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TAX REMEDIES Aside from the above-mentioned persons, withholding

agents constituted as such under the Tax Code and its

BIR Organizational Structure
implementing regulations are required to deduct and
The Bureau of Internal Revenue (BIR) is headed by a remit taxes within the prescribed dates to the BIR on
Commissioner of Internal Revenue and four (4) Deputy payments of compensation income subject to creditable
Commissioners (Sec. 3, NIRC), each of whom heads the withholding tax on wages, certain income payments
Operations Group, Legal and Inspection Group, subject to expanded withholding tax, passive
Resource and Management Group, and Information investment incomes and capital gains subject to final
Systems Group. The Commissioner and four (4) Deputy tax, and gross incomes paid to non-resident foreign
Commissioners, together with 13 Assistant persons subject to final taxes as well as payments by the
Commissioners for the different services, comprise the government for goods and services subject to value
senior level of administrative authority. Supporting added tax or other percentage tax. It will be noted that
them are the nineteen (19) Regional Directors (Sec. 10, these withholding agents are required to strictly comply
NIRC), more than one hundred fifteen (115) Revenue with their responsibilities under the law — to deduct
District Officers (Sec. 9, NIRC), two (2) Large Taxpayers and remit to the BIR the taxes on certain transactions —
Audit and Investigation Divisions and two (2) Large without any compensation from government, yet they
Taxpayers District Offices, and thousands of revenue are penalized for any failure to comply with such tax
officers conducting the audit of taxpayers’ books of obligations as a withholding agent.
accounts and accounting records. The revenue officers
Powers and Duties of BIR
tasked to audit, develop and file criminal tax cases are
assigned at the National Investigation Division, in the The Tax Code enumerates the powers and duties of the
National Office, and at the Special Investigation BIR as follows:
Division, in the regional offices.
1. To assess and collect national internal taxes, fees, and
Agents in the Collection of National Internal Revenue charges;
2. To enforce all forfeitures, penalties and fines
The BIR officials are charged with the assessment and connected therewith;
collection of all national internal revenue taxes, fees
3. To execute judgment in all cases decided in its favor
and charges, including the VAT and excise taxes on
by the CTA and the ordinary courts; and
imported goods as well as penalties and fines for
violations of certain provisions of the 2005 National 4. To effect and administer the supervisory and police
Internal Revenue Code (“Tax Code” for brevity) and powers conferred upon it by the Tax Code or other
special laws administered by the BIR. However, the special laws (Sec. 2, NIRC).
following officials are constituted as agents of the
Commissioner of Internal Revenue in the collection of The Commissioner of Internal Revenue has been given
national internal revenue taxes (Sec. 12, NIRC): (a) the broad powers under the Tax Code in order to effectively
Commissioner of Customs and his subordinates, with enforce tax laws and collect the needed revenues.
respect to the collection of value added tax and excise These powers include:
tax on imported goods;^ (b) the head of the appropriate 1. Power to interpret tax laws and to decide tax eases.
government office and his subordinates, with respect to — The power to interpret the provisions of the Tax
the collection of energy tax; and (c) the authorized Code and other tax laws shall be under the exclusive
agent banks, with respect to the receipt of payments of and original jurisdiction of the Commissioner, subject to
internal revenue taxes authorized to be made through review by the Secretary of Finance (Sec. 4, NIRC). The
banks. Any bank officer or employee involved in this provision was inserted in R.A. 8424, which became
task shall be subject to the same sanctions and effective on January 1, 1998, in order to avoid situations
penalties under Sections 269 (violations committed by where different government agencies like the BIR,
government enforcement officers) and 270 (unlawful Department of Finance (DOF), Department of Justice
divulgence of trade secrets) of the Tax Code. (DOJ), Board of Investments (BOI), and even the Office
of the Executive Secretary sometimes issue conflicting
opinions on the proper interpretation of certain opportunity to correct whatever mistake has been
provisions of the Tax Code and other tax laws. committed by his subordinates, pursuant to the
doctrine of exhaustion of administrative appeal. This is
A legislative rule is in the nature of subordinate
also in conformity with the provisions of the Tax Code,
legislation, designed to implement a primary legislation
which provides that the power to decide disputed
by providing the details thereof Interpretative rules are
assessments arising under the Tax Code or other laws or
designed to provide guidelines to the law which the
portions thereof administered by the BIR is vested in
administrative agency is in charge of enforcing.
the Commissioner, subject to the exclusive appellate
Accordingly, in considering a legislative rule, a court is
jurisdiction of the Court of Tax Appeals.^
free to make three inquiries: (i) whether the rule is
within the delegated authority of the administrative While the Secretary of Finance has supervisory powers
agency; (ii) whether it is reasonable; and (iii) whether it over the BIR, an appeal by the taxpayer of the
was issued pursuant to proper procedure (Misamis Commissioner’s decision on the disputed assessment to
Oriental Association of Coco Traders v. Department of the Secretary of Finance or filing a motion for
Finance Secretary cited in Commissioner of Customs v. reconsideration with the Commissioner shall not stop
Hypermix Feeds Corporation, GJt. No. 179579, February the running of the 30-day period to make an appeal to
1, 2012). the CTA. The power of review, which implies the power
to reverse or modify, granted to the Secretary of
In a leading case, the Supreme Court ruled that the
Finance is limited only on rulings issued by the
jurisdiction to review rulings of the Commissioner, in
Commissioner which are adverse to the taxpayer
particular RMO 15-91 and RMC 43-91, implementing
pursuant to his power to interpret Tax Code provisions.
the five percent (5%) lending investor’s tax on
The power to interpret the law is different from the
pawnshops, belongs to the CTA, not to the Regional
power to decide on disputed assessments.
Trial Courts (RTC). The petition should have been filed
with the CTA, not the RTC. Such revenue orders were 3. Power to examine books and other accounting
issued pursuant to petitioner’s powers under Section records and obtain information. — In ascertaining the
245 (authority of the Secretary of Finance to correctness of any return, or in making a return when
promulgate rules and regulations) of the Tax Code. none has been made, or in determining the liability of
Thus, the court stated that “the authority of the any person, or in collecting any such liability, or in
Secretary of Finance ... shall be without prejudice to the evaluating tax compliance, the Commissioner is
power of the Commissioner of Internal Revenue to authorized:
make rulings or opinions in connection with the
a. To examine any book, paper, record, or other data
implementation of the provisions of internal revenue
which may be relevant or material to such inquiry;
laws, including ruling on the classification of articles of
sales and similar purposes.” b. To obtain on a regular basis from any person other
than the person whose internal revenue tax liability is
2. Power to decide disputed assessments, refunds of
subject to audit or investigation, or from any office or
taxes, fees or other charges, penalties. — The power to
officer of the national and local governments,
decide disputed assessments, refund I tax credit of
government agencies and instrumentalities, including
taxes, and other matters arising under the Tax Code is
the Bangko Sentral ng Pilipinas and government- owned
vested with the Commissioner, subject to the exclusive
or controlled corporations, any information;
appellate jurisdiction of the Court of Tax Appeals (CTA)
(R.A. 1125, as amended). The jurisdiction of the CTA has c. To summon the person liable for tax or required to
been enlarged under R.A. 9282 (April, 2004) to include file a return, or any officer or employee of such person,
collection of assessed deficiency taxes and criminal tax to appear before the Commissioner or his duly
cases, where the basic tax assessed is FI million or more. authorized representative at a time and place specified
in the summons and to produce such books, papers,
The assessments issued by the Regional Directors,
records, or other data, and to give testimony;
Assistant Commissioners, and Deputy Commissioners
may be appealed administratively to the Commissioner.
This is necessary to give the Commissioner an
d. To take such testimony of the person concerned, Under RA. 10021, as implemented by Revenue
under oath, as may be relevant or material to such Regulations No. 10-2010 dated October 6, 2010,
inquiry; and Congress allows the CIR to obtain information relating
to bank deposits and other related information held by
e. To cause revenue officers and employees to canvass
financial institutions, as may be requested in writing by
from time to time of any revenue district or region and
a foreign tax authority of a contracting state to which
inquire after and concerning all persons therein who
the Philippines has an effective tax treaty, subject to
may be liable to pay any internal revenue tax, and all
certain conditions.
persons owning or having the care, management or
possession of any object with respect to which a tax is Garnishment of bank deposits
imposed (Sec. 5, NIRC).
Garnishment is an administrative remedy
While the Supreme Court recognized the power of allowed by law to enforce a tax liability. Bank accounts
taxation of government, it however cautioned the shall be garnished by serving a warrant of garnishment
government to exercise such power to minimize injury upon the taxpayer and upon the president, manager,
to the proprietary rights of a taxpayer (Roxas V. CTA, 23 treasurer or other responsible officer of the bank. Upon
SCRA 276). receipt of the warrant of garnishment, the bank shall
turn over to the Commissioner so much of the bank
4. Power to inquire into banks deposits of taxpayers. —
accounts as may be sufficient to satisfy the claim of the
The provisions of the foregoing paragraphs
Government (Sec. 208, NIRC).
notwithstanding, nothing shall be construed as granting
the Commissioner the authority to inquire into bank 5. Power to assess and collect the correct amount of
deposits other than as provided for in Section 6(F) of tax. — After the return is filed, the Commissioner or his
the Tax Code (Sec. 5, NIRC). Notwithstanding any duly authorized representative may authorize the
contrary provisions of R.A. 1405 (Bank Secrecy Law) and examination of any taxpayer and the assessment of the
other general or special laws, the Commissioner is correct amount of tax. The tax or deficiency tax so
authorized to inquire into the bank deposits of:(1) a assessed shall be paid upon notice and demand from
decedent to determine his gross estate; and (2) any the Commissioner or his duly authorized representative
taxpayer who has filed an application for compromise of (Sec. 6[A], NIRC).
his tax liability under Section 204(A)(2) of this Code by
After the return is filed, the Commissioner or his duly
reason of financial incapacity to pay his tax liability. The
authorized representative may authorize the
application to compromise shall not be considered,
examination of any taxpayer and the assessment of the
unless and until the taxpayer waives in writing his
correct amount of tax. The tax or deficiency tax so
privilege under R.A. 1405, and such waiver shall
assessed shall be paid upon notice and demand from
constitute the authority of the Commissioner to inquire
the Commissioner or his duly authorized representative.
into the bank deposits of the taxpayer (Sec. 6[F], NIRC).
However, failure to file a return shall not prevent the
If a bank has knowledge of the death of a person, who Commissioner from authorizing the examination of any
maintained a bank deposit account alone or jointly with taxpayer. The tax or any deficiency tax so assessed shall
another, it shall not allow any withdrawal from the said be paid within the period fixed in the assessment notice
deposit account, unless the Commissioner has certified and demand letter from the Commissioner or from his
that the transfer taxes imposed thereon have been duly authorized representative.
paid. However, the administrator of the estate or any
When a report required by law as a basis for assessment
one of the heirs of the decedent may, upon
of any national internal revenue tax shall not be
authorization by the Commissioner, withdraw an
forthcoming within the time fixed by laws or rules and
amount not exceeding P20,000 without the said
regulations or when there is reason to believe that any
certification. For this purpose, all withdrawal slips shall
such report is false, incomplete or erroneous, the
contain a statement to the effect that all of the joint
Commissioner shall assess the proper tax on the best
depositors are still living at the time of withdrawal by
evidence obtainable. In case a person fails to file a
any one of the joint depositors and such statement shall
required return or other document at the time
be under oath by the said depositors (Sec. 97, NIRC).
prescribed by law, or willfully or otherwise files a false has, in the meantime, been actually served upon the
or fraudulent return or other document, the taxpayer (CIR v. Citicorp Capital Phils., CA-GR SPNo.
Commissioner shall make or amend the return from his 6855, April 12, 2002).
own knowledge and from such information as he can
7. Power to delegate powers to subordinate officials. —
obtain through testimony or otherwise, which shall be
The Commissioner may delegate the powers vested in
prima facie correct and sufficient for all legal purposes.
him under the Tax Code to any or such subordinate
Assessment of correct or proper taxes. — It will be officials with the rank equivalent to a division chief® or
noted from the above provisions that the Commissioner higher, subject to such limitations and restrictions as
is generally required to assess the correct amount of may be imposed by rules and regulations to be
deficiency tax. However, when any of the circumstances promulgated by the Secretary of Finance, upon
mentioned in Section 6(B) of the Tax Code is present, recommendation of the CIR. However, the following
the Commissioner may assess the proper deficiency tax powers of the CIR shall not be delegated:
based on the best evidence obtainable. The reason for
a. The power to recommend the promulgation of rules
the difference in the statutory provisions and the kind
and regulations by the Secretary of Finance;
of assessment that may be made lies, among others, in
the circumstances of the taxpayer (whether cooperative b. The power to issue rulings of first impression or to
or uncooperative) as well as the availability of adequate reverse, revoke or modify any existing ruling of the BIR;
books and records of taxpayers for purposes of
ascertaining the correctness of his declarations made in c. The-power to compromise or abate any tax liability,
the tax returns. but this power may be delegated to regional offices
where the basic deficiency tax is P500,000 or less or if it
For reasons of public policy and based on the lifeblood involves minor criminal violations;
theory, the assessment made by the Commissioner is
prima facie presumed correct. The burden of proof to d. The power to assign or reassign revenue officials to
show the incorrectness or inaccuracy of such establishments where articles subject to excise tax are
assessment or its details lies on the taxpayer, contrary stored or kept (Sec. 7, NIRC).
to the usual presumptions of good faith and innocence. Definition of remedies
The revenue officers are also presumed to have taken
into consideration all the facts to which their attention “Remedy” is a method by which a cause of action can
was called. However, the presumption of correctness of be enforced by law or equity. It is the procedure or type
an assessment, being a mere presumption, cannot he of action which may be availed of by the plaintiff as the
made to rest on another presumption. means to obtain the relief desired (Florenz D. Regalado,
Remedial Law Compendium, Vol. I, p. 20).
6. Power not to allow withdrawal of any return,
statement or declaration, although the same may be Types of remedies under the 1997 Tax Code
amended. — Any return, statement or declaration filed 1. Summary — remedies at the administrative
in any office authorized to receive the same shall not be level that are executed without ceremony or
withdrawn. However, the same may be modified, delay; short or concise;
changed, or amended within three (3) years from the 2. Substantive — remedies provided for by law or
date of such filing, provided that no notice for audit or regulation; an essential part or constituent or
investigation of such return, statement or declaration relating to what is essential;
has, in the meantime, been actually served upon the 3. Procedural — remedies involving law of
taxpayer. For purposes of this section, the term “audit pleading, evidence, jurisdiction, etc.;
notice” may refer to a letter of authority (LA), a tax 4. Administrative — remedies available at the
verification notice (TVN), or a letter notice (LN). administrative (BIR) level;
There is no provision in the 1997 Tax Code prohibiting 5. Judicial — remedies that are enforced through
the amendment of a return once a claim for refund has judicial action, which may be civil or criminal.
been filed. It is prohibited only if a notice for audit or Substantive Remedies
investigation of such return, statement or declaration
1. Imposition of withholding tax on certain income The interpretation given by the administrative officer
payments charged by reason of his office to carry out the
provisions of a statute should be respected whenever
The Secretary of Finance may, upon the
such interpretation is assailed by someone who alleges
recommendation of the Commissioner, require the
no reasons of weight to contradict or weaken it
withholding of a tax on the items of income payable to
(Commissioner v. Ledesma, 31 SCRA 95).
natural or juridical persons, residing in the Philippines,
by payor-corporation/ persons as provided for by law, The law concedes to administrative bodies the authority
at the rate of not less than one percent (1%) but not to act on and decide claims and applications in
more than 32% thereof, which shall be credited against accordance with their judgment, in the exercise of their
the income tax liability of the taxpayer for the taxable adjudicatory capacity. Because of their acquired
year (Sec. 57[B], NIRC). expertise in specific matters within the purview of their
respective jurisdictions, the findings of these
2. Issuance of revenue regulations by administrative
administrative bodies merit not only great weight but
also respect and finality. There is a limit, however, to
The power to issue regulations is expressly conferred in such a deference paid to the actuations of such bodies.
the Tax Code. Thus, the Secretary of Finance, upon the Clearly, where there has been a failure to interpret and
recommendation of the Commissioner, shall apply the statutory provisions in question, judicial
promulgate all needful rules and regulations for the power should assert itself. Under the theory of
effective enforcement of the provisions of the Tax Code separation of powers, it is the judiciary, and to the
(Sec. 244, NIRC). The rules and regulations of the judiciary alone, that the final say on questions of law in
Bureau of Internal Revenue shall contain, among others, appropriate cases coming before it is vested (Begosa v.
provisions specifying, prescribing or defining the time Philippine Veterans Administration, GJZ. No. L-25916,
and manner of canvassing revenue regions, forms of April 30,1970).
labels, conditions to be observed by revenue officers
Principle of legislative approval by re-enactment
respecting the institutions and conduct of legal actions
(Sec. 245, NIRC). The principle of legislative approval of administrative
interpretation of a statute is to the effect that the re-
3. Failure to obey summons, including subpoenas
enactment of a statute substantially unchanged is
Any person who, being duly summoned to appear to persuasive indication of the adoption by Congress of a
testify, or to appear and produce books of accounts, prior executive construction. The principle applies with
records, memoranda or other papers, or to furnish more cogency in a case where what is involved is not a
information as required under the pertinent provisions mere opinion of the Commissioner of Internal Revenue
of the Tax Code, neglects to appear or to produce such or ruling rendered on a mere query, but a Revenue
books of accounts, records, memoranda or other Memorandum Circular issued to “all internal revenue
papers, or to furnish such information, shall, upon officials” by the Commissioner (ABS- CBN Broadcasting
conviction, be punished TSec. 266, NIRO. Corporation v. Court of Tax Appeals and Commissioner,
108 SCRA142).
4. Declaration under penalties of perjury
Any declaration, return and other statements required
under the Tax Code, shall, in lieu of an oath, contain a The power to tax is considered as the strongest of all
written statement that they are made under the the powers of government. It is described as unlimited,
penalties of perjury. Any person who willfully files a plenary, comprehensive and supreme, in the absence of
declaration, return or statement containing information constitutional restrictions, the principal check on its
which is not true and correct as every material matter abuse resting in the responsibility of Congress to their
shall, upon conviction, be subject to the penalties constituents. In enacting R.A. 8424, Congress placed
prescribed for peijury under the Revised Penal Code upon the Bureau of Internal Revenue the duty to
(Sec. 267, NIRC). generate adequate national internal revenue taxes to
defray the expenses of government.
Administrative interpretations should he respected
Because taxes are the lifeblood of the nation and their There is a question of fact when the doubt or difference
prompt collection is an imperious need, the BIR has arises as to the truth or falsehood of the alleged facts
been given ample powers to assess and collect national (Commissioner v. Court of Appeals and YMCA, 298 SCRA
internal revenue taxes. The assessment of taxes must, 83). Factual findings of administrative agencies which
however, be exercised within the ambit of the law and have acquired expertise in their field are binding and
its implementing regulations. conclusive on the Supreme Court (Fortich v. Corona,
GJt. No. 131457, April 24,1998).
A. Power to Assess
The power to assess and collect the correct amount of
tax is vested with the Commissioner of Internal Revenue a. Income from the sale of banana saplings was not
under the Tax Code. After the return is filed, the included in the income tax return of the taxpayer;
Commissioner or his duly authorized representative
b. Representation expenses are not substantiated by
may authorize the examination of any taxpayer and the
invoices or receipts;
assessment of the correct amount of tax (Sec. 6[A],
NIRC). c. Tax was paid after the deadline prescribed by law for
the filing of return and pasmient of tax.
“Assess” means to impose a tax; to charge with a tax; to
declare a tax to be payable; to apportion a tax to be Question of Law
paid or contributed, to ^ rate; to fix or settle a sum to
be paid by way of tax; to set, fix or charge a certain sum There is a question of law when the doubt or difference
to each taxpayer; to settle determine or fix the amount arises as to what the law is on a certain state of facts
of tax to be paid (84 C.J.S., pp. 749-750). (Commissioner v. Court of Appeals and YMCA, supra).

Presumption of correctness Examples:

The assessments made by the Commissioner and his a. Gross income for purposes of computing the
authorized agents are presumed correct. The burden of minimum corporate income tax does not include
proof to show the incorrectness or inaccuracy of such miscellaneous or incidental income;
assessments or the details thereof lies on the taxpayer b. Additional income tax paid per amended tax return
(Republic v. Marsman Development Co., 44 SCRA 418). subsequently filed by taxpayer before receipt of audit
The burden of proof is on the taxpayer contesting the notice is not subject to 25% surcharge;
validity or correctness of an assessment to prove not
only that the Commissioner of Internal Revenue is c. Excess of fair market value over exercise price of a
wrong but that the taxpayer is right (Tan Guan v. CTA stock option is considered as additional compensation
and Commissioner, 19 SCRA 90S). The agents of the BIR income and not as fringe benefit.
will also be presumed to have taken into consideration Assessment Process
all the facts to which their attention was called
(Collector v. Avelino, 3 SCRA 570). The assessment process starts with the self-assessment
by the taxpayer of his tax liability, the filing of the tax
Unless rebutted, all presumptions generally are return, and the payment of the entire tax due shown in
indulged in favor of the correctness of the assessment his tax return in accordance with the methods and
by the Commissioner against the taxpayer (Cyanamid within the dates prescribed in the law and regulations
Philippines v. Court of Appeals, 322 SCRA 639). (Secs. 51, 52, 56 [income tax], 90, 91 [estate tax], 103
Basis of Assessment [donor’s tax], 114[value added tax], and 128[percentage
taxes], NIRC).
An assessment is issued by the BIR based on findings of
fact and/or law. In fact, the factual and/or legal bases of The role of the government in the assessment process
the assessment must be stated; otherwise, the includes the following:
assessment is null and void. 1. Examination of books of accounts and other
Question of Fact accounting records of taxpayers by revenue officers to
determine correct tax liability. — In ascertaining the
correctness of any return, or in making a return when In one case, the court sustained the use of the doctrine
none has been made, or in determining the liability of of best evidence obtainable, where the conductor’s
any person, or in collecting any such liability, or in daily reports were allowed to be used instead of the
evaluating tax compliance, the Commissioner or his freight tickets issued by a common carrier, for purposes
authorized representative is authorized to examine any of computing the documentary stamp tax thereon
book, paper, record, or other data which may be (Interprovincial Autobus Co. v. Commissioner, 98 Phil.
relevant or material to such inquiry and to assess the 290).
correct tax liability (Secs. 5[B] and 6[A], NIRC).
Networth method of investigation
The books of accounts, accounting records or
In the leading U.S. case of Holland v. U.S. (348 U.S. 121),
information (such as costs and volume of production,
the net worth method was described succinctly as
receipts or sales and gross incomes of taxpayers, and
follows: “If the government can prove with reasonable
the names, addresses, and financial statements of
certainty the taxpayer’s net worth, that is, the excess of
corporations) that may be examined by revenue officers
assets and liabilities at a given date or starting point,
may be in the possession of the taxpayer under
generally December 31 of a given year if the taxpayer is
examination or with third parties, including the national
on the calendar year basis, and if the government is
and local governments, government agencies and
then able to prove by independent evidence such as
instrumentalities (.e.g., Bangko Sentral ng Pilipinas), and
bank deposits or purchases of assets, that the
government-owned or -controlled corporations (Sec.
taxpayer’s net worth has increased at the end of the
5[B], NIRC).
taxable year in question, then the inference is
If said taxpayer or third parties do not submit the reasonable and therefore permissible that the increase
documents or information requested by the BIR, the in the net worth plus a reasonable allowance for living
person may be required to testify or the document may expenses for the period and plus or minus adjustments
be summoned and required to be presented to the BIR for other items, such as taxes paid, insurance premiums,
(Sec. 5[C] and [D], NIRC). depreciation and others, represents the income of the
Best evidence obtainable
The use of the net worth method is supported by
When a report required by law as a basis for the
Section 43 of the 1997 Tax Code which allows the
assessment of any tax shall not be forthcoming within
Commissioner to use any method of computation or
the time fixed by laws or rules and regulations, or when
accounting which would more clearly reflect the income
there is reason to believe that any such report is false,
of the taxpayer (Collector v. Avelino, 3 SCRA 57).
incomplete or erroneous, the Commissioner shall assess
the proper tax on the best evidence obtainable. In case 2. Preparation of tentative findings and holding of
a person fails to file a required return or other informal conference. — Soon after the completion of
document at the time prescribed by law, or willfully or the tax audit, the revenue officer will render a written
otherwise files a false or fraudulent return or other report, stating therein whether or not the factual and
document, the Commissioner shall make or amend the legal basis of his findings and whether or not the
return from his own knowledge and from such taxpayer agrees with his findings. If the taxpayer is not
information as he can obtain through testimony or amenable, the taxpayer shall be informed in writing by
otherwise, which shall be prima facie correct and the Revenue District Officer or by the Chief of Division
sufficient for all legal purposes (Sec. 6[B], NIRC). {e.g., Special Investigation Division) concerned of the
discrepancies in the taxpayer’s payment of his taxes, for
However, it is believed that the revenue officer’s report
the purpose of informal conference, in order to afford
should be complete and must indicate clearly the
the taxpayer with an opportunity to present his side of
method(s) used in estimating the tax liability, the
the case. If the taxpayer fails to respond within 15 days
particular method adopted in preference to some other
from date of receipt of the notice for informal
methods, and additional circumstances supporting the
conference, he shall be considered in default, in which
correctness of his estimate of the tax liability, in order
case, the Revenue District Officer or the Chief of the
that it will carry great weight.
Division shall endorse the case with the least possible
delay to the Assessment Division of the Revenue are their own and cannot bind the government, which
Regional Office or to the Commissioner or his duly CEinnot be placed in estoppel on account of the
authorized representative, for appropriate review and misteikes of its agents (Tax Practice and Procedure in
issuance of deficiency tax assessment, if warranted (Sec. the Philippines, T.P. Matic, Jr., p. 321).
3.1.1, Rev. Regs. No. 12-99, September 6, 1999). [NOTE:
Power to allocate income and deductions among
Rev. Regs. No. 18-2013, November 28, 2013, removed
affiliated taxpayers
the informal conference stage].
In the case of two or more organizations, trades or
Administrative due process
businesses (whether or not incorporated and whether
Due process demands that the person be duly informed or not organized in the Philippines owned or controlled
of the charges against him. He cannot be convicted of directly or indirectly by the same interests, the
an offense with which he was not charged. Commissioner is authorized to distribute, apportion or
Administrative proceedings are not exempt from basic allocate gross income or deductions between or among
and fundamental procedural principles, such as the such organization, trade or business, if he determines
right to due process in investigations and hearings. The that such distribution, apportionment or allocation is
right to substantive and procedural due process is necessary in order to prevent evasion of taxes or clearly
applicable in administrative proceedings (Civil Service to reflect the income of any such organization, trade or
Commission v. Luctis, GJt. No. 127838, January 21, business (Sec. 50, NIRO).
1999), The essence of due process is that a party be
The purpose of such authority given to the
afforded reasonable opportunity to be heard and to
Commissioner is to place a controlled taxpayer on tax
submit any evidence he may have in support of his
parity with an uncontrolled taxpayer, by determining
defense. In administrative proceedings, due process
the true net income from the property and business of
simply means the opportunity to explain one’s side or
such controlled taxpayer, using the uncontrolled
the opportunity to seek a reconsideration of the action
taxpayers as the standard.
or ruling complained of. A formal or trial-type hearing is
not, at all times, necessary (Padilla v. Sto. Tomas, 243 3. Issuance of Preliminary Assessment Notice (PAN). —
SCRA 155). If after review and evaluation by the Assessment
Division or by the Commissioner or his duly authorized
Principle of estoppel
representative, it is determined that there exists
The error made by a tax official in the assessment of his sufficient basis to assess the taxpayer for any deficiency
tax liabilities does not have the effect of relieving the tax(es), said office shall issue to the taxpayer, at least by
taxpayer from the obligation to pay the full amount of registered mail, a PAN for the proposed assessment,
his tax liability, for taxes are fixed by law and the showing in detail, the facts and the law, rules and
government is never estopped to collect the legitimate regulations, or jurisprudence on which the proposed
taxes because of errors committed by its agents assessment is based, and it shall the taxpayer to reply to
(Commissioner v. Atlas Consolidated Mining Co., 102 the findings within 15 days from the date of receipt of
SCRA 246). However, like other principles, the principle the PAN. If the taxpayer fails to respond within 15 days
of estoppel also admits of exceptions in the interest of from date of receipt of the PAN, he shall be considered
justice and fair play. The Commissioner is precluded in default, in which case, a formal letter of demand and
from adopting a position inconsistent with one assessment notice shall be caused to be issued by said
previously taken where injustice would result therefrom office, calling for payment of the taxpayer’s deficiency
or where there has been a misrepresentation to the tax liability, inclusive of the applicable penalties (Sec.
taxpayer (Balmaceda v. Corominas & Co., 66 SCRA 553). 3.1.2, Rev. Regs. No. 12-99).

The principle is rooted in the notion of sovereignty 4. Reply. — For purposes of contesting in writing the
formerly nutshelled in the ancient maxim that “The king findings of the revenue officers contained in a PAN, the
can do no wrong.” In this view of infallibility of the regulations use the term ""reply” to distinguish the
State, any mistakes committed by the agents of the written objection(s) against a FAN issued by the BIR,
sovereign, namely; government officials and employees, where the generic term “protest,” or the specific term
“request for reconsideration” or “request for Tax amnesty partakes of an absolute waiver by the
reinvestigation” is utilized. government of its right to collect what is due it and to
give tax evaders who wish to relent a chance to start
Hereunder are the distinctions between “reply” and
with a clean slate. A tax amnesty, much like a tax
exemption, is never favored or presumed in law. The
1. A taxpayer is generally given under the regulations grant of a tax amnesty, similar to a tax exemption, must
fifteen days from the date of receipt of the PAN within be construed strictly against the taxpayer and liberally
which to make his written “reply” thereto, while he is in favor of the taxing authority.
given under the law 30 days from the date of receipt
5. Issuance of Formal Assessment Notice (FAN) and
within which to file his “protest” against the FAN.
letter of demand. — The formal letter of demand and
2. Due to the shorter time given to the taxpayer to assessment notice shall be issued by the Commissioner
make the “reply,” a taxpayer generally does not or his duly authorized representative. The letter of
respond in an adequate manner to the specific findings demand calling for payment of the taxpayer’s deficiency
of the revenue officer. On the other hand, the “protest” tax(es) shall state the facts, the law, rules and
is usually sufficient and comprehensive to explain the regulations, or jurisprudence on which assessment is
legal and factual bases why the assessment is incorrect, based; otherwise, the formal letter of demand and
and certain documentary evidence not presented assessment notice shall be void. The same shall be sent
during the preliminary assessment phase and legal to the taxpayer only by registered mail or by personal
authorities and jurisprudence relevant to the findings of delivery. If sent by personal delivery, the taxpayer or his
the revenue officers are submitted or presented. authorized representative shall acknowledge receipt
thereof in the duplicate copy of the letter of demand,
3. Most often than not, the taxpayer himself normally showing the following: (a) his name; (b) signature; (c)
handles the aspect of the preliminary assessment designation and authority to act for and in behalf of the
process, hoping that he could still convince the revenue taxpayer, if received by a person other than the
officer of the correctness or reasonableness of the taxpayer himself; and (d) date of receipt thereof.^
taxpayer’s position. However, they generally do sloppy
jobs as taxation is a highly technical and complicated FAN (BIR Form 17.08) contains the following
matter. It is best to leave tax matters in the hands of the information: name, address, and TIN of the taxpayer;
professionals. During the formal assessment stage, a kind of tax; period covered; basic tax assessed,
taxpayer is almost always represented by his tax agent surcharge, interest, and compromise penalty, if any; and
or consultant. the date when such deficiency tax must be paid.
Generally, the date of payment is about thirty days from
4. Failure to reply to a PAN makes the taxpayer in the date of mailing or release of the formal assessment,
default and authorizes the revenue official to issue the although in some cases, there is a delay in the signing
FAN. However, no liability for additional or deficiency and release of such formal assessment notice.
tax arises from such failure to file a reply. In view of this
principle, it can be said that the filing of a “reply” to The FAN and letter of demand should always go
PAN is directory on the part of the taxpayer. On the together. The reason for this is that the information
other hand, failure to file a timely “protest” to a FAN given in the FAN is inadequate for the taxpayer to make
makes the formal assessment notice final and a good evaluation of the correctness of the formal
executory, and the taxpayer loses his right to contest assessment. Since the law requires that the factual
the assessment, at the administrative and judicial levels, and/or legal bases of the assessment must be stated,
even if such assessment is weak or has no legal basis. and this requirement is not satisfied by the issuance of
Because of this tax consequence, it behooves upon the FAN alone, a letter of demand thus fills up the void and
taxpayer to file such “protest” within 30 days from date explains to the taxpayer how the deficiency assessment
of receipt of the assessment. In other words, the filing was arrived at, including the reasons and legal bases for
of a protest against an assessment is mandatory and the assessment.
had to be made on a timely manner.
The taxpayer shall be informed in writing of the law and
Tax amnesty as a defense the facts on which the assessment is made; otherwise,
the assessment shall be void. Applying the provisions of person must immediately forward the same to the
Section 228 of the Tax Code, the Tax Court was rather official in charge of tax matters. This will ensure the
lenient in favor of the government in its earlier filing of a written protest against the assessment within
decisions. Thus: thirty days from the date of receipt thereof by the office
and not by the officer in charge of tax matters.
1. If the assessment notice is deemed insufficient
insofar as compliance with Section 228 It must also be noted that the final assessment notice
(protesting of assessment) of the T eix Code is must be protested by the taxpayer within the 30-day
concerned, such insufficiency can be cured, if period, despite the fact that exactly the same issues
the demand letter can show the legal and were raised by the revenue officers in the preliminary
factual bases relied upon in the issuance of the assessment notice, which were objected to, adequately
assessment which the assessment notice failed explained, and supported by factual and legal
to detail. The rule requiring the BIR to inform arguments submitted by the taxpayer or his authorized
the taxpayer in writing of the laws and the facts representative at the preliminary assessment stage. The
on which the assessment is made runs parallel protest against the final assessment notice is not the
to the due process clause for it is believed that same as the reply to the preliminary assessment notice,
it is only through a detailed appraisal of its basis in the same manner that the preliminary assessment
that the taxpayer may be able to dispute the notice does not ripen into a final assessment notice if
imposition or agree with it. not duly issued or deemed issued within the three-year
2. Although petitioner did not receive the notice period the BIR may make an assessment.
of assessment sent by respondent
Where the taxpayer is appealing on the ground that the
Commissioner, it may not complain of lack of
assessment is erroneous, it is incumbent upon him to
due process. In one case, petitioner was given
prove what the correct and just liability is by a full and
the opportunity to be heard and to present, as
fair disclosure of all pertinent data.
it did, its side of the controversy by respondent
Court acting on petitioner’s motion for Legal effects of issuance of FAN/DL
reconsideration and modifying the decision to
reduce petitioner’s tax liability. Absence of a. The issuance of the FAN/DL legally creates tax liability
previous notice is not itself a substantial defect; of the taxpayer which is being demanded in the
what the law abhors is the lack of opportunity accompanying letter of demand.
to be heard. b. If the taxpayer files a timely protest against the
Assessments are prima facie presumed correct and FAN/DL, the assessment does not become final and
made in good faith. The taxpayer has the duty of executor. The taxpayer may file a supplemental protest,
proving otherwise. In the absence of proof of any containing the additional or new evidence and
irregularities in the performance of official duties, an arguments in support of its protest, within the next 60
assessment will not be disturbed. All presumptions are days from the date of filing of the protest letter.
in favor of the correctness of tax assessments. Failure to c. The taxpayer does not have to pay the deficiency tax
present proof of error in the assessment will justify assessment in filing the protest letter, but the 20%
judicial affirmation of said assessment. deficiency interest per annum shall start to run from the
TTie assessment notice must be personally delivered or date the tax is due up to the date of payment of the
meiiled to the address shown in the income tax return deficiency tax.
covered by the assessment, unless a written notice of d. The business of the taxpayer does not become illegal
the change of address duly received by the appropriate by non-reason of the non-payment of the assessed
revenue office was previously made by the taxpayer or national internal revenue tax, unlike local business tax,
his authorized representative. It is always important to which must be paid upon the filing of the protest.
indicate and stamp on the assessment notice, demand
letter, and the envelope containing the assessment 6. Filing of administrative protest by the taxpayer
notice and demand letter the eocact date of receipt by against the assessment. — The taxpayer or his duly
the person who received the same, and such receiving authorized representative may protest administratively
against the aforesaid formal letter of demand and Tax Appeals within 30 days from date of receipt of the
assessment notice within 30 days from date of receipt said decision, otherwise, the assessment shall become
thereof This period is known as the “30-day period” in final, executory and demandable (Sec. 228, NIRC; Sec.
this book. If there are several issues involved in the 3.1.5, Rev. Regs. No. 12-99).
formal letter of demand and assessment notice but the
However, the counting of the 180-day period will start
taxpayer only disputes or protests against the validity of
to run from the filing of the protest letter (i.e., request
some of the issues raised, the taxpayer shall be required
for reconsideration), and if the respondent failed to
to pay the deficiency tax or taxes attributable to the
render his decision within 180 days from the filing of his
undisputed issues, in which case, a collection letter shall
protest letter, petitioner has 30 days therefrom to file
be issued to the taxpayer calling for payment of the said
an appeal with the CTA.«
deficiency tax, inclusive of the applicable surcharge
and/ or interest. No action shall be taken on the 8. Denial of protest by the Commissioner or his
taxpayer’s disputed issues until the taxpayer has paid authorized representative. — The decision of the
the deficiency tax or taxes attributable to the said Commissioner or his duly authorized representative
undisputed issues. The prescriptive period for shall (a) state the facts, the applicable law, rules and
assessment or collection of the tax or taxes attributable regulations, or jurisprudence on which such decision is
to the disputed issues shall be suspended. based; otherwise, the decision shall be void; and (b)
that the same is his final decision (Sec. 3.1.6, Rev. Regs.
The taxpayer shall state the facts, the applicable law,
No. 12-99).
rules and regulations, or jurisprudence on which his
protest is based; otherwise, his protest shall be In general, if the protest is denied, in whole or in part,
considered void and without force and effect. If there by the Commissioner or his duly authorized
are several issues involved in the disputed assessment representative, the taxpayer may appeal to the Court of
and the taxpayer fails to state the facts, the applicable Tax Appeals within 30 days from date of receipt of the
law, rules and regulations, or jurisprudence in support said decision; otherwise, the assessment shall become
of his protest against some of the several issues on final, executory and demandable. However, if the
which the assessment is based, the same shall be taxpayer elevates his protest to the Commissioner
considered undisputed issue or issues, in which case, within 30 days from date of receipt of the final decision
the taxpayer shall be required to pay the corresponding of the Commissioner’s duly authorized representative,
deficiency tax or taxes attributable thereto (Sec. 3.1.5, the latter’s decision shall not be considered final,
Rev. Regs. No. 12-99). executory and demandable, in which case, the protest
shall be decided by the Commissioner.
If the taxpayer fails to file a valid protest against the
formal letter of demand and assessment notice within 9. Appeal by the taxpayer of the final decision of the
30 days from date of receipt thereof, the assessment Commissioner or his authorized representative on the
shall become final, executory and demandable. disputed assessment to the Court of Tax Appeals. — If
the Commissioner or his duly authorized representative
7. Submission of documentary evidence and arguments.
fails to act on the taxpayer’s protest within 180 days
— The taxpayer shall submit the required documents in
from date of submission, by the taxpayer, of the
support of his protest (i.e., request for reinvestigation)
required documents in support of his protest, the
within 60 days from date of filling of his letter of
taxpayer may appeal to the Court of Tax Appeals within
protest; otherwise, the assessment shall become final,
30 days from the lapse of the said 180-day period,
executory and demandable. This period is referred to as
otherwise, the assessment shall become final, executory
the “60-day period.” The phrase “submit the required
and demandable (Sec. 228, NIRC).
documents” includes submission or presentation of the
pertinent documents for scrutiny and evaluation by the B. Power to Collect Taxes
Revenue Officer conducting the audit. The said Revenue
Officer shall state this fact in his report of investigation. Delinquency tax v. deficiency tax

If the protest is denied, in whole or in part, by the A taxpayer is considered delinquent in the payment of
Commissioner, the taxpayer may appeal to the Court of his tax when (a) the self-assessed tax per return filed by
the taxpayer on the prescribed date was not paid at all Administrative remedies of the government to collect
or was only partially paid; or (b) the deficiency tax assessed taxes
assessed by the BIR became final and executory.
The remedies of the government for the collection of
The term “deficiency” means: (1) The amount by which national internal revenue taxes can be classified into
the tax imposed by law [Title II (Income Tax)] as administrative remedies and judicial remedies. The
determined by the Commissioner or his authorized administrative remedies are:
representative exceeds the amount shown as the tax by
1. Tax lien;
the taxpayer upon his return; or (2) If no amount is
2. Distraint of personal property, or levy of real
shown as the tax by the taxpayer upon his return, or if
property, or garnishment of bank deposits;
no return is made by the taxpayer, then the amount by
3. Sale of property;
which the tax as determined by the Commissioner or
4. Forfeiture;
his- authorized representative exceeds the amounts
5. Compromise and abatement;
previously assessed (or collected without assessment)
6. Penalties and fines; and
as a deficiency (See Sec. 56[B], NIRC).
7. Suspension of business operations.
Distinction between remedies in the collection of The judicial remedies of the government are civil
deficiency tax and delinquency tax action and criminal action.
Tax lien
a. A delinquent tax can immediately be collected
administratively through the issuance of the “Tax lien” is understood to denote a legal claim or
warrant of distraint and levy, and/or by judicial charge on property, either real or personal, as security
action, while a deficiency tax can be collected for the payment of some debt or obligation (Hongkong
also through administrative and/or judicial & Shunghui Banking Corporation V. Commissioner, 39
remedies but has to go through the process of Phil. 145).
filing the protest against the assessment by the
When a taxpayer neglects or refuses to pay his internal
taxpayer and denial of such protest by the BIR.
revenue tax liability after demand, the amount so
b. The filing of a civil action for the collection of
demanded shall be a lien in favor of the government
the delinquent tax in the ordinary court is a
from the time assessment was made by the
proper remedy, while the filing of a civil action
Commissioner until paid with interest, penalties and
at the ordinary court for the collection of a
costs that may accrue in addition thereto upon all
deficiency tax during the pendency of the
property and rights to property belonging to the
protest may be the subject of a motion to
dismiss. In addition to the motion to dismiss at
the ordinary court, a petition for review must The lien shall not be valid against any mortgagee,
be filed by the taxpayer with the CTA within the purchaser or judgment creditor until notice of such lien
30-day period prescribed in R.A. 1125, as shall be filed by the Commissioner in the office of the
amended to toll the running of the prescriptive Register of Deeds of the province or city where the
period. property of the taxpayer is situated or located (Sec. 219,
c. A delinquent tax is subject to administrative NIRC).
penalties, such as 25% surcharge, interest, and
compromise penalty. A deficiency tax is The claim of the government predicated on a tax lien is
generally not subject to the 25% surcharge, superior to the claim of a private litigant predicated on
although subject to interest and compromise a judgment. The tax claim must be given preference
penalty. over any other claim of any other creditor, in respect of
any and all properties of the insolvent. There is no merit
After a Final Assessment Notice and Demand Letter in the contention of the National Labor Relations
have been issued by the BIR, next stage is the collection Commission that taxes are absolutely preferred claims
thereof only with respect to movable or immovable properties
on which they are due (Republic v. Peralta, 150 SCRA
The tax lien attaches not only from the service of the Distraint, levy, or garnishment
warrant of distraint of personal property but from the
Distraint of personal property
time the tax became due and payable.
Distraint is a remedy whereby the collection of
The power of the court in execution of judgments
delinquent taxes is enforced on the goods, chattels or
extends only to properties unquestionably belonging to
effects and other personal property of whatever
the judgment debtor. Execution sales affect the rights of
character of the taxpayer, including stocks and other
the judgment debtor only, and the purchaser in an
securities, debts, credits, bank accounts and interests in
auction sale acquires only such right as the judgment
and rights to personal property (Sec. 205[a], NIRC).
debtor had at the time of sale.
a. Actual distraint is resorted to when at the time
The sheriff is not authorized to attach or levy on
required for payment, a person fails to pay his
property not belonging to the judgment debtor.
delinquent tax obligation (Sec. 207[A], NIRC). Distraint
The term “tax” is used in a broad sense encompassing consists in the actual seizure and taking possession of
all government revenues collectible by the personal property of the taxpayer.
Commissioner under the Tax Code, whether or not
b. Constructive distraint is issued where no actual tax
involving taxes in the strict technical sense thereof {e.g.,
delinquency of the taxpayer is necessary before the
forest charges) (Commissioner v. National Labor
same is resorted to by government. It may be availed of
Relations Commission and Maritime Company of the
when the taxpayer is retiring from any business subject
Phil^ 238 SCRA 42).
to tax; he intends to leave the Philippines; he removes
BIR may collect the deficiency tax due from one heir his property therefrom; or he performs any act tending
only or from all the heirs in proportion to their to obstruct the proceedings for collecting the tax due or
inheritance received. — After the closure of the estate which may be due from him. Constructive distraint shall
proceedings of Atanacio Pineda and the distribution of be effected by requiring the taxpayer or any person
the estate to his heirs, the CIR tried to collect from one having possession or control of the personal property to
of the heirs deficiency income tax due from the estate. sign a receipt covering the property distrained and
The respondent appealed to the CTA alleging that he obligate himself to preserve the same intact and
was appealing “only that proportionate part or portion unaltered and not to dispose of the same in any manner
pertaining to him as one of the heirs.” The CTA found whatever, without the express authority of the
respondent Pineda liable only for the payment Commissioner (Sec. 206, NIRC). It is a preventive
corresponding to his share of the tax assessed. The CIR remedy to forestall hiding or possible dissipation of the
appealed to the Supreme Court and proposed to hold taxpayer’s assets when tax delinquency takes place.
respondent liable not only for his share in the tax but “Garnishment” refers to a warning to a person in whose
for the payment of all the taxes found by the CTA to be hands the effects of another are attached, not to pay
due from the estate. The Supreme Court granted the the money or deliver the property or allow withdrawal
petition and ruled that Pineda was liable for the of deposits of the defendant in his hands (see Reliance
assessment as an heir and as a holder-transferee of Procoma, Inc. v. Phil-Asia Tobacco Corporation,
property belonging to the estate/taxpayer. As an heir, 57SCRA370).
he was individually answerable for the part of the tax
Levy of real property
proportionate to the share he received from the
inheritance. His liability, however, cannot exceed the Levy is a remedy whereby the collection of delinquent
amount of his share. As a holder of property belonging taxes is enforced on the real property belonging to the
to the estate, he was liable for the tax up to the amount delinquent taxpayer. Levy shall be effected by writing
of the property in his possession. The reason was that upon an authenticated certificate showing the name of
the government has a lien on the property received by the taxpayer and the amounts of the tax and penalty
him from the estate for unpaid income taxes for which due, a description of the property upon which levy is
said estate was liable (CIR v. Pineda, G.R. No. L-22734, made. At the same time, written notice of the levy shall
September 15,1967). be mailed to or served upon the Register of Deeds of
the province or city where the property is located and
upon the delinquent taxpayer, or if he be absent from bidder for cash, or with the approval of the
the Philippines, to his agent or the manager of the Commissioner, through duly licensed commodity or
business in respect to which the liability arose, or if stock exchanges.
there be none, to the occupant of the property in
In the case of stocks and other securities, the officer
question (Sec. 207, NIRC).
making the sale shall execute a bill of sale which he shall
The remedy by distraint of personal property and levy deliver to the buyer, and a copy thereof furnished the
on realty may be repeated if necessary, until the full corporation, company or association which issued the
amount due, including all expenses, is collected (Sec. stocks or other securities. Upon receipt of the copy of
217, NIRC). The reason for this provision was succinctly the bill of sale, the corporation, company or association
explained by the court as follows: If a full discharge of shall make the corresponding entry in its books, transfer
the tax liability is to be the result of the distraint and the stocks or other securities sold in the name of the
levy, this would permit a clever taxpayer who is able to buyer, and issue, if required to do so, the corresponding
conceal most of the valuable part of his property from certificates of stock or other securities.
the revenue officers to escape payment of his tax
Any residue over and above what is required to pay the
liability, by sacrificing an insignificant portion of his
entire claim, including expenses, shall be returned to
holdings (Castro V. Collector, 6 SCRA 8 8 6 ).
the owner of the property sold. The expenses
Distraint and levy proceedings are validly begun or chargeable upon each seizure and sale shall embrace
commenced by the issuance of the warrant and service only the actual expenses of seizure and preservation of
thereof on the taxpayer. — Under Section 223(c) of the the property pending the sale, and no charge shall be
Tax Code, it is not essential that the warrant be fully imposed for the services of the local internal revenue
executed so that it can suspend the running of the officer or his deputy (Sec. 209, NIRC).
statute of limitations on the collection of the tax. It is
Within twenty days after levy, the officer conducting
enough that the proceedings have validly begun and
the proceedings shall proceed to advertise the property
that their execution has not been suspended by reason
or a usable portion thereof as may be necessary to
of the voluntary desistance of the CIR. Jurisprudence
satisfy the claim and cost of sale; and such
establishes that distraint and levy proceedings are
advertisement shall cover a period of at least thirty
validly begin or commenced by the issuance of the
days. It shall be effectuated by posting a notice at the
warrant and service thereof on the taxpayer (BPI v.
main entrance of the municipal building or city hall and
Commissioner, G.R. No. 139736, October 17,2005).
in a public and conspicuous place in the barrio or district
Sale of property in which the real estate lies and by publication once a
week for three (3) weeks in a newspaper of general
The Revenue District Officer or his duly authorized
circulation in the municipality or city where the
representative shall, upon recommendation of the
property is located. The advertisement shall contain a
Commissioner, forthwith cause a notification to be
statement of the amount of taxes and penalties so due
exhibited in not less than two public places in the
and the time and place of sale, the name of the
municipality or city where the distraint is made,
taxpayer against whom taxes are levied, and a short
specifying the time and place of sale and the articles
description of the property to be sold. At any time
distrained. The time of sale shall not be less than twenty
before the day fixed for the sale, the taxpayer may
days after notice to the owner or possessor of the
discontinue all proceedings by paying the taxes,
property and the publication or posting of such notice.
penalties and interest. If he does not do so, the sale
One place for the posting of such notice shall be at the
shall proceed and shall be held either at the main
Office of the Mayor of the city or municipality in which
entrance of the municipal building or city hall, or on the
the property is distrained.
premises to be sold, as the officer conducting the
At the time and place fixed in such notice, the said proceedings shall determine and as the notice of sale
revenue officer shall sell the goods, chattels, or effects, shall specify (Sec. 213, NIRO.
or other personal property, including stocks and other
securities so distrained, at public auction to the highest
Forfeiture of property for want of bidder. — In case Should the BIR formally accept the offer of compromise
there is no bidder for the real property in the public sale based on doubtful validity of the assessment made by
or if the amount of the highest bid is insufficient to pay the taxpayer, the remaining basic tax (i.e., 60% of the
the taxes, penalties and costs, the property shall be basic tax) plus all the surcharges and deficiency
declared forfeited to the Government. The Register of interests shall be deemed waived and cancelled. In the
Deeds concerned shall, upon registration of the case of offer to compromise based on financial
declaration for forfeiture, transfer the title of the incapacity, if accepted by the CIR, the remaining 90% of
property to the Government without the necessity of an the basic tax plus all penalties shall be waived.
order from a competent court.
Effective after 15 days from publication in a newspaper
Within one year from the date of such forfeiture, the of general circulation of Revenue Regulations No. 9-
taxpayer or anyone for him, may redeem said property 2013 dated May 10, 2013, all decisions of the National
by paying the full amount of taxes, penalties, interests Evaluation Board, granting request of taxpayer to
and costs of sale, but if the property is not thus compromise, shall have the concurrence of the
redeemed, the forfeiture shall become absolute (Sec. Commissioner of Internal Revenue. The compromise
215, NIRC). offer shall be paid first by the taxpayer upon filing of the
application for compromise settlement. No application
Compromise and abatement
for compromise shall be processed without the full
Compromise settlement of the offered amount. In case of
disapproval, the amount paid upon filing shall be
The Commissioner may compromise any national deducted from the total outstanding tax liabilities.
internal revenue tax when (a) a reasonable doubt as to
the validity of the claim against the taxpayer exists, or Abatement
(b) the financial position of the taxpayer demonstrates a
When the tax or any portion thereof appears to be
clear inability to pay the assessed tax.
unjustly or excessively assessed, or when the
The compromise settlement of any tax liability shall be administration and collection costs involved do not
subject to the following minimum amounts: justify the collection of the amount due, the tax may be
abated; i.e., the entire tax liability of the taxpayer is
1. For cases of financial incapacity, a minimum cancelled (Sec. 204[B], 1997 Tax Code).
compromise rate equivalent to 10% of the basic tax
assessed; and The power to compromise or abate shall not be
delegated by the Commissioner, except in the following
2. For other cases, a minimum compromise rate cases: (a) assessments issued by regional offices
equivalent to 40% of the basic tax assessed. involving basic taxes of ₱500,000 or less; and (b) minor
Where the basic tax involved exceeds ₱1,000,000 or criminal violations. These cases may be compromised by
where the settlement offered is less than the prescribed a regional evaluation board (Sec. 7, NIRC).
minimum rates, the compromise shall be subject to the Penalties and fines
approval of the National Evaluation Board which shall
be composed of the Commissioner and the Deputy Compromise and compromise penalty compared:
All criminal violations may be compromised, except (a)
1. They both imply mutual agreement. A compromise
those already filed in court, or (b) those involving fraud
penalty cannot be imposed in the absence of a showing
(Sec. 204[A], NIRO.
that the taxpayer consented thereto. If the
The taxpayer’s offer to compromise shall not be Commissioner’s offer of compromise is rejected by the
considered, unless and until he waives in writing his taxpayer, the Commissioner cannot enforce it but he
privilege under R.A. 1405 or under other general or may file a criminal action against the taxpayer for the
special laws, and such waiver shall constitute the tax violation (Commissioner v. Fireman’s Fund Insurance
authority of the Commissioner to inquire into his bank Co., 148 SCRA 315).
deposits (Sec. 6[F], NIRC).
2. The Commissioner has no power to impose and in court without the approval of the Commissioner fSec.
collect the compromise penalties in the absence of a 220, NIRC).
compromise agreement validly entered into between
No court shall have the authority to grant an injunction
the taxpayer and the Commissioner (Mithi ng Bayan
to restrain the collection of any national internal
Cooperative Marketing Association v. Araneta, 2 SCRA
revenue tax, fee or charge imposed by the Tax Code
879). However, where in an appeal to the CTA, the
(Sec. 218, NIRC). However, the Court of Tax Appeals is
taxpayer has expressed his willingness to pay
given the power to restrain the collection of national
compromise penalties, said amounts may be collected
internal revenue taxes, subject to certain conditions
as part of the judgment (Commissioner v. Guerrero, 19
(Sec. 7, RA. 1125).
SCRA 205).
Civil action
3. The right to enter into an agreement, including the
amount to be paid in settlement of a tax violation, is There are two (2) ways by which the civil tax liability of
discretionary to the Commissioner or the taxpayer. a taxpayer is enforced by the government through civil
actions. These are: (1) by filing a civil case for the
collection of a sum of money with the proper regular
1. Definition and nature of violation being court (i.e., Municipal Court or Regional Trial Court), if
compromised'. A compromise penalty is an amount of basic tax assessed is less than PI million, or with the
money paid by a taxpayer to compromise a tax violation CTA, where the basic tax assessed amounts to PI million
that he has committed, which may be the subject of or more; and (2) by filing an answer to the petition for
criminal prosecution, while a compromise is an amount review filed by the taxpayer with the Court of Tax
of money paid by the taxpayer to settle his civil liability Appeals.
for tax assessed by the government.
When the Commissioner of Internal Revenue files a civil
2. Basis of amount paid: In compromise, the basis of the action for the collection of taxes, it is the Republic of
amount paid is the basic tax assessed; in compromise the Philippines that is the party plaintiff, not the
penalty, the basis is the gross sales or receipts during Commissioner of Internal Revenue. But when it is the
the year or the tax due. taxpayer that files a petition for review in the Court of
Tax Appeals, the respondent is the Commissioner of
3. Minimum amount prescribed: In compromise, the
Internal Revenue, not the Republic of the Philippines.
law sets a limit as to the amount that may be accepted
by the government, depending on the legal grounds Jurisdiction over civii actions
used by the taxpayer; in compromise penalty, the
Civil action is available to and initiated by the
amount set depends on the nature of the tax violation
government only when a tax liability becomes
and the minimum amount is generally not less than
delinquent and collectible. Effective April, 2004,
jurisdiction over civil actions for the collection of
JUDICIAL REMEDIES OF GOVERNMENT delinquent taxes with basic tax amounting to PI million
or more shall be filed with the CTA. The RTC retains
The main function of the BIR is to raise revenues for the
jurisdiction over basic tax in the amounts up to less than
operations of government. To effect collection of
PI million.
delinquent taxes, the BIR may resort to judicial actions
under the Tax Code. Civil and criminal actions and When collectibility of tax liability arises
proceedings instituted in behalf of the Government
1. Self-assessed tax shown in the return was not paid
under the authority of this Code or other laws enforced
within the date prescribed by law
by the BIR shall be brought in the name of the
Government of the Philippines and shall be conducted Internal revenue taxes are self-assessing and no further
by legal officers of the BIR, but no civil or criminal assessment by the government is required to create the
actions for recovery of taxes or the enforcement of any tax liability, where the taxpayer merely filed his tax
fine, penalty or forfeiture under this Code shall be filed return showing an amount of tax due, without paying
the same or paying only a portion thereof. In such a
case, the taxpayer is immediately considered as assessments have not become final and executory. The
delinquent with respect to the unpaid amount of tax. Supreme Court ruled that the request for
reconsideration cannot be considered as a protest
2. Final assessment is not protested administratively
against the assessment. The failure of the heirs to
within 30 days from date of receipt
substantiate their claim against the assessment due to
The assessment may be protested administratively by the non-submission of their position paper justified the
filing a request for reconsideration or reinvestigation Commissioner’s action in collecting the tax in the court
within 30 days from receipt of the assessment in such settlement proceedings (Dayrit v. Cruz, 165 SCRA 571).
form and manner as may be prescribed by
4. Failure to file a timely appeal to the CTA on the final
implementing rules and regulations. Otherwise, the
decision of the Commissioner or his authorized
assessment shall become final (Sec. 229, NIRC). The
representative on the disputed assessment. — Taxpayer
filing of the protest within the 30-day period is
filed with the BIR a request for reinvestigation after he
mandatory and is not extendible, and if the BIR imposes
was assessed deficiency income tax. Subsequently, a
certain conditions for the approval of such protest, said
letter-decision demanding payment was issued by BIR.
conditions must be satisfied with by the taxpayer.
Since the taxpayer did not appeal, a civil action for
Failure to question assessment served upon the collection was filed by the Government. The court ruled
decedents heirs. — Apart from failing to file the that the taxpayer’s failure to appeal the decision to the
required estate tax return, petitioner and the other Court of Tax Appeals deprived him of the right to
Marcos heirs failed to question the assessments served question the Commissioner’s authority to collect the tax
on them as heirs of the late President Ferdinand within the prescriptive period provided by law (Basa v.
Marcos, thereby allowing said assessments to lapse into Republic, 138 SCRA 34).
finality. Said assessments having become final and
Where the taxpayer failed to comply with a condition
executory, the same may be collected by summary
laid down by the Commissioner for the reinvestigation
remedy of distraint or levy (Marcos II v. Court of
of the case and its failure to appeal to the CTA made the
Appeals, 273 SCRA 47).
assessment final and executory, so that if an action to
3. Non-compliance with the condition laid in the collect the tax assessment is filed by the government in
approval of protest the ordinary court, this is akin to an action to enforce a
judgment such that no inquiry can be made thereon as
The protest letter filed by the taxpayer or his authorized to the merits of the original case or the justness of the
agent, provided it is not considered as pro forma, is judgment relied upon (Mambulao Lumber Co. V.
generally approved by the Commissioner. In some Republic, 132 SCRA 1). [NOTE: A civil action to collect an
instances, the Commissioner imposes certain conditions assessment that has become final and executory is now
or requires the filing of position papers in granting the required to be filed with the CTA under RA.. 9282,
request for reinvestigation or reconsideration, in order where the basic tax assessed is FI million or more.]
to adequately evaluate the validity of the arguments
and documents mentioned in the protest letter. Thus, Collection of tax through the filing of the BIR’s answer in
failure of the taxpayer to comply with such condition the petition for review filed by the taxpayer with the
within the time granted him is construed as if no protest CTA. — The fact that no civil action to collect the
was filed by him. taxpayer’s tax liability was filed by the Government (in
the RTC) is no ground for claiming that the right of the
Estate and inheritance taxes were assessed against the Government to collect said liability had already
estate of spouses Marta Teodoro and Don Toribio prescribed. The Supreme Court ruled that prescription
Teodoro. The heirs then filed a request for had not set in inasmuch as the Government’s answer in
reconsideration of the assessments and asked that they the CTA was filed well within the prescriptive period
be given 30 days within which to submit their position prescribed by law (Fernandez Hermanos, Inc. v.
paper in support of their claim. The position paper was Commissioner, 29 SCRA 552). In other words, the
not submitted. When the Government sought to collect answer filed by the government in the Court of Tax
the tax liabilities in the settlement proceedings on the Appeals was tantamount to the filing of a civil action for
estate, the heirs interposed the defense that the collection in the regular court. Incidentally, when action
for collection is filed in the regular courts, prescription is action to collect taxes. Article 1144 of the Civil Code
tolled. which provides that actions upon a written contract
must be brought within ten (10) years from the time the
When to go to court?
right of action accrues, finds a fitting application
As a general rule, the BIR can file a civil action for the (Republic V. Dorego, GJl. No. L-16594, April 26, 1962). It
collection of a tax that has become delinquent or appearing that said bonds were executed on June 12
collectible within five (5) years from the date of and 29, 1946, the right of the government to collect the
assessment. Thus, in the leading case of Republic v. Lim amounts covered thereby, prescribed on June 12 and
Tian Teng Sons (16 SCRA 584), the Supreme Court held 29,1956. The complaint was filed on February 18,1953.
that nowhere in the Tax Code is the Commissioner
Who approves the filing of civil action?
required to rule first on the taxpayer’s request for
reinvestigation before he can go to court for the No civil or criminal action for the recovery of taxes or
purpose of collecting the tax assessed. The legislative the enforcement of any fine, penalty or forfeiture under
policy is to give the Commissioner much latitude in the this Code shall be filed in court without the approval of
speedy and prompt collection of taxes because it is on the Commissioner (Sec. 220, NIRC). However, a Regional
taxation that the Government depends to obtain the Director may also approve the filing of civil actions for
means to carry on its operations. The Court further said collection of delinquent tax, if this power is expressly
that when the Commissioner did not reply to the delegated to him by the Commissioner under an
taxpayer’s request for reconsideration and instead appropriate revenue memorandum [or administrative]
referred the case to the Solicitor General for judicial order on the matter (Republic v. Hizon, 320 SCRA 574).
collection, this was indicative of his decision against
Complaints in civil actions for the collection of
reinvestigation. Failure on the part of the taxpayer to
delinquent taxes are required to be approved by the
file the appeal to the CTA makes the final decision of
Solicitor General before they are filed. However, BIR
the Commissioner on the disputed assessment final and
legal officers deputized as Special Attorneys and
stationed outside Metro Manila may file verified
Distraint and levy proceedings are validly begun or complaints without the approval of the Solicitor
commenced by the issuance of the warrant and service General, provided that the Solicitor General is furnished
thereof on the taxpayer. — Under Section 223(c) of the a copy of the complaint, and thereafter, the Solicitor
Tax Code, it is not essential that the warrant be fully General files a notice of appeeirance in the court where
executed so that it can suspend the running of the the action is filed. If the complaint is found to be
statute of limitations on the collection of the tax. It is improperly filed, a motion to dismiss is filed with the
enough that the proceedings have validly begun and court (Republic v. Domecillo, CA.-GJl. SP No. 17676,
that their execution has not been suspended by reason February 9,1990).
of the voluntary desistance of the CIR. Jurisprudence
Respondents in a civil action for the collection of tax
establishes that distraint and levy proceedings are
validly begun or commenced by the issuance of the Parties who are not included in an assessment made by
warrant and service thereof on the taxpayer (BPI v. the Commissioner of Internal Revenue cannot be made
Commissioner, GJl. No. 139736, October 17,2005). respondents in an appeal from a particular assessment,
and no judgment can be rendered against such parties
However, the filing of a civil action in the regular court
because any such judgment would be an encroachment
(RTC) to collect a tax which was the subject of a pending
on the prerogative of the Commissioner to make an
protest in the BIR was a justifiable basis for the taxpayer
assessment and would further violate the rule on due
to appeal to the CTA and to move for a dismissal in the
process and the exhaustion of administrative remedies.
trial [regular] court of the Government’s action to
Moreover, under Section 7 of R.A. 1125, only the
collect the tax liability under dispute (Yabes v. Flojo, 115
Commissioner of Internal Revenue and the
Commissioner of Customs may be sued before the
Another exception relates to an action to collect on the Court of Tax Appeals in appropriate cases (Gotamco &
bonds, which is an action separate and distinct from an
Sons v. Commissioner, CTA Case No. 165, August 2. Failure to file return, supply correct and accurate
12,1965). information, pay tax, withhold and remit tax and refund
excess taxes withheld on compensation. — Any person
The stockholders of a corporation that has tax
required under the Tax Code or by rules and regulations
delinquency cannot be made liable for the obligations of
promulgated there under to pay any tax, make a return,
the corporation. The obligations of the corporation are
keep any record, or supply correct and accurate
not those of the stockholders, for it is a basic rule that a
information, who willfully fails to pay such tax, make
corporation is vested by law with a personality separate
such return, keep such record, or supply such correct
and distinct from those of the persons composing it as
and accurate information, or withhold or remit taxes
well as from that of any other legal entity to which it
withheld, or refund excess taxes withheld on
may be related (Sunio V. National Labor Relations
compensation, at the time or times required by law or
Commission, 127 SCRA 390). It is, however, possible for
rules and regulations shall, in addition to other penalties
stockholders to be held personally liable for the unpaid
provided by law, upon conviction thereof, be punished.
tax liabilities of a defunct corporation as when the
assets of the corporation have passed into the hands of In Criminal Case No. 0-013 (for non-filing of tax return
its stockholders (Tan Tiong Bio v. Commissioner, 100 under Section 255 of the Tax Code), the elements that
Phil. 86). Also, a stockholder who has unpaid must be established are; (a) the accused was a person
subscriptions is liable for the debts of the corporation required to make or file a return; (b) the accused failed
(Lumanlan v. Cura, 59 Phil. 746). to make or file the return at the time required by law;
and (c) the failure to make or file the return was willful.
Criminal actions
As to the first element. It has been established that the
A. Under the 1997 Tax Code accused is a resident Filipino citizen and that he is the
sole proprietor of “Mendez Body and Face Salon and
Two common crimes punishable under the Tax Code Spa” in Quezon City. The accused was earning income
which are filed by the BIR are as follows: for 2001 to 2003 through the ad placements, the
1. Attempt to evade or defeat tax. — Any person who vehicles registered in his name, and the numerous
willfully attempts in any manner to evade or defeat any travels he took in said years. As to the second element,
tax imposed under the Tax Code or the payment he did not file his ITR with RDO 39, South Quezon and
thereof, in addition to other penalties provided by law, there were no records of returns filed for said years as
upon conviction thereof, be punished. The conviction or certified by the RDO. As to the third element, although
acquittal obtained under this Section shall not be a bar the accused did not earn any income in 2002, his
to the filing of a civil suit for the collection of taxes (Sec. purchases and expenditures prove that he has
254, NIRO. knowledge that he has substantial income, which was
used on such, and his denial of income connotes his
To establish the existence of fraud, the following attempt to conceal said Income by not filing his tax
requisites must be present and established by return. Also, the habitual failure to file his ITR for 2001
competent evidence: and 2002, despite findings that he was earning income,
a. The end to be achieved — the objective is to pay an then shows the willfulness of his non-filing for 2002.
amount of tax that is less than that known by the In Criminal Case No. 0-015 (for failure to supply correct
taxpayer to be legally due; information), the elements that must be established
b. The accompanying state of mind — the state of mind are: (a) the accused is a person required under the Tax
is variously described as being evil, in bad faith, Code or by rules and regulation to pay any tax, make a
deliberate and not accident, or willful; and return, keep any record or supply correct and accurate
information; (b) the accused failed to supply correct and
c. The overt act done or scheme used by the taxpayer, accurate information at the time or times required by
which must be tinged with some element of deceit, law or rules and regulations; and (c) such failure to
misrepresentation, trick, device, concealment or supply information is willful. The prosecution has
dishonesty (“Fraud under Tax,” Balter). already the first element. Regarding the second
element, the accused filed his ITR for 2003 with RDO
Calasiao, Pangasinan for his “Mendez Weight Less subsequently withdraws the same return or statement
Center” located at Dagupan City. However, it was after securing the official receiving seal or stamp of
discovered that there are several other branches receipt of an internal revenue office where the same
registered with the BIR under the name of the accused was actually filed shall, upon conviction therefor, be
as the sole owner. Taking into consideration the bulk of punished (Sec. 255, NIRC).
circumstantial evidence proving the accused’s ability to
Although the accused may have failed to file the estate
spend on the previously mentioned expenditures and
tax return, the accused should be exempted from
purchases during 2003, the accused earned substantial
criminal liability as she was prevented to do so due to
income during said year. These findings contradict the
an insuperable cause made by no less than the
declaration made by the accused in the ITR he filed that
government. From February 1986, the accused and her
he suffered a net loss during the year. The accused also
family were forcibly placed on exile in Hawaii until
failed to file his ITRs for his income earned from the
November 1994, when they returned to the country.
operation of the other branches of his business for
The properties of President Marcos were sequestered
2003. As to the third element, the accused is considered
and placed under the control and possession of the
to have knowledge that he has the obligation to declare
government after which forfeiture proceedings were
and file ITR for taxes from all sources, and despite his
filed before the Sandiganbayan Court. Why would the
knowledge, he failed to file his ITR on his income from
government require accused to comply with her
other businesses, making it appear that his only source
obligation when it had taken away the means by which
of income was from the operation of his branch in
she could comply with the requirements of the law.
Dagupan City (People v. Mendez, Crim Case No. 0-013,
Logically, a legal heir who does not possess knowledge
January 5, 2011; People v. Wong Yan Tak, et al. [Pin AT
or information regarding the total value of the estate of
Pac Mart], CTA Crim. Case No. 0-090, October 17,2012).
the decedent would not dare execute a return under
For failure of the State Prosecutor to submit the records oath under pain of criminal liability. In the same
of preliminary investigation, the CTA dismissed the case manner, the accused cannot be expected or pay the tax
without prejudice (People v. Tambunting, Crim. Case due on the estate of her deceased husband during the
No. 0-200, May 17, 2011). time she had no record in her possession and control
with which she could assess the value of the gross
The accused, as President of Jadewell Parking Systems
estate and the deductions allowed thereto to determine
Corporation, should at the very least have been aware
the estate tax liability.
of who is authorized to sign Jadewell’s income tax
returns and other tax filings. Accused, as president and Under Section 83 of the Tax Code, the law presumes
general manager of Jadewell, could not even explain that the person filing the return has personal
how a certain Via Aguas was able to sign some tax knowledge regarding the extent and value of the
returns and payment forms, despite the allegation of properties of the decedent. Otherwise, the requirement
the defense that said Via Aguas is not an employee of that the return must contain the itemized list of his
Jadewell. Accused also submitted into evidence Income assets under oath serves no purpose. In order to
tax returns which were unsigned. Knowing all these, establish a willful violation of said provision, it is
accused did not even inquire as to whether Jadewell’s incumbent upon the prosecution to prove that on 28
income tax returns were being properly filed and September 1998 and within 90 days thereafter, the
whether the information contained therein is true and accused while in Hawaii personally knew the extent and
accurate. This “deliberate avoidance” or “omission” on total value of the estate of the late president. At the
the part of the accused leads this court to conclude that time of the filing of the criminal complaint against the
the supply of false and incorrect information was willful accused, the latter was not yet in any way the executor
emd done with the toowledge of the accused (People v. or administrator of the estate and only after the filing of
Rogelio A. Tan, CTA Crim. Case No. 0-064, June the complaint that the accused was designated by the
27,2012). court as co-administrator. The Marcoses were totally
isolated from the rest of the world. They were not
Any person who attempts to make it appear for any
afforded means of communication and transportation
reason that he or another has in fact filed a return or
for the accused to have complied with the requirement
statement, or actually files a return or statement and
of filing of return and payment of tax. From the and, furthermore, because the appeal was not pursued
foregoing facts, the forcible expulsion of the accused by ' the Solicitor General. When the motion for
from the country was a form of disability similar to the reconsideration filed by petitioner was likewise denied,
exculpatory cause enumerated in the Tax Code. petitioner filed the instant motion seeking an
Accordingly, the court found the accused’s failure to file elucidation on the supposed discrepancy between the
the return and to pay the estate tax due was not willful, pronouncement of this Court, on one hand, that would
and the prosecution’s scanty evidence failed to require the participation of the Office of the Solicitor
establish the element of criminal intent (People v. General and pertinent provisions of the Tax Code, on
Imelda R. Marcos, Crim. Case No. d.9I.24-38283,April the other hand, that allow the legal officers of the BIR to
20,2007). institute and conduct action in behalf of the
Government under Section 220 of the Tar Reform Act of
Important principles on criminal actions
1997 (RA. 8424 effective 1 January 1998).
Some important principles in the collection^^texes
Ordered to comment, the Office of the Solicitor General
through criminal action are:
expressed the view that under Section 220 of the Tax
1. No criminal action for the recovery of taxes or the Reform Act, amending Section 221 of the 1993 Tax
enforcement of any fine, penalty or forfeiture shall be Code, the primary responsibility to conduct civil and
filed in court without the approval of the criminal actions lies with the legal officers of the BIR,
Commissioner.^ The Commissioner, through such that it is no longer necessary for BIR legal officers
administrative issuances, has delegated this power to to be deputized by the Office of the Solicitor General or
file criminal actions against delinquent taxpayers to his the Secretary of Justice before they can commence any
subordinate officials in the legal service. action under the 1997 Tax Code.

For failure of the State Prosecutor to comply with the The institution or commencement before a proper court
order to submit to the CTA the written approval issued of civil and criminal actions and proceedings arising
by the CIR to file the case and the records of the under the Tax Reform Act which “shall be conducted by
preliminary investigation, the case was dismissed, legal officers of the Bureau of Internal Revenue” is not
without prejudice (People V. Renne Samala, Crim. Case in dispute. An appeal from such court, however, is not a
No. 0-214, September 1, 2011). matter of right. Section 220 of the Tax Reform Act must
not be understood as overturning the long established
Criminal actions instituted on behalf of the Government procedure before this Court in requiring the Solicitor
under the authority of the Tax Code or other laws, General to represent the interest of the Republic. This
enforced by the BIR, shall be brought in the name of the Court continues to maintain that it is the Solicitor
Government, of the Philippines and shall be conducted General who has the primary responsibility to appear
by the legal officers of the BIR. However, it does not for the government in appellate proceedings. This
preclude the BIR from seeking the assistance of pronouncement finds justification in the various laws
experienced litigators from the Department of Justice in defining the Office of the Solicitor General, beginning
the prosecution of the criminal action. Criminal cases with Act No. 135, which took effect on 16 June 1901, up
are filed in the name of “People of the Philippines to the present Administrative Code of 1987.
versus the accused taxpayer” in order to differentiate it
from civil cases for the collection of delinquent taxes Aware that the dismissal of the petition could have
which are filed in the name of “Republic of the lasting effect on government revenues, the lifeblood of
Philippines versus the delinquent taxpayer. the state, the Court heeds the plea of petitioner for a
chance to prosecute the case. Relative to the lack of
The Solicitor General is the principal law officer and verification required of petitions, the Supreme Court
legal defender of the government. — In its resolution has held in a number of instances that such a deficiency
dated 15 November 2000, the Supreme Court denied can be excused or dispensed with in meritorious cases,
the Petition for Review on Certiorari submitted by the the defect being neither jurisdictional nor always fataL,
Commissioner of Internal Revenue for non-compliance Verification is mainly intended to ensure that the
with the procedural requirement of verification explicit allegations in the pleadings are true and correct and not
in Section 4, Rule 7, of the 1997 Rules of Civil Procedure
mere speculations (Commissioner v. La Suerte Cigar and 5. Under existing provision of law, the judgment in the
Cigarette Factory, GJt. No. 144942, July 4,2002). criminal [tax] case shall not only impose the penalty but
shall also order payment of the taxes subject of the
3. The grant of a motion to dismiss a criminal case must
criminal case as finally decided by the Commissioner.®
be based upon the judge’s o ^ personal conviction that
there was no case against the accused. The trial judge However, the Court said: “While the accused is guilty
must himself be convinced that there was indeed no beyond reasonable doubt for violation of Section 255
sufficient evidence against the accused, and this (Failure to file return or to supply correct information),
conclusion can be arrived at only after an assessment of this court will not impose the alleged tax liabilities,
the evidence in the possession of the prosecution. What considering that there was no assessment issued
is imperatively required is the trial judge’s own against the accused. The computations presented by
assessment of such evidence, it not being sufficient for the prosecution to prove civil liabilities may not be used
the valid and proper exercise of judicial discretion because the BIR did not follow the assessment
merely to accept the prosecution’s word for its procedures provided for in the Tax Code, and the civil
supposed insufficiency of evidence.® liabilities for the non-payment of tax may not be
determined and imposed” (People v. Jose Mendez, CTA
4. The acquittal of the taxpayer in a criminal action
Crim. Case No. 013 and,015, January 5,2011).
under the Tax Code does not necessarily result in
exoneration of said taxpayer from his civil liability to pay 6. Under RA. 9282, the filing of the criminal case implies
taxes. In ordinary criminal cases, the civil liability in also the filing of the civil case. In fact, no reservation for
incurred by reason of the offender’s criminal act. Article the filing of the civil case may be made under this new
100 of the Revised Penal Code provides that every law, unlike that of a felony under the Revised Penal
person criminally liable for a felony is also civilly liable. Code. Accordingly, not only are the individuals but also
In tax cases, the civil liability to pay taxes arises not the corporations who participated in the commission of
because of any felony but upon the taxpayer’s failure to the offense are included in the information, although
pay taxes. Criminal liability in taxation arises as a result the corporations can only be held civilly liable.
of one’s failure to pay his tax liabilities. Moreover, while
The filing of the criminal action implies the filing also of
Section 73 of the old Tax Code has provided the
the civil action, and no reservation thereto may be
imposition of the penalty of imprisonment or fine, or
made. — As to the civil aspect, the same is deemed
both, for refusal or neglect to pay income tax or to
instituted with the criminal case, and shall be jointly
make a return thereof, it failed to provide the collection
determined in the same proceedings by the CTA
of said tax in criminal proceedings. The only civil
pursuant to Section 7(b)(1) of R.A. 9282. Corollarily,
remedies provided for the collection of taxes are
there is the rule that an accused acquitted of a criminal
distraint or goods, chattels, etc., or by judicial action,
charge may, nevertheless, be held in the same case
which remedies are generally exclusive in the absence
civilly liable, where the facts established by the
of a contrary intent from the legislator.
evidence so warrants.'^
The acquittal of the taxpayer in a criminal action under
Deficiency and delinquent taxes may be collected
the Tax Code does not necessarily result in exoneration
through civil or criminal actions. — Under existing
of said taxpayer from his civil liability to pay taxes. —
provision of law, the remedies for the collection of
With regard to the tax proper, the , acquittal in the
national internal revenue taxes resulting from
criminal case could not operate to discharge the
delinquency shall be by civil or criminal action, and the
petitioner from the duty to pay the tax, which the law
judgment in the criminal [tax] case shall not only impose
requires to be paid, since that duty is imposed by
the penalty but shall also order payment of the taxes
statute prior to and independent of any attempt on the
subject of the criminal case as finally decided by the
part of the taxpayer to evade payment. The obligation
Commissioner. Also, under R.A. 9282, the filing of the
to pay the tax is not a mere consequence of the
criminal case implies also the filing of the civil case. In
felonious acts charged in the information, nor is it a
fact, no reservation for the filing of the civil case may be
mere civil liability derived from a crime that would be
made under this new law, unlike that of a felony under
wiped out by the judicial declaration that the criminal
the Revised Penal Code. Accordingly, not only are the
acts charged did not exist.
individuals but also the corporations who participated she and her husband are mandated by law to file their
in the commission of the offense are included in the income tax returns. The petitioner testified that she
information, although the corporations can only be held does not even know how much was her tax obligation,
civilly liable. nor did she bother to inquire or determine the facts
surrounding the filing of her income tax returns. Such
‘‘Willful” means not merely voluntary, hut with a bad
neglect or omission, as aptly found by the former
purpose; corruptly; a voluntary act is a free, intelligent,
Second Division, is tantamount to “deliberate
and intentional act. — The assessment notices were
ignorance” or “conscious avoidance.”^^
issued by the BIR to the taxpayer. The accused admitted
during the hearing on December 7, 2000 the existence The Marcoses were totally isolated fmm the rest of the
of the assessment notices, which were proven to have world; they were not afforded the means of
been sent by registered mail. He also admitted that he communication and transportation and were not
received the Warrant of Distraint and Levy and Demand allowed to receive visitors in Hawaii; thus, it was
Letter, demanding the payment of the deficiency taxes impossible for the accused to have complied with the
stated in the assessment notices. He admitted too that requirement of filing and paying any of her tax
he ignored the demand for the payment of the obligations. — The BIR filed criminal complaints against
deficiency taxes. There is no other conclusion that can Imelda Marcos for failure to pay income tax; failure to
be drawn, except that the accused willfully did not pay give a written notice of death; failure to pay estate
his deficiency tax liabilities. The word “willful” in a taxes; and failure to file income and estate tax returns.
statute, means “not merely voluntary, but with a bad Mrs. Marcos, in her counter-affidavit, stated that the
purpose; in other words, corruptly.” A voluntary act is a Marcoses were forcibly evicted from the country and
free, intelligent, and intentional act. Furthermore, the brought to Hawaii in 1986, leaving most of their
accused admitted that he paid P50,000 to two BIR personal and real properties under the possession and
regional office employees to settle his tax liabilities control of the government. Finding probable cause, the
without asking for any receipt. This reveals a conscious DOJ filed information against Imelda Marcos.
effort to evade his 1993 tax liabilities. The act of bribing
The court took judicial notice of the forcible eviction of
the BIR employees constitutes an overt act on the part
the Marcoses out of the country. The Marcoses were
of the accused that showed his deliberate and willful
totally isolated from the rest of the world. They were
refusal to pay his deficiency tax liabilities to the
not afforded the means of communication and
transportation and were not allowed to receive visitors
The accusedPs mere reliance on the representations in Hawaii. Thus, it was impossible for the accused to
made by his accountant, with deliberate refusal or have complied with the requirement of filing and paying
avoidance to verify the contents of his income tax any of her tax obligations. Likewise, even though she
return and to inquire on its authenticity constitutes wanted to do so, their sudden departure from the
‘Willful blindness.— ‘'Willfulness” was characterized as country prevented the accused from bringing her
a state of mind that may be inferred from the personal record and documents with which she could
circumstances of the case. Thus, proof of willfulness assess or determine her income for the year 1985 to
may be, and usually is, shown by circumstantial prepare her income tax return. Consequently, failing on
evidence alone. Another circumstance which convinced the part of the prosecution to substantiate through
this Court to infer the presence of “willfulness” on the competent evidence that the accused willfully,
part of the accused not to file his income tax returns is unlawfully and feloniously neglected to file and pay her
his admission that he signed the income tax returns but income tax return for the year 1985, she could not be
failed to read all the contents, and that he did not held criminally liable.
personally file his income tax returns, and did not verify
The court finds merit in the argument that the failure on
from the BIR if his income tax returns were actually
the part of the accused to file the estate tax return and
filed. “
to pay the estate tax is not willful. Although the accused
Petitioner’s sole reliance on her husband to file their may have failed to comply with what is required by law,
income tax returns is not a valid reason to justify her the accused should be exempted from criminal liability
non-filing, considering that she knew from the start that as she was prevented to do due to an insuperable cause
made by no less than the government; i.e., as early as violation of the law, and if the same be not known at
February, 1986, accused and her family were forcibly the time, from the discovery thereof and the institution
placed on exile in Honolulu, Hawaii until November, of judicial proceedings for its investigation and
1991, when they returned to the country; the punishment. The prescription shall be interrupted when
properties of President Ferdinand Marcos were proceedings are instituted against the guilty persons
sequestered and placed under the control and and shall begin to run again if the proceedings are
possession of the government after which forfeiture dismissed for reasons not constituting jeopardy. The
proceedings were filed before the Sandiganbayan Court. term of prescription shall not run when the offender is
As pointed out by the defense, why would the absent from the Philippines.’^® However, a petition for
government require accused to comply with her reconsideration of an assessment may affect the
obligations when it had taken away the very means by suspension of the prescriptive period for the collection
which she could comply with the requirements of the of taxes, but not the prescriptive period of a criminal
law? Logically, a legal heir who does not possess a action for violation of law.
knowledge or information regarding the total value of
When the civil action arising out of a tax delinquency is
the estate of the decedent would not dare execute a
extinguished by prescription, considering that under the
return “under oath” under pain of criminal liability. In
law, the Government has only five years from date of
the same manner, it is error to expect that the accused
assessment of tax within which to collect the tax, it is
would pay the tax due on the estate of her late husband
still possible for such tax to be collected by criminal
during the alleged time under which she was made to
action inasmuch as actions of this kind prescribe only
Jjay when she had no records in her possession and
after the lapse of five years counted from the discovery
control with which she could assess the gross value of
of the crime and the institution of proceedings for its
the late president’s estate at the time of his death and
investigation and punishment}'^
the deductions allowed from the gross estate to
determine the estate tax liability. 8. In a criminal action that was instituted against the
taxpayer for having filed a false and fraudulent return
On the whole, underscoring the finding of the Court
and for failure to pay taxes, the subsequent satisfaction
that accused’s failure to comply with her tax obligation
of the tax liability by payment or prescription will not
was due to causes beyond her control, there is no doubt
operate to extinguish the taxpayer’s criminal liability.
that the element of “wilfullness” for crimes involving
Whether under the Tax Code or Revised Penal Code, the
the violation of the NIRC, as alleged in the information
satisfaction of civil liability is not one of the grounds for
in these five criminal complaints, is lacking. In short, the
extinction of criminal action.
prosecutor’s evidence did not pass the test of moral
certainty that there was “willful disobedience” on the 9. If a person convicted for violation of any of the
part of the accused with the intention to evade and provisions of the Tax Code has no property with which
defeat the payment of the tax.^® to meet the fine imposed upon him by the court, or is
unable to pay such fine, he shall be subject to a
6. With regard to the tax proper, the acquittal in the
subsidiary personal liability. This provision corrected the
criminal case could not operate to discharge the
lack of authority for the courts to impose subsidiary
petitioner from the duty to pay the tax, which the law
penalty in case of insolvency on the part of the
requires to be paid, since that duty is imposed by
taxpayer, which he is sentenced to pay.
statute prior to and independent of any attempt on the
part of the taxpayer to evade payment. The obligation 10. Any person convicted of a crime penalized by the
to pay the tax is not a mere consequence of the Tax Code shall, in addition to being liable for the
felonious acts charged in the information, nor is it a payment of the tax, shall be subject to the penalties
mere civil liability derived from a crime that would be imposed herein. Payment of the tax due after
wiped out by the judicial declaration that the criminal apprehension shall not constitute a valid defense in any
acts charged did not exist. prosecution for violation of any provision of this Code or
in any action for the forfeiture of untaxed articles.^®
7. All violations of any [penal] provision of the Tax Code
shall prescribe after five (5) years. Prescription shall
begin to run from the day of the commission of the
11. If the Commissioner is convinced that the taxpayer
is criminally liable, he should institute criminal
proceedings and not arbitrarily impose a penalty.
However, if the BIR official accepts the payment of
compromise penalty offered by the taxpayer for
violation of a specific provision of law imposing criminal
liability, the criminal liability of the taxpayer for such
violation shall be obliterated.

12. Taxes are the lifeblood of government and every

citizen is duty bound to pay taxes and to pay taxes in
the right amount. Therefore, technicalities will have to
yield to the government interest of the nation to
enforce its laws against tax evasion, especially where
the amounts involved are huge. Procedural rules should
not be applied with rigidity especially when to do so
would result in manifest failure or miscarriage of justice.
Rules of procedure should not be applied in a very
technical sense, for they are adopted to help secure,
not override, substantial justice.

13. The guilt of the accused must be established beyond

reasonable doubt. — Joseph Typingco is the alleged
President and authorized officer of Fiesta Pack, Inc. He
was charged for violation of Section 255 (Failure to file
return and to supply correct information), in relation to
Sections 253(d) [Officers of corporation on whom
penalties may be imposed] and 256 (Penalty liability of
corporations) of the