Materials: Taxation Tax Evasion

Kinds of Taxes: A scheme used outside those lawful means and when
availed of, it usually subjects the taxpayer to further or
1. Income Tax:
additional civil or criminal liabilities:
Tax on a person's income, emoluments, profits arising
 Under-declaration of income
from property, practice of profession, conduct of trade
 Non-declaration of income and other items subject to
or business
tax
2. Donor’s Tax  Under-appraisal of goods subject to tariff
 Over-declaration of deductions
Tax imposed on donations inter-vivos or those made
between living persons to take effect during the lifetime Tax Avoidance vs. Tax Evasion
of the donor
Tax Avoidance Tax Evasion
3. Estate Tax Validity Legal; not subject to Illegal; subject
criminal penalty to criminal
Tax on the right of the deceased person to transmit penalty
property at death Effect Minimization of Almost always
4. Excise Tax taxes results in
absence of tax
-Tax applicable to specified goods manufactured in the payments
Philippines for domestic sale or consumption Means and Legal; valid means Illegal methods
Method
5. Documentary Stamp Tax

Tax on documents, instruments, loan agreements and Materials: Chapter 2: Tax/Taxation/Tax Administration
papers, agreements evidencing the acceptance,
assignments, sale or transfer of an obligation, rights or Taxation Law: refers to any law that arises from the
property incident thereto exercise of the taxation power of the State

Who pays taxes? Types of Taxation Laws

 Resident Citizens 1. Tax Laws: are laws that provide for the
assessment and collection of taxes
Taxed on all their net income derived from sources Ex.
within and without the Philippines - National Internal Revenue Code
 Alien Individuals - Tarif and Custom Code
- Local Tax Code
Whether a resident or not, is taxable only on income - Real Property Tax Code
derived from sources within the Philippines
2. Tax Exemption Laws: are laws that grant certain
Tax Avoidance
immunity from taxation. (excused from paying
The exploitation by the taxpayer of legally permissible taxes)
alternative rates or methods of assessing taxable Ex.
property or income to reduce or entirely avoid tax - Minimum Wage Law
liability. - Omnibus Investment Code of 1987 (Executive
Order 226)
Availing of all deductions allowed by law of refraining
- Barangay Micro Business Enterprise Law
from engaging in activities subject to tax
- Cooperative Development Act

Sources of Taxation Laws:
1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or Case Laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuances
6. Local Ordinances
7. Tax Treaties and convention with foreign countries
8. Revenue Regulations
Types of Administrative Issuances
1. Revenue regulations:
- Are issuances signed by the Secretary of Finance upon
recommendation of the Commissioner of Internal
Revenue (CIR) that specify prescribe or define rules and
regulation for the effective enforcement of the
provisions of the National Internal Revenue Code (NIRC)
and related statutes.
- Revenue regulations are formal pronouncements
intended to clarify or explain the tac law and carry into
effect its general provisions by providing details of
administration and procedure.
- Revenue regulations has he force and effect of a law but
is not intended to expand or limit the application of the
law, otherwise, it is void.
2. Revenue memorandum orders (RMOs):
- Are issuances that provide directive or instructions,
prescribe guideline and outline processes, operations,
activities, workflows, methods and procedure necessary
in the implementation of stated policies, goals,
objectives, plans and programs of the Bureau in all
areas of operations except auditing.
3. Revenue memorandum rulings (RMRs):
- Are rulings, opinions and interpretations of the CIR with
respect of the provisions of the Tax Code and other tax
laws as applied to a specific set of facts with or without
established precedents, and which the CIR may issues
from time to time for the purpose of providing
taxpayers guidance on the tax consequences in specific
situations. BIR ruling, therefore, cannot contravene duly
issued RMRs, otherwise the Rulings are null and void ab
initio.
4. Revenue Memorandum Circulars (RMCs):
- Are issuances that publish pertinent and applicable
pardons as well as amplifications of laws, rules,
regulations and precedents issued by the BIR and other
agencies/offices.
5. Revenue Bulletins (RB):
- Refer to periodic issuances, notices and official
announcement of the Commissioner of Internal
Revenue that consolidates the Bureau of Internal
Revenue’s position on certain specific issues of law or
administration in relation to the provisions of the Tax
Code relevant tax laws and other issuances for the
guidance of the public.
6. BIR Rulings:
- Are official positions of the Bureau to queries raised by
taxpayers and other stakeholders relative to clarification
and interpretation of tax laws.
- Rulings are merely advisory or a sort of information
service to that taxpayer such that none of them is
binding except to the addressee and may be reversed
by the BIR at any time.
Types of rulings:
1. Valued Added Tax (VAT) rulings
2. International Tax Affairs Division (ITAD) rulings
3. BIR rulings
4. Delegated Authority (DA) rulings
Generally Accepted Accounting Principles (GAAP) vs
Tax Laws
Generally accepted accounting principles or GAAP are
not laws, but are mere conventions of financial
reporting. They are benchmarks for the fair and relevant
valuations and recognitions of income expense, assets,
liabilities and equity of a reporting entity for the general
purpose, financial reporting. GAAP accounting reports
are intended to meet the common needs of a vast
number of users in the general public.
Tax Laws including reules, regulations and rulings
prescribe the criteria for tax reporting, a special form of
financial reporting which is intended to meet specific
needs of the tax authorities
Taxpayers normally follow GAAP in recording
transactions in their books. However, in the preparation C. As to incidence
and filing of tax returns, taxpayers are mandated to 1. Direct Tax – When both the impact and
follow the tax law in cases of conflict with GAAP incidence of ta
D. As to amount
Nature of Philippine Tax Laws

Philippine tax laws are civil and not political in nature.

They are effective even during periods of enemy
occupation. They are Laws of the occupied territory and
not by the occupying enemy. Tax payments are made
during occupation of foreign enemies are valid.

Our internal revenue laws are not penal in nature

because they do not define crime. Their penalty
provisions are merely intended to secure taxpayer’s
compliances.

Tax

Tax is an enforced proportional contribution levied by

the lawmaking body of the State to raise revenue for
public purpose

Elements of a Valid Tax

1. Tax must be levied by the taxing power having

jurisdiction over the object of taxation
2. Tax must not violate constitutional and inherent
limitations
3. Tax must be uniform and equitable
4. Tax must be for public purpose
5. Tax must be proportional in character
6. Tax is generally payable in money

Classification of Taxes

A. As to purpose
1. Fiscal or revenue tax – tax imposed for general
purpose
2. Regulatory – a tax imposed to regulate
business, conduct, acts or transactions
3. Sumptuary – a tax levied to achieve some social
or economic objectives

B. As to subject matter
1. Personal, poll or capitation - a tax on persons
who are residents of a particular territory
2. Property tax – a tax on properties, real or
personal
3. Excise or privilege tax – tax imposed upon the
performance of an act, enjoyment of a privilege
or engagement in an occupation.