Chapter 2 – Taxes,

Tax Laws and Tax

Administration

Cesar G. Gaspar Jr., CPA

Instructor
OBJECTIVE

I. Type of taxation laws

II. Distinction among tax laws, revenue regulations, and rulings
III. Tax, its elements and classifications
IV. Distinction of tax from similar items
V. Tax system and its types
VI. The principles of sound tax system
VII. How tax is administered
VIII. The powers of the Bureau of Internal Revenue (BIR) and the Commissioner of Internal Revenue
(CIR) and the non-delegated powers of CIR
IX. The criteria for selection of large tax payers
TAXATION LAWS AND
ITS TYPES
TAXATION LAW
⮚ Any law that arises from the exercise of TAXATION
the taxation power of the State LAWS and its
Types of taxation laws TYPES
1) Tax laws – laws that provide assessment
and collection of taxes
2) Tax exemption laws – laws that grant
certain immunity from taxation
SOURCES OF TAXATION LAWS
I. Constitution TAXATION
II. Statutes and Presidential Decrees
LAWS and its
III. Judicial Decisions or case laws
TYPES
IV. Executive Orders and Batas Pambansa
V. Administrative Issuances
VI. Local Ordinances
VII.Tax Treaties and conventions with foreign countries
VIII.Revenue Regulations
TYPES OF ADMINISTRATIVE ISSUANCES
1) Revenue regulations TAXATION
LAWS and its
2) Revenue memorandum orders
TYPES
3) Revenue memorandum rulings
4) Revenue memorandum circulars
5) Revenue bulletins
6) BIR Rulings
 NATURE OF
PHILIPPINE TAX LAWS
 ELEMENTS OF A VALID
TAX

1) Tax must be levied by the taxing

power having jurisdiction over
4) Tax must be for public purpose.
the object of taxation.
5) Tax must be proportional in
2) Tax must not violate
character.
constitutional and inherent
TAX and its limitations. 6) Tax is generally payable in money.

ELEMENTS and 3) Tax must be uniform and

CLASSIFICATIONS equitable.
 CLASSIFICATION OF
TAXES

A. As to PURPOSE C. As to INCIDENCE
1) Fiscal or revenue tax 1) Direct tax
2) Regulatory 2) Indirect tax
3) Sumptuary D. As to AMOUNT

TAX and its B. As to SUBJECT MATTER 1) Specific tax

ELEMENTS and 1) Personal, poll or capitation 2) Ad valorem

CLASSIFICATIONS 2) Property tax

3) Excise or privilege tax
 CLASSIFICATION OF
TAXES

E. As to RATE F. As to IMPOSING AUTHORITY

1) Proportional tax 1) National tax

2) Progressive and graduated tax 2) Local tax

3) Regressive tax
TAX and its 4) Mixed tax
ELEMENTS and
CLASSIFICATIONS
 DISTINCTION OF TAXES
with SIMILAR ITEMS
⮚ Tax vs. GAAP
⮚ Tax vs. Revenue
⮚ Tax vs. License Fee
⮚ Tax vs. Toll

TAX and its ⮚ Tax vs. Debt

⮚ Tax vs. Special Assessment
ELEMENTS and
CLASSIFICATIONS ⮚ Tax vs. Tariff
⮚ Tax vs. Penalty
TAX SYSTEM AND ITS
TYPES
TAX SYSTEMS
⮚ Methods and schemes of imposing,
TAX SYSTEM
assessing and collecting taxes
and its TYPES
Types of tax system According to Imposition
1) Progressive
2) Proportional
3) Regressive
Types of tax system According to Impact
4) Progressive
5) Regressive
TAX COLLECTION SYSTEMS
A. Withholding system on income tax TAX SYSTEM
1. Creditable withholding tax and its TYPES
2. Final withholding tax
B. Withholding system on business tax
C. Voluntary compliance system
D. Assessment or enforcement system
 PRINCIPLES OF A SOUND TAX SYSTEM TAX SYSTEM
and its TYPES
1) Fiscal adequacy
2) Theoretical justice
3) Administrative feasibility
TAX ADMINISTRATION
 TAX ADMINISTRATION
⮚ Management of the tax system

Chief Officials of the Bureau of Internal Revenue (BIR)

1) 1 Commissioner
2) 4 Deputy Commissioners, each to be designated to the
following:
TAX a) Operations Group
ADMINISTRATION b) Legal Enforcement Group
c) Information System Group
d) Resource Management Group
 POWER OF THE BIR
1) Assessment and collection of taxes
2) Enforcement of all forfeiture, penalties and fines, and judgments in all cases
decided in its favor by the courts
3) Giving effect to , and administering the supervisory and police powers
conferred to it by the NIRC and other laws
4) Assignment of internal revenue officers and other employees to other duties

TAX 5) Provision and distribution of forms, receipts, certificates, stamps, etc. to proper
officials
ADMINISTRATION
6) Issuance of receipts and clearances
7) Submission of annual report, pertinent information to Congress and reports to
the Congressional Oversight Committee in matters of taxation
 POWERS OF THE BIR
1) Assessment and collection of taxes
2) Enforcement of all forfeiture, penalties and fines, and judgments in all cases
decided in its favor by the courts
3) Giving effect to , and administering the supervisory and police powers
conferred to it by the NIRC and other laws
4) Assignment of internal revenue officers and other employees to other duties

TAX 5) Provision and distribution of forms, receipts, certificates, stamps, etc. to proper
officials
ADMINISTRATION
6) Issuance of receipts and clearances
7) Submission of annual report, pertinent information to Congress and reports to
the Congressional Oversight Committee in matters of taxation
 POWERS OF THE COMMISSIONER
OF INTERNAL REVENUE
1) To interpret the provisions of the NIRC, subject to review by the Secretary of
Finance
2) To decide tax cases, subject to the exclusive appellate jurisdiction of the Court
of Tax Appeals
3) To obtain information and to summon, examine and take testimony of persons
to effect tax collection

TAX
4) To make assessment and prescribe additional requirement for tax
administration and enforcement
ADMINISTRATION 5) To examine tax returns and determine tax due thereon
6) To conduct inventory taking or surveillance
7) To prescribe presumptive gross sales and receipts for a taxpayer
 POWERS OF THE COMMISSIONER
OF INTERNAL REVENUE
8) To terminate tax period
9) To prescribe real property values
10) To compromise tax liabilities of taxpayers
11) To inquire into bank deposits
12) To accredit and register tax agents

TAX 13) To refund or credit internal revenue taxes

14) To abate or cancel tax liabilities in certain cases
ADMINISTRATION
15) To prescribe additional procedures or documentary requirements
16) To delegate his powers to any subordinate officer with a rank
equivalent to a division chief of an office
 NON-DELEGATED POWERS OF THE
COMMISSIONER OF INTERNAL
REVENUE
1) The power to recommend the promulgation of rules and regulations to
the Secretary of Finance.
2) The power to issue rulings of first impression or to reverse, revoke or
modify any existing rulings of the Bureau.
3) The power to compromise or abate any tax liability
4) The power to assign and reassign internal revenue officers to
TAX establishments where articles subject to excise tax are produced or
kept
ADMINISTRATION
 RULES IN ASSIGNMENTS OF
REVENUE OFFICERS TO OTHER
DUTIES
1) Revenue officers assigned to an establishment where excisable articles
are kept shall in no case stay there for more than 2 years.
2) Revenue officers assigned to perform assessment and collection
function shall not remain in the same assignment for more than 3
years.
3) Assignment of internal revenue officers and employees of the Bureau

TAX to special duties shall not exceed 1 year.

ADMINISTRATION
 AGENTS and DEPUTIES for
COLLECTION OF NATIONAL
INTERNAL REVENUE TAXES
1) The Commissioner of Customs and his subordinates with respect to
collection of national internal revenue taxes on imported goods.
2) The head of appropriate government offices and his subordinates with
respect to the collection of energy tax.
3) Banks duly accredited by the Commissioner with respect to receipts of
payments of internal revenue taxes authorized to be made thru banks.

TAX
ADMINISTRATION
 OTHER AGENCIES TASKED WITH TAX
COLLECTIONS OR TAX INCENTIVES
RELATED FUNCTIONS

1) Bureau of Customs
2) Board of Investments
3) Philippine Economic Zone Authority
4) Local Government Tax Collecting Unit

TAX
ADMINISTRATION
 TAXPAYER CLASSIFICATION FOR
PURPOSES OF TAX ADMINISTRATION

1) Large taxpayer
2) Non-large taxpayer
Criteria for Large Taxpayers
A. As to Payment
1) Value Added Tax

TAX 2)
3)
Excise Tax
Income Tax
ADMINISTRATION
4) Withholding Tax
5) Percentage Tax
6) Documentary stamp tax
 TAXPAYER CLASSIFICATION FOR
PURPOSES OF TAX ADMINISTRATION

Criteria for Large Taxpayers

B. As to Financial Conditions and Results of Operations
1) Gross receipts or sales
2) Net worth
3) Gross purchases

TAX
4) Top corporate taxpayer listed and published by Securities and Exchange
Commission
ADMINISTRATION
 AUTOMATIC CLASSIFICATION OF
TAXPAYERS AS LARGE TAXPAYERS

1) All branches of taxpayers under the Large Taxpayer’s Service

2) Subsidiaries, affiliates, and entities of conglomerates or group of companies of a
large taxpayer
3) Surviving company in case of merger or consolidation of a large taxpayer
4) A corporation that absorbs the operation or business in case of spin-off of any
large taxpayer

TAX 5) Corporation with an authorized capitalization of at least P300,000,000 registered

with the SEC
ADMINISTRATION
6) Multinational enterprises with an authorized capitalization or assigned capital of
at least P300,000,000
7) Publicly listed corporations
 AUTOMATIC CLASSIFICATION OF
TAXPAYERS AS LARGE TAXPAYERS

8) Universal, commercial and foreign banks

9) Corporate taxpayers with at least P100,000,000 authorized capital in banking,
insurance, telecommunication, utilities, petroleum, tobacco and alcohol
industries
10) Corporate taxpayers engaged in the production of metallic minerals

TAX
ADMINISTRATION