ResA The Review Schoo! of Accountancy BTel. No. 735-9807 & 734-3989 ‘TAXATION ‘TAMAYO/LIM/CAIGA/ MANUEL ‘TK.1701:_BASIC PRINCIPLES (INHERENT POWERS AND LIMITATIONS ON THE POWER OF TAXATION) INHERENT POWERS OF THE STATE 1. Inherent powers. _ ‘a. Inherent powers | 1) Taxation ~ The power by which the sovercion raises revenue-to defray the necessary expenses |. ___ af the government. | |2) Power of Eminent Domain ~ The power of the State or those to whom the power has been [relegated to take prvats property for public use upon paying the. owners a just | | __compensation to be ascertained eccorsing te law. |3) Police Power ~The power of the Siate to enact such laws in relation to persons and property a may promote publi: heaith, pubic morals, public safety and general welfare of the people. [ Br Similarities Among |i) They are inkerontin the State; | | the Three Inherent |2) They exist independently of the Constitution; | | Powers |3) They constitute the three methods by which the State interferes with private rights and Property; |ay They are legistativein nature and characte | 5) Each presupposes 2: equivalent compensation. [a. Taxation Defined | Taxation is the ad of ayng a ta, 16 He processor tears by wihich the sovereign, through ts | | tawmaking body, raises income to d ae ay the necessary expenses of government. Purposes of ‘a. The principal (pnmary) purpose 1s to raise revenue for governmental needs. This is also called | |” Taxation revenue purpose. | b. The secondary purposes. taxation are | 1) Compensatory purposes | a, To reduce excessive inequalities cf weath bb. To maintain high fevel of employment . To contro! inflation 2) Sumptuary or regulatory purpose ~ Vs implement the police power of the State to _ _ Se “promote the general welfare. | Theory and Basis, The power of taxation proceeds «pon the theary that the existence of the government is a of Taxation | necessity, tat carnal contnue without means to py ts expenses and that for hs meen | | asa right to compe! all its citizens and property within its mits to contribute. b. The basis is the reciprocal duties of protection and support between the State and its | inhabitants. The State collects taxes from the subjects of taxation in order that it may be able to | | perform the functions of govessrnent. The citvzens on the ollver hand, pays taxes in order that | | they may be secured in tne enjoyment of the benefits of organized society (benefits received | | theory). _ — = — — — ‘a Taxes are the Meblood of tie Government and ther prompt and certain availabilty are | imperious (expecting obedience} nec | Upon taxation depends the a-vverament’: ability to serve the people for whose benefit taxes are | collected. | . Manifestation of Hfeblood theory: 1) Imposition of tay even in the absence of Constitutional grant. 2) Right to select objects of taxation. __3) No injunction to enjom (or stop) tax collection. ~ “The power of taxation is comprehensive, plenary, unlimited and supreme. This power 's, | | | | e | however, subject to inherent and const-tutional Initations. _ if ‘a. It is daherent in 27 perpovee 2) Thr hnunige may be used a6 Beds for azonsine tne foxes fore other months or quarters ofthe same dr Iter rable oars and auch assessment sha be daewed pia fac core, 5) Whom i ud at» person has fled tn Soar recs and veces valobon of the requrementsof the Tax Cod, or en there is reason to beeve that the books cf accounts and other records donot corey reflect te | edratons made oF to be made ina return requred tobe fled under the provsons ofthe Tax Code, the | Cratiionn Stor taking to account the tl races, lncroe oF other male base af ether persons ‘engaged in similar businesses under simular situations or circumstances or after considering other relevant | ‘iedation, may prescribe @ minimum amount of suc gross recep, sles and taxable base, and such amount Zo prescribed shall be prima facie correct for purges of detesmining the intemal revenue tax habilties of such | persons. | TX-1703ReSA: The Review School of Accountancy Page 2 of 4 'D. Authority to Terminate Taxable Period - | 4) The Commissioner shall declare the period of a taxpayer terminated at any time when it shalt come to his! knowledge: | 2. that a person is retiing from business subject to tax, or b. sintending to leave the Philippines oF remove his property therefrom or to hide or conceal his property, of is performing any act tending to obstruct the proceedings forthe collection of the tax for the pastor current quarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately | 2} The Commissioner shall sed the taxpayer @ notice of his decison to terminate together with a request for immediate payment of the tax for the period so declared terminated and the tax for the preceding year or quarter, or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shal be subject to all penalties prescribed, unless paid within the time fixed in the, demand made by the Commssioner. 4 "E. Authority to Prescribe Real Property Values 1) TheCommissoner is hereby authorized to divide the Philipines into diferent zones or areas and shall, ueon mandatory consuitetion with competent apprassersboth fromthe private and public sectors, and with prior | notice to affected taxpayers, determine the faie market value of realpropertieslocatedineachzonecrarea, subject to automatic adjustment once every three (3) years through rules and regulations issued by the Secretary | of Fiance based on the current Philippine valuation standards: | | 2) No adjustment in zonal valuation shall be valid unless published in a newspaper of general circulation in the | province, cy of municipality concerned, orinthe absence thereof, shall be posted in the provincial capitol, ty ‘or municipathalland in two (2) other conspicuous public placestherein, 3) Thebasisof any valuation, including the records of consultations done, shall be public records open to the inqutry of any taxpayer. 4) For purposes of computing any internal revenue tax, the value ofthe property shal be, whichever isthe higher of: 2. the fair market value as determined by the Commissioner; or | the fair market value as shown in the schedule of values of the Provincial and City Assessors x ink Deposit Accounts | Rotwtstending any contrary prowsion oF FA. No. 1405 and other general or special laws, the Commissioner i hereby authonze tongue into bank deposts of 3. decedent to determine fis gross estat; and j By ny taxpayer ho hs ed on apaleation for compromise of his tax tabilty by reson of financial incapacty | to poy histor tabi. | | 2) tn cases taxpayer fles an application to compromise the payment of his tax tabilties on his claim that Ns! financial postion demonstrates a clear inabilty to pay the tax assessed, his application shall not be considered] | Gnless and uti he wanes ting his preg under RA. No, 1408 or under athe general or spec ls, and | __ such waiver shall constitute and authory ofthe Commissioner to inquire into the bank depos ofthe taxpayer ("G: Authority to Accredit and Register Tax Agents | 1) The Commissioner shall accredit and register, based on their professional competence, integrity and moral fitness, Indiwduats and. general professional partnerships and ther representatives who prepare and le tor returns | | ‘statements, reports, protests, and other papers with, or who appear before the Bureau for taxpayers; | 2) Indvwduols'and gener! professional partnerships and ther representatives who are dened accretation by the) Commissioner and/or the national and regional accreditation boards may appeal such denial to the Secretary of ance, who shal rule onthe appeal within say (60) 6s ftom receptof seth appeal, 1 3) Fate ofthe Secretary of France to rule onthe appel within the prescnbed pertod shall be deemed as approval Of te application for secretion ofthe appelnt. H. Authority to Prescribe Additional Procedural or Documentary Requirements 1) The Commissioner may prescribe the manner of complance wth any documentary or procedural requirement in connection with the submission or preparation of financial statements accompanying the tax returns. Authority of the Commissioner to Delegate Power (Sec. 7)_ _< “A. The Commissioner may delegate the powers vested in him under the pertinent provisions of the Tax Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions 25 may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner; 'B. The following powers of the Commissioner shall not be delegated: j 1) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; | 2) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau, | 3}, The power to compromise or abate any tax lability; i 44) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax | are produced or kept.ReSA: The Review School of Accountancy Page 3 of 4 \V. Organization of the Bureau of Internal Revenue Powers and Duties of the Bureau of Internal Revenue ‘The Bureau of Internal Revenue shail be under the supervision and control of the Department of Finance and its powers and duties shall comprehend the assessment and collection of all national intemal revenue taxes, fees, and charges, and the enforcement cf all forfeitures, penaities, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Aypeais and the ordinary courts. ‘The Bureau shall give effect to and administer the supervisory and police powers ‘conferred to it by this Code or other laws. Chief Officials of the Bureau of Internal Revenue The Bureau of Intemal Revenue shall have a chief to be known as: a. Commissioner of Internal Revenue, hereinafter referred to as the Commissioner; and b. four assistant chiefs to be known as Deputy Commissioners who shall each be the head of the following: Legal and Enforcement Group (now Legal Group); 2) Operation Group; 3) Information System Group; and Reso 1 Group V1. Organization of the Bureau of Customs. Chief Officials of the Bureau of | The Bureau of Customs shal aver ‘Customs a. one chief and D. four assistant chiefs, to be known respectively as the Commissioner of Customs, Deputy Commissioners The Bureau of Customs shall have five (5) Deputy Commissioners, each one to head: ‘2. Customs Revenne Collection Monitoring Group . Customs Assessment and Operations Coordinating Group c Inteligence and Enforcement Group . Intemal cministration Group fe. Management System Technology Group. ‘Appointment of the Commissioner and the Deputy Commissioners. “The Commissioner and the Deputy Commissioners of Customs shall be appointed by the President of the Philippines. ‘VI. Local Tax Collecting Units ‘Scope of local taxes “The provision unde= Local Gavernment Taxation shall govern the exercise by provinces, cies, municipalities, end Barangays of their taxing and other Fevenue-raising powers. Local Taxing Authority “The power to impose a tax, fee, or charge or to generate revenue under this Code stale exercised by the Sanggunien of the local government unit cconcemed through an appropriate ordinance. Venue of Filing of Return ‘Allocal taxes, fees, and charges shall be collected by tre provincial, ty, ‘municipal, or Barangay treasures, or their duly authorized deputies. _ Time of filing of tax return vor. ization of Board of Investment ‘Composition of the Board ‘Unless otherwise provided in this Code, all local taxes, fees, and charges shall paid within the first twenty (20) days of January or of each subsequent quarter, as the case mey be. “The Sanggunian concemed may, for a justifiable reason or cause, extend the 5x (6) months. “The Board of Investments slall be composed of seven (7) governors a. The Secretary of Trade and industry, b. three (3) Undersecretaries of Trade and Industry to be chosen by the President; and three (3) representatives from other government agencies and the private sector. “The Secretary of Trede and Industry shall be concurrently Chalrman of the Board and the Undersecrerery af the Ocpartment of Trade and Industry for Industry and Tavestments shal bz concurrent the Vice-Chairman of the Board and its Managing Head. time of payment of suc foxes, fees, or charges without surcharges or penates, |ReSA: The Review School of Accountancy 1X. Philippine Economic Zone Authority / Purpose of Creation ‘Composition of PEZA Board Incentives Offered by PEZA ”We are shaped and fashioned FAXATION - Basic Principles : POWER OF CIR (Batch 37) __| all appointments shal be ad interim or perma Page 4 of 4 | The tice 3) representatives irom the other goverament agencies and the private | | Sector sal be appointed bythe President fr term of fou) yeas Upon the expiration of his erm, @ governor shall serve as such unt his sucessor stall nave been appointed and qualified | No vacancy shal be filed except for the unexpired portion of any term, and that no one may be designated to be governor of the Board in an acting capacity but Philippine Economic Zone Authority (PEZA) is 2 government agency in| | the Philippines attached to the Department of Trade and Industry created to help promote investments in the export-oriented manufacturing industry into the ‘country by assisting investors in registering and facilitating their business ‘operations and providing tax incentives, | PEZA also assists investors who locate in service facilities inside selected areas in| the country (areas are called PEZA Special Economic Zones) which are usually business process outsourcing and knowledge process outsourcing firms. | Other activities also eligible for PEZA registration and incentives include | establishment and operation within special economic zones for tourism, medical tourism, fogistics and warehousing services, economic zone development and | | operation and faites providers | -| ‘ERR was enacted under Repubic AG 7916 and was passed by the House of | Representatives and. the Senate and approved by former Philippine | President Fidel V. Ramos on the 2ist of February, 1995. | {As provided in the Special Economic Zone Act, the PEZA Board is: '2. chaired by the Secretary ofthe Department of Trade and Industry. b. Vice-Chair is the Director General (Chit Executive Officer) of PEZA, | {c. Members of the Board are Undersecretaries representing nine (9) key ‘government Departments, to ensure efficient coordination between PEZA and their respective Departments on matters pertaining to investors’ | ‘operations inside the Special Economic Zones. | BEA offers both fiscal and non-fiscal incentives as well as ready-to-occupy | business locations in world-class economic zones and IT parks or buildings Feat cenves ince: | 2. income tax holday for a certain number of years, which translates to | 100% exemption from corporate income tax; | tax and. duty-free importation of raw materials, capital equipment, machineries and spare parts; c. exemption from wiherfage dues and export tax, impost or fees; 3d. VAT zero-rting of local purchases subject to compliance with BIR and | i PEZA requieements; €e. exemption from payment of any and all local government imposts fees, | licenses or taves; and ‘exemption from expanded withholding tax. b f Non-fscal incentives, on the other hand include: 2. simplified import-export procedures, extended visa facilitation assistance to foreign nationals and spouses and dependents; special visa multiple entry privileges; and more. | | | | 2 | at 5 -=END ‘by what we love.” - Johann von Goethe TX-1703