoned for non.payment of poll tax he may be imprisoned for non.payment of other taxes. Poll ta0?ca/itation?co((unity ta0es. *ased upon the residence of the taxpayer regardless of the source of income or location of the property of a tax payer. If a tax is payable under a community tax certificate the tax is not necessarily a personal tax. The personal tax therein is only the basic community tax of &8 for

33

which a person under the Constitution cannot be imprisoned for nonpayment thereof. The community tax certificate 11. "eto /oFer of the President
The ,resi ent shall have the power to veto any particular ite$ or ite$s in an appropriation& revenue& or tariff bill& but the veto shall not affect the ite$ or ite$s to which he oes not ob#ect.

The item or items in vetoed shall be returned to the 'ower house of Congress with the objections of the &resident. If after a reconsideration 5/? of #'' the members of such 3ouse shall agree to pass the bill it shall be sent together with the objection to the other house by which it shall li%ewise be reconsidered and if approved by 5/? of #'' the members of the 3ouse it shall become a law. PresidentGs /oFer to ta0
The /ongress $ay& by law& authori(e the ,resi ent to fix within specifie li$its& an sub#ect to such li$itations an restrictions as it $ay i$pose& tariff rates& i$port an export @uotas& tonnage an wharfage ues& an other uties or i$posts within the fra$ewor: of the national evelop$ent progra$ of the Aovern$ent.

1+.

R4I;IR4C4(TS0 a. 4nabling law b. 'aw must provide for limitations and restrictionsD and c. Cust be within the framewor% of national development 1*. $a0ation and #reedo( of the /ress
"./TI%5 -. 5o law shall be passe expression& or of the pressHF abri ging the free o$ of speech& of

3owever li%e others the media organi-ation must pay e!uitable and non. discriminatory taxes on its business.

16. EXE=PTI5# 9R5= TAXATI5# =eanin'@ )rant of immunity express or implied to particular persons. corporations or to persons or corporations of a particular class from a tax upon a property or an excise which persons and corporations generally within the same taxing district are obliged to pay. *riefly it is the privilege of not being imposed a financial burden to which others are subject. ,rivilege of not being i$pose a financial bur en to which others are sub#ect. Po*er of le'islat!re to 'rant exe-ption@ &ower to tax includes the power to exempt. In the exercise of its inherent power to tax the state through its legislature

34

has the full power to exempt any person corporation class of property from taxation as its views of public policy and expediency may dictate. Interpretation of tax exe-ption 'rants@ Strictly construed against the person entity or property claiming the exemption. +ne claiming the exemption must justify such claim by clear and positive grant. #at!re of tax exe-ption pri(ile'e A It is personal and cannot be assigned or transferred by the person to whom it is given without the consent of the state given in clear and unmista%able terms. T&pes of exe-ption. a. 70/ressed B expressly granted by law b. I(/lied B exemption by omission. (Iut 1**D 5I3/ on inco$e tax provi es& inco$e Efro$ whatever source& inclu ing but not li$ite toF so how can there be an exe$ption by o$ission when it co$es to I5/%M. tax). c. Contractual B the elements of a valid contract must be present d. 2nilateral B granted at will Significance of %nowing whether contractual or unilateral0 If ;(I'#T4R#' it could be withdrawn at will 7the power to exempt carries with it the power to withdraw at will2D If C+(TR#CT;#' cannot be withdrawn at will Tax A-nest&. It is an immunity from all criminal and civil obligations arising from non.payment of taxes. It is general pardon given to all taxpayers. It applies only to past tax periods hence retroactive application. Tax amnesty is retroactive in application. $a0 e0e(/tion on the other hand is an immunity from the civil liability only. It is an immunity or privilege a freedom from a charge or burden of which others are subjected. It is prospective in application.

17. 95R= 59 E 1APE 9R5= TAXATI5#


hifting 1apitali-ation Avoidance Transformation Evasion B unlawful Exemption 7$iscussed above2

a! $a0 7vasion . deliberate adoption of I''4)#' C4#(S to defeat or lessen the payment of tax otherwise %nown as Tax Dod'in' and punishable by law

35

i. Exa-ples@ deliberate failure to report taxable income deliberate padding of expenses ii. CIR v. 7state of -eni&no $oda (+CC%!: Tax evasion connotes the integration of three factors0 (JonKt forgetL 5agaga$it ito sa hypothetical @uestion<proble$sM ba:a in sa ob#ective itanong) 1. the end to be achieved i.e. the payment of less than that %nown by the taxpayer to be legally dueD 5. #n accompanying state of mind which is described as being Je(il.K in J+ad fait)K. J*illf!llK. or Jdeli+erateK and not $erely "accidentalHI an ?. # course of action of failure of action which is ;('#>=;'.

iii. 0ad'es of 9ra!d 7Reyes v. CIR2 Iaunin itong ba ges of frau sa loob ng La "alle sa 2n "un ay 1. $eliberate over.claim of deductions 5. $eliberate under.declaration of income ?. Recurrence of both 1. $a0 Avoidance B use by the taxpayer of legally permissible methods in order to reduce tax liabilityD otherwise called Tax =ini-iEation a. Exa-ples@ >ithdrawal of the deposit of money in ban%s 7interest of which is subject to 5GF withholding tax2 and investment of said idle funds in tax.free government securities to avoid payment of interest income postponing sale of capital assets $ot)er t)an realt& and s)ares of stocDs% until 15 months shall have elapsed from date of ac!uisition so as to reduce the taxable capital gain thereon by 8GF. Got)er t)an real and s)ares of stocDsF - because if what is involved is realty or shares of stoc%s there is a presumed capital gains of :F c. )hiftin& . the process by which the tax burden is transferred from the statutory

taxpayer (impact of taxation) to another (incident of taxation) without vio atin! the aw"
I=PA1T 59 TAXATI5# A point on which tax is originally imposed. I#1IDE#T 59 TAXATI5# B point on which the tax burden finally rests or settles down. .x. <alue added tax. The seller is re!uired by law to pay tax but the burden is actually shifted or passed on to the buyer.

36

d. Ca/italization - a mere increase in the value of the property is not income but merely an unreali-ed increase in capital. (o income until after the actual sale or other disposition of the property in excess of its original cost. Except@ If by reason of appraisal the cost basis of property increased and the resultant basis is used as the new tax base for purposes of computing the allowable depreciation expense the net difference between the original cost basis and new basis is taxable under the econo$ic benefit principle. (II3 3uling 5o. 12*& March 1*& 1**+) e. Transfor-ation - manufacturer or producer upon whom the tax has been imposed fearing the loss of his mar%et if he should add the tax to the price pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units at a lower cost.

P5WER 59 T<E 1IR 7Study this portion2 18. #ational Internal Re(en!e Taxes Ad-inistered +& t)e 0IR a. b. c. d. e. f. g. Income tax Transfer Taxes 74state and $onor,s2 <alue #dded Tax +ther &ercentage Taxes 4xcise Taxes 7Specific and ad valorem on certain goods2 $ocumentary Stamp Taxes Such other taxes as are or thereafter may be imposed and collected by the *IR

2:. P5WER 59 T<E 1IR T5 I#TERPRET TAX LAW A#D T5 DE1IDE TAX 1A E
)7C. %. PoFer of the Co((issioner to Inter/ret $a0 LaFs and to 9ecide $a0 Cases. ' The power to interpret the provisions of this /o e an other tax laws shall be un er the exclusive an original #uris iction of the /o$$issioner& sub#ect to review by the "ecretary of Ginance. The power to eci e ispute assess$ents& refun s of internal revenue taxes& fees or other charges& penalties i$pose in relation thereto& or other $atters arising un er this /o e or other laws or portions thereof a $inistere by the Iureau of Internal 3evenue is veste in the /o$$issioner& sub#ect to the exclusive appellate #uris iction of the /ourt of Tax )ppeals.

$o inter/ret ta0 laFs +riginal and exclusive power of the CIRD done by issuing revenue regulations

37

Subject to review by Secretary of =inance 7CIR B S+=2

$o decide ta0 case CIR subject to appeal to CT# 7CIR B CT#2

21. P5WER T5 50TAI# I#95R=ATI5#


)7C. D. PoFer of the Co((issioner to .1tain Infor(ationE and to )u((onE 70a(ineE and $aBe $esti(ony of Persons . ' In ascertaining the correctness of any return& or in $a:ing a return when none has been $a e& or in eter$ining the liability of any person for any internal revenue tax& or in collecting any such liability& or in evaluating tax co$pliance& the /o$$issioner is authori(e : ()) To exa$ine any boo:& paper& recor & or other ata which $ay be relevant or $aterial to such in@uiryM (I) To obtain on a regular basis fro$ any person other than the person whose internal revenue tax liability is sub#ect to au it or investigation& or fro$ any office or officer of the national an local govern$ents& govern$ent agencies an instru$entalities& inclu ing the Iang:o "entral ng ,ilipinas an govern$ent' owne or 'controlle corporations& any infor$ation such as& but not li$ite to& costs an volu$e of pro uction& receipts or sales an gross inco$es of taxpayers& an the na$es& a resses& an financial state$ents of corporations& $utual fun co$panies& insurance co$panies& regional operating hea @uarters of $ultinational co$panies& #oint accounts& associations& #oint ventures of consortia an registere partnerships& an their $e$bersM (/) To su$$on the person liable for tax or re@uire to file a return& or any officer or e$ployee of such person& or any person having possession& custo y& or care of the boo:s of accounts an other accounting recor s containing entries relating to the business of the person liable for tax& or any other person& to appear before the /o$$issioner or his uly authori(e representative at a ti$e an place specifie in the su$$ons an to pro uce such boo:s& papers& recor s& or other ata& an to give testi$onyM (J) To ta:e such testi$ony of the person concerne & un er oath& as $ay be relevant or $aterial to such in@uiryM an (.) To cause revenue officers an e$ployees to $a:e a canvass fro$ ti$e to ti$e of any revenue istrict or region an in@uire after an concerning all persons herein who $ay be liable to pay any internal revenue tax& an all persons owning or having the care& $anage$ent or possession of any ob#ect with respect to which a tax is i$pose . The provisions of the foregoing paragraphs notwithstan ing& nothing in this "ection shall be construe as granting the /o$$issioner the authority to in@uire into ban: eposits other than as provi e for in "ection C(G) of this /o e.

38

;nder pain of contempt E TAXE

22. P5WER T5 A

Ri')t to a-end ret!rn >ithin ? years from the date of filing *;T before service of audit notice
)7C. 6. PoFer of the Co((issioner to MaBe assess(ents and Prescri1e additional Re3uire(ents for $a0 Ad(inistration and 7nforce(ent. ' ()) .xa$ination of 3eturns an Jeter$ination of Tax Jue. ' )fter a return has been file as re@uire un er the provisions of this /o e& the /o$$issioner or his uly authori(e representative (ay authori(e the exa$ination of any taxpayer an the assess$ent of the correct a$ount of tax: ,rovi e & howeverM That failure to file a return shall not prevent the /o$$issioner fro$ authori(ing the exa$ination of any taxpayer. The tax or any eficiency tax so assesse shall be pai upon notice an e$an fro$ the /o$$issioner or fro$ his uly authori(e representative. )ny return& state$ent of eclaration file in any office authori(e to receive the sa$e shall not be with rawn: ,rovi e & That Fithin three (*! years fro( the date of such filin& & the sa$e $ay be $o ifie & change & or a$en e : ,rovi e & further& That no notice for au it or investigation of such return& state$ent or eclaration has in the $eanti$e been actually serve upon the taxpayer.

0est e(idence o+taina+le r!le


(I) #ailure to )u1(it Re3uired ReturnsE )tate(entsE Re/orts and other 9ocu(ents. ?hen 9 ) report re@uire by law as a basis for the assess$ent of any national internal revenue tax shall not be forthco$ing within the ti$e fixe by laws or rules an regulations or There is reason to believe that any such report is false& inco$plete or erroneous

the /o$$issioner shall assess the proper tax on the 1est evidence o1taina1le.
In case a person 9

39

fails to file a re@uire return or other ocu$ent at the ti$e prescribe by law& or willfully or otherwise files a false or frau ulent return or other ocu$ent&

the /o$$issioner shall (aBe or a(end the return fro$ his own :nowle ge an fro( such infor(ation as he can o1tain throu&h testi(ony or otherFise& which shall be pri$a facie correct an sufficient for all legal purposes.

In2!ir& into +anD deposits T*o 'ro!nds@ 1. $etermine the gross estate of the decedent 5. +ffer for compromise based on financial incapacity
C (G) )uthority of the /o$$issioner to in@uire into Ian: Jeposit )ccounts. ' 5otwithstan ing any contrary provision of 3epublic )ct 5o. 1-1> an other general or special laws& the /o$$issioner is hereby authori(e to in@uire into the ban: eposits of: (1) a ece ent to eter$ine his gross estateM an (2) any taxpayer who has file an application for co$pro$ise of his tax liability un er "ec. 21- ()) (2) of this /o e by reason of financial incapacity to pay his tax liability. In case a taxpayer files an application to co$pro$ise the pay$ent of his tax liabilities on his clai$ that his financial /osition de(onstrates a clear ina1ility to /ay the ta0 assessed & his application shall not be consi ere !nless an until he waives in writing his privilege un er 3epublic )ct 5o. 1-1> or un er other general or special laws& an such waiver shall constitute the authority of the Co((issioner to in3uire into the 1anB de/osits of the ta0/ayer .

*an% shall not allow withdrawal unless there is a certification that a tax thereon has been paid 4KC4&T0 4ven if without a certification that tax had been paid withdrawal of not exceeding &5GQ allowed if there is a prior authority from the *IR

(/) Authority to Conduct Inventory=taBin&E surveillance and to Prescri1e Presu(/tive @ross )ales and Recei/ts. If there is reason to believe that such person is not eclaring his correct inco$e& sales or receipts for internal revenue tax purposes& the /o$$issioner $ay& at any ti$e uring the taxable year& ''

40

%r er inventory'ta:ing of goo s of any taxpayer as a basis for eter$ining his internal revenue tax liabilities& or ,lace the business operations of any person& natural or #uri ical& un er observation or surveillance

The fin ings $ay be use as the basis for assessing the taxes for the other $onths or @uarters of the sa$e or ifferent taxable years an such assess$ent shall be ee$e pri$a facie correct. The /o$$issioner& after ta:ing into account the sales& receipts& inco$e or other taxable base of other persons engage in si$ilar businesses un er si$ilar situations or circu$stances or after consi ering other relevant infor$ation $ay /rescri1e a (ini(u( a(ount of such gross receipts& sales an taxable base& an such a$ount so prescribe shall be pri$a facie correct for purposes of eter$ining the internal revenue tax liabilities of such person 9 ?hen it is foun that a person has faile to issue receipts an invoices in violation of the re@uire$ents of "ections 11! an 2!D of this /o e& or ?hen there is reason to believe that the boo:s of accounts or other recor s o not correctly reflect the eclarations $a e or to be $a e in a return re@uire to be file un er the provisions of this /o e&

(J) Authority to $er(inate $a0a1le Period . ' ?hen it shall co$e to the :nowle ge of the /o$$issioner that a taxpayer is 9 1) 3etiring fro$ business sub#ect to tax& or 2) Inten ing to leave the ,hilippines or to re$ove his property therefro$ or to hi e or conceal his property& or !) ,erfor$ing any act ten ing to obstruct the procee ings for the collection of the tax for the past or current @uarter or year or to ren er the sa$e totally or partly ineffective (unless such procee ings are begun i$$e iately) The /o$$issioner shall eclare the tax perio of such taxpayer ter$inate at any ti$e an shall sen the taxpayer a notice of such ecision& together with a re@uest for the i$$e iate pay$ent of the tax for the perio so eclare ter$inate an the tax for the prece ing year or @uarter& or such portion thereof as $ay be unpai & an "ai taxes shall be ue an payable i$$e iately an shall be sub#ect to all the penalties hereafter prescribe & unless pai within the ti$e fixe in the e$an $a e by the /o$$issioner. (.) Authority of the Co((issioner to Prescri1e Real Pro/erty "alues . ' The /o$$issioner is hereby authori(e to ivi e the ,hilippines into ifferent (ones or areas an shall& upon consultation with co$petent appraisers both fro$ the private an public sectors& eter$ine the fair $ar:et value of real properties locate in each (one or area. Gor purposes of co$puting any internal revenue tax& the value of the property shall be& whichever is the higher of: (1) the fair $ar:et value as eter$ine by the /o$$issioner& or

41

(2) the fair $ar:et value as shown in the sche ule of values of the ,rovincial an /ity )ssessors.

()2 Authority to Accredit and Re&ister $a0 A&ents. B The Commissioner shall accredit and register based on their professional competence integrity and moral fitness individuals and general professional partnerships and their representatives who prepare and file tax returns statements reports protests and other papers with or who appear before the *ureau for taxpayers. >ithin one hundred twenty 715G2 days from January 1 1669 the Commissioner shall create national and regional accreditation boards the members of which shall serve for three 7?2 years and shall designate from among the senior officials of the *ureau one 712 chairman and two 752 members for each board subject to such rules and regulations as the Secretary of =inance shall promulgate upon the recommendation of the Commissioner. Individuals and general professional partnerships and their representatives who are denied accreditation by the Commissioner and/or the national and regional accreditation boards may appeal such denial to the Secretary of =inance who shall rule on the appeal within sixty 7:G2 days from receipt of such appeal. Gailure of the "ecretary of Ginance to rule on the )ppeal within the prescribe perio shall be ee$e as approval of the application for accre itation of the appellant.

732 Authority of the Co((issioner to Prescri1e Additional Procedural or 9ocu(entary Re3uire(ents. . The Commissioner may prescribe the manner of compliance with any documentary or procedural re!uirement in connection with the submission or preparation of financial statements accompanying the tax returns.

2". DELEGATI5# 59 P5WER


)7C. . Authority of the Co((issioner to 9ele&ate PoFer . ' The /o$$issioner $ay elegate the powers veste in hi$ un er the pertinent provisions of this /o e to any or such subor inate officials with the ran: e@uivalent to a ivision chief or higher& sub#ect to such li$itations an restrictions as $ay be i$pose un er rules an regulations to be pro$ulgate by the "ecretary of Ginance& upon reco$$en ation of the /o$$issioner: ,rovi e & however& That the following powers of the /o$$issioner shall not 1e dele&ated: (A.A=97L7@A-L7! (a) The /oFer to reco((end the pro$ulgation of rules an regulations by the "ecretary of GinanceM (b) The /oFer to issue rulin&s of first i$pression or to reverse& revoBe or (odify any existing ruling of the IureauM (c) The /oFer to co(/ro(ise or a1ate& un er "ec. 21- ()) an /o e& any tax liability: (I) of this

42

.B/.,T (to the exception) 9 $eaning the following powers are dele&a1le: The following $ay be co$pro$ise by a re&ional evaluation 1oard which shall be co$pose of the 3egional Jirector as /hair$an& the )ssistant 3egional Jirector& the hea s of the Legal& )ssess$ent an /ollection Jivisions an the 3evenue Jistrict %fficer having #uris iction over the taxpayer& as $e$bersM (3an: 9 Jivision /hief) )ssess$ents issue by the regional offices involving basic eficiency taxes of Give hun re thousan pesos (,>11&111) or less& 7if the assessment originates from the (ational 'evel can,t be compromised by a delegate irrespective of the amount ) an Minor cri$inal violations& as $ay be eter$ine by rules an regulations to be pro$ulgate by the "ecretary of Ginance& upon reco$$en ation of the /o$$issioner& iscovere by regional an istrict officials&

( ) The power to assign or reassign internal revenue officers to establish$ents where articles sub#ect to excise tax are pro uce or :ept.

)u((ary: General R!le@ Commissioner may delegate his powers to his subordinates Exception@ The following powers may (+T be delegated 1. The /oFer to reco((end the pro$ulgation of rules an regulations by the "ecretary of GinanceM 5. The /oFer to issue rulin&s of first i$pression or to reverse& revoBe or (odify any existing ruling of the IureauM ?. The /oFer to co(/ro(ise or a1ate & un er "ec. 21- ()) an (I) of this /o e& any tax liability: Exceptions to t)e exceptions@ The following may nonetheless be delegated even if they involve non.delegable powers provided the conditions for delegation to be valid are present. Regional evaluation board may compromise the following0 )ssess$ents issue by the regional offices involving basic eficiency taxes of Give hun re thousan pesos (,>11&111) or less& 7if the assessment originates from the (ational 'evel canFt be compromised by a delegate irrespective of the amount) an

43

Minor cri$inal violations& as $ay be eter$ine by rules an regulations to be pro$ulgate by the "ecretary of Ginance& upon reco$$en ation of the /o$$issioner& iscovere by regional an istrict officials&

&ower of assessment and collection B delegable being administrative in character. R!les@ The tax law must designate which agency must collect taxes 7*IR/Sec. of =inance2. Circulars or regulations issued by the Secretary of =inance or CIR must be in accordance with the tax measures imposed by Congress.

44