NATURE/ CHARACTERISTICS OF THE STATE’S POWER OF TAX

a)It is inherent in sovereignty.

-can enforce contribution in the absence of law

b)It is legislative in character.

-cannot be exercised by executive and juridical branches

c) Exemption of government entities, agencies and instrumentalities.

d)International Comity
e)Limitation of territorial jurisdiction
f) Strongest among all the inherent powers of the state

 Agencies performing governmental function are tax exempt unless

expressly taxed
 Agencies performing proprietary functions are subject to tax unless
expressly exempted
 GOCCs performing proprietary functions are subject to tax, however the
following are granted tax exemptions:
 Government Service Insurance System (GSIS)
 Social Security System (SSS)
 Philippine Health Insurance Corporation (PHIC)
 Philippine Charity Sweepstakes Office (PCSO)
 Local Water Districts (RA 10026)

CLASSIFICATION OF TAXES
1. As to scope:
 National- imposed by the national government
 Local – imposed by the local government

2. As to subject matter or object:

 Personal, poll, or capitation – tax of a fixed amount imposed
upon individual residing within a specified territory.
 Property – tax imposed on property in proportion to its value
 Excise – tax on certain rights and privileges (sin products or
imported goods)

3. As to who bears the burden:

 Direct – taxpayer cannot shift to another
  Indirect – indemnify himself at the expense of another

4. As to determination of fixed amount:

 Specific- tax of fixed amount by number, standard of weight,
or measurement
 Ad valorem – tax of fixed proportion of the value of the
property
5. As to purpose:
 Primary, Fiscal, or Revenue Purpose
 Secondary, Regulatory, Special, or Sumptuary Purpose

6. As to graduation or rate:
 Proportional – tax based on fixed percentages of amount
 Progressive – tax the rate of which increases as the tax base
or bracket increases
 Regressive - tax the rate of which decreases as the tax base
or bracket increases

7. As to taxing authority:
 National – imposed under National Internal Revenue Code,
collected by Bureau of Internal Revenue
 Local – imposed by LGUs

ELEMENTS OF SOUND TAX SYSTEM

a. Fiscal Adequacy – sources must be adequate

b. Theoretical Justice or Equity – tax should be proportionate
c. Administrative Feasibility – law must be capable of effective and
efficient enforcement

LIMITIATIONS ON THE STATE’S POWER TO TAX

1. Inherent Limitations
2. Constitutional Limitations

 Progressive System – emphasis on direct taxes

 Regressive System – more indirect taxes imposed
 Regressive Tax Rates – tax rates which decreases as tax base or
bracket increases
 FACTORS IN DETERMINING THE SITUS OF TAXATION

a. Subject matter ( person, property, or activity)

b. Nature of tax
c. Citizenship
d. Residence of the taxpayer
e. Source of Income
f. Place of excise, business or occupation being taxed
NATURE/ CHARACTERISTICS OF THE STATE’S POWER OF TAX

g)It is inherent in sovereignty.

-can enforce contribution in the absence of law

h)It is legislative in character.

-cannot be exercised by executive and juridical branches

i) Exemption of government entities, agencies and instrumentalities.

j) International Comity
k) Limitation of territorial jurisdiction
l) Strongest among all the inherent powers of the state

 Agencies performing governmental function are tax exempt unless

expressly taxed
 Agencies performing proprietary functions are subject to tax unless
expressly exempted
 GOCCs performing proprietary functions are subject to tax, however the
following are granted tax exemptions:
 Government Service Insurance System (GSIS)
 Social Security System (SSS)
 Philippine Health Insurance Corporation (PHIC)
 Philippine Charity Sweepstakes Office (PCSO)
 Local Water Districts (RA 10026)

CLASSIFICATION OF TAXES
8. As to scope:
 National- imposed by the national government
 Local – imposed by the local government

9. As to subject matter or object:

  Personal, poll, or capitation – tax of a fixed amount imposed
upon individual residing within a specified territory.
 Property – tax imposed on property in proportion to its value
 Excise – tax on certain rights and privileges (sin products or
imported goods)

10. As to who bears the burden:

 Direct – taxpayer cannot shift to another
 Indirect – indemnify himself at the expense of another

11. As to determination of fixed amount:

 Specific- tax of fixed amount by number, standard of weight,
or measurement
 Ad valorem – tax of fixed proportion of the value of the
property
12. As to purpose:
 Primary, Fiscal, or Revenue Purpose
 Secondary, Regulatory, Special, or Sumptuary Purpose

13. As to graduation or rate:

 Proportional – tax based on fixed percentages of amount
 Progressive – tax the rate of which increases as the tax base
or bracket increases
 Regressive - tax the rate of which decreases as the tax base
or bracket increases

14. As to taxing authority:

 National – imposed under National Internal Revenue Code,
collected by Bureau of Internal Revenue
 Local – imposed by LGUs

ELEMENTS OF SOUND TAX SYSTEM

d. Fiscal Adequacy – sources must be adequate

e. Theoretical Justice or Equity – tax should be proportionate
f. Administrative Feasibility – law must be capable of effective and
efficient enforcement

LIMITIATIONS ON THE STATE’S POWER TO TAX

3. Inherent Limitations
4. Constitutional Limitations

 Progressive System – emphasis on direct taxes

 Regressive System – more indirect taxes imposed
 Regressive Tax Rates – tax rates which decreases as tax base or
bracket increases

FACTORS IN DETERMINING THE SITUS OF TAXATION

g. Subject matter ( person, property, or activity)

h. Nature of tax
i. Citizenship
j. Residence of the taxpayer
k. Source of Income
l. Place of excise, business or occupation being taxed
NATURE/ CHARACTERISTICS OF THE STATE’S POWER OF TAX

m) It is inherent in sovereignty.
-can enforce contribution in the absence of law

n)It is legislative in character.

-cannot be exercised by executive and juridical branches

o)Exemption of government entities, agencies and instrumentalities.

p)International Comity
q)Limitation of territorial jurisdiction
r) Strongest among all the inherent powers of the state

 Agencies performing governmental function are tax exempt unless

expressly taxed
 Agencies performing proprietary functions are subject to tax unless
expressly exempted
 GOCCs performing proprietary functions are subject to tax, however the
following are granted tax exemptions:
 Government Service Insurance System (GSIS)
 Social Security System (SSS)
 Philippine Health Insurance Corporation (PHIC)
 Philippine Charity Sweepstakes Office (PCSO)
  Local Water Districts (RA 10026)

CLASSIFICATION OF TAXES
15. As to scope:
 National- imposed by the national government
 Local – imposed by the local government

16. As to subject matter or object:

 Personal, poll, or capitation – tax of a fixed amount imposed
upon individual residing within a specified territory.
 Property – tax imposed on property in proportion to its value
 Excise – tax on certain rights and privileges (sin products or
imported goods)

17. As to who bears the burden:

 Direct – taxpayer cannot shift to another
 Indirect – indemnify himself at the expense of another

18. As to determination of fixed amount:

 Specific- tax of fixed amount by number, standard of weight,
or measurement
 Ad valorem – tax of fixed proportion of the value of the
property
19. As to purpose:
 Primary, Fiscal, or Revenue Purpose
 Secondary, Regulatory, Special, or Sumptuary Purpose

20. As to graduation or rate:

 Proportional – tax based on fixed percentages of amount
 Progressive – tax the rate of which increases as the tax base
or bracket increases
 Regressive - tax the rate of which decreases as the tax base
or bracket increases

21. As to taxing authority:

 National – imposed under National Internal Revenue Code,
collected by Bureau of Internal Revenue
 Local – imposed by LGUs
 ELEMENTS OF SOUND TAX SYSTEM

g. Fiscal Adequacy – sources must be adequate

h. Theoretical Justice or Equity – tax should be proportionate
i. Administrative Feasibility – law must be capable of effective and
efficient enforcement

LIMITIATIONS ON THE STATE’S POWER TO TAX

5. Inherent Limitations
6. Constitutional Limitations

 Progressive System – emphasis on direct taxes

 Regressive System – more indirect taxes imposed
 Regressive Tax Rates – tax rates which decreases as tax base or
bracket increases

FACTORS IN DETERMINING THE SITUS OF TAXATION

m. Subject matter ( person, property, or activity)

n. Nature of tax
o. Citizenship
p. Residence of the taxpayer
q. Source of Income
r. Place of excise, business or occupation being taxed
BIR

*What is BIR?
The Bureau of Internal Revenue is an agency of Department of Finance.
BIR collects more than half of the total revenues of the government. Caesar
Dulay is the current Commissioner of BIR.
MANDATE
The Bureau of Internal Revenue shall 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 internal revenue taxes, fees,
and charges, and the enforcement of all forfeitures, penalties, and fines
connected therewith, including the execution of judgments in all cases
decided in its favor by the Court of Tax Appeals 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. (Section 2 of the National
Internal Revenue Code of 1997)

MISSION
We collect taxes through just enforcement of tax laws for nation-building
and the upliftment of the lives of Filipinos

VISION The Bureau of Internal Revenue is an institution of service

excellence and integrity.

GUIDING PRINCIPLE "Service Excellence with Integrity and

Professionalism"

*What are the policies that govern BIR?

National Tax Law

I. 1987 Constitution

The 1987 Philippine Constitution sets limitations on the exercise of the

power to tax. The rule of taxation shall be uniform and equitable.
 All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only.
 The Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restriction
 The Supreme Court shall have the power to review, revise, reverse,
modify or affirm on appeal or certiorari, as the law or the Rules of Court
may provide, final judgments and orders of lower courts
 Tax exemptions are limited to those granted by law

II. Laws

The basic source of Philippine tax law is the National Internal Revenue
Law, which codifies all tax provisions, the latest of which is embodied in
Republic Act No. 8424 (“The Tax Reform Act of 1997”).

III. Periodicals

Periodicals on Philippine tax law are the:

(1) Philippine Revenue Service (copies available in the BIR Library),
published by the BIR from 1969-1980;
(2) Philippine Revenue Journal (copies available in the BIR Library) which
was both published by the Bureau of Internal Revenue from 1969 to 2000;
and
(3) the Tax Monthly, published by the National Tax Research Center
(NTRC) (copies available in the BIR Library and the NTRC).

VIII. Local Government Tax Law

Local taxes may be imposed, as the Constitution grants, to each local
government unit, the power to create its own sources of revenues and to
levy taxes, fees, and charges which shall accrue to the local governments.

*How was it created/organized?

In the early American regime from the period 1898 to 1901, the country was
ruled by American military governors. In 1902, the first civil government
was established under William H. Taft. However, it was only during the term
of second civil governor Luke E. Wright that the Bureau of Internal
Revenue (BIR) was created through the passage of Reorganization Act No.
1189 dated July 2, 1904. On August 1, 1904, the BIR was formally
organized and made operational under the Secretary of Finance, Henry Ide
(author of the Internal Revenue Law of 1904), with John S. Hord as the first
Collector (Commissioner). The first organization started with 69 employees,
which consisted of a Collector, Vice-Collector, one Chief Clerk, one Law
Clerk, one Records Clerk and three (3) Division Chiefs.

*Where is the BIR reported?

In 2010, the BIR developed a complaint system, serving as an avenue to
cater all types of complaints/concerns, which in turn are being sent to the
concerned offices for resolution. Email facilities and Short Messaging
System or SMS were provided to complement the system. Though, the old
system served its purpose, re-engineering for its utilization and capabilities
is much required.
The rebirth of the BIR’s eComplaint System has finally been set for
operations. The enhanced eComplaint system is made simpler, easy to
access and user-friendly. The system handles complaints by mainly logging
into the BIR’s website and tapping the eServices wherein you shall find the
eComplaint System.

Within the eComplaint System are sub-components which sets the criteria
on specific types of complaints or concerns, namely:
 eComplaint Home – the homepage describes the system’s background
 and the set criteria including its processes for the utilization of the sub-
systems;
 eComplaint NO-OR - are complaints for the non-issuance of official
receipts/invoices and matters relative to the issuance of receipts, such
as but not limited to the issuance of Authority to Print Receipts and
Cash Register Machines/Point-of-Sales machines;
 eComplaint DISIPLINA - are complaints and concerns relative to erring
BIR personnel; Code of Conduct – a detailed compilation pertaining to
the present laws and regulations enforced and must be adopted by all
BIR personnel;
 eComplaint R.A.T.E. –pertains to complaints related to Tax Evasion
and/or Tax Avoidance;
 eComplaint OTHERS – are complaints specifically provided for other
tax-related matters not within the context of the other sub-system; and
 eComplaint FAQs – are compilations of “frequently ask questions”,
lifted from the complaints raised thru system.

*What is its structure in the government?

The BIR’s journey with the Performance Governance System (PGS) began
in CY 2009, when it was selected to be one of six (6) National Government
Agencies chosen to participate in a landmark Millennium Challenge
Corporation (MCC) Compact Eligibility endeavor to adopt the Performance
Governance System.
PGS is a tool translating statements of governance and vision into
actionable strategies and commitments leading to the realization of
breakthrough results. Prior to its selection for this project, the BIR had
already embarked on programs to promote transparency and accountability
in the revenue service, in accordance with the recommendations of the
Integrity Development review (IDR) project implemented in 2007.
The introduction to PGS has helped to further promote our commitment to
participatory governance and partnership with our stakeholders, and has
witnessed the renewal of the public’s trust and confidence in the
Government, particularly in the BIR as the country’s tax collecting agency.
Indeed, the BIR has achieved even greater focus and seen the optional
impact of its programs give to the available resources for the
accomplishment of its mandate. Also, the adaptation of the PGS has
gained a high level of attention and is now considered a necessary
condition for honest and good governance, the central tenet of the Aquino
Administration.
The PGS has indeed provided excellent directions for the BIR’s efforts to
focus on efficiency, effectiveness, transparency and accountability thereby
enabling us to enhance our performance and productivity and to contribute
even more significantly to the attainment of the country’s development and
nation building initiatives.

*What are the duties and the responsibilities?

What are the Bureau of Internal Revenue (BIR) and What Does It Do?
 The Bureau of Internal Revenue (BIR) is the government body under
the Department of Finance that collects taxes and enforces tax laws. Its
powers and duties include the following: *Reduction and collection of all
internal revenue taxes, fees, and charges *Enforcement of all
forfeitures, penalties, and fines connected therewith, including the
execution of judgments in all cases decided in its favor by the Court of
Tax Appeals and the ordinary courts *Administration of supervisory and
police powers conferred to it by the National Internal Revenue Code
and special laws.