CHAPTER 2

TAXES, TAX LAWS, AND TAX ADMINISTARATION

TAXATION LAW 5. Revenue bulletins

Taxation Law refers to any that arises from the 6. BIR rulings
exercise of the taxation power of the State.
 Revenue Regulations are issuances signed by
TYPES OF TAXATION LAWS the Secretary of Finance upon
recommendation of the Commissioner of
1. Tax laws - Theses are laws that provide for the Internal Revenue (CIR) that specify prescribe,
assessment and collection of taxes. or define rules and regulations for the effective
Examples: enforcement of the provisions of the National
Internal Revenue Code (NIRC) and related
a. The National Internal Revenue Code statutes.

b. The Tariff and Customs Code Revenue Regulations are formal pronouncement
intended to clarify or explain the tax law and carry
c. The Local Tax Code into effects its general provisions by providing
details of administration and procedure. Revenue
d. The Real Property Tax Code
Regulation has the force and effect of a law, but is
2. Tax exemption laws - These are laws that grant not intended to expand or limit the application of
certain immunity from taxation. the law’ otherwise, it is void.

Examples:  Revenue Memorandum Orders (RMOs) are

issuances that provide directives instructions;
a. The Minimum Wage Law prescribe guidelines; and outline processes,
operations, activities, workflows, methods,
b. The Omnibus Investment Code of 1987
and procedures necessary in the
(E.O. 226)
implementation of stated policies, goals,
c. Barangay Micro-Business Enterprise objectives, plans and programs of the Bureau
(BMBE) Law in all areas of operations except auditing.

d. Cooperative Development Act  Revenue Memorandum Rulings (RMRs) are

rulings, opinions and interpretations of the
SOURCES OF TAXATION LAWS CIR with respect to the provisions of the Tax
Code and other tax laws as applied to a
1. Constitution
specific set of fact, with or without established
2. Statutes and Presidential Decrees precedents, and which the CIR may issue from
time to time for the purpose of providing
3. Judicial Decisions or case laws taxpayers guidance on the tax consequences in
the specific situations. BIR Rulings, therefore,
4. Executive Orders and Batas Pambansa cannot contravene duly issued RMRs;
otherwise, the Rulings are null and void an
5. Administrative Issuance
initio.
6. Local Ordinances
 Revenue Memorandum Circulars (RMCs) are
7. Tax Treaties and Conventions with foreign issuances that publish pertinent and applicable
countries portions as well as amplifications of laws,
rules, regulations, and precedents issued by
8. Revenue Regulations the BIR and other agencies/offices.
TYPES OF ADMINISTRATIVE ISSUANCES  Revenue Bulletins (RB) refer to periodic
issuances, notices, and official announcements
1. Revenue regulations
of the Commissioner of Internal Revenue that
2. Revenue memorandum orders consolidate the Bureau of Internal Revenue’s
position on certain specific issues of law or
3. Revenue memorandum rulings administration in relation to the provisions of
the Tax Code, relevant tax laws, and other
4. Revenue memorandum circulars issuances for the guidance of the public.
 BIR Rulings are official positions of the Bureau
t 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 the to the taxpayer such
that none of them is binding except to the
addressee and may be reversed by the BIR at
anytime.
TYPES OF RULINGS
1. Value Added Tax (VAT)
2. Internal 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 valuation and recognition of income,
expense, assets liabilities, and equity of a reporting
entity for 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 rules, regulations, and rulings
prescribe the criteria for tax reporting, a special
form of financial reporting which is intended to
meet specific needs of tax authorities.
Taxpayers normally follow GAAP in recording
transactions in their books. However, in the
preparation and filing of tax returns, taxpayers are
mandated to follow the tax law in cases of conflict
with GAAP.
NATURE OF PHILIPPINES TAX LAW
Philippines 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 made during occupations of foreign
follow the tax law in cases of conflict with GAAP.
Our internal revenue laws are not penal in nature
because they do not define crime. Their penalty
provisions are merely intended to secure
taxpayers’ compliance.
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. Taxmust 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 - a tax imposed for
general purposes
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 - a tax imposed upon
the performance of an act, enjoyment of a
privilege or engagement in an occupation