aban-tax-1-reviewer.pdf

7/15/2019 Aban-Tax-1-Reviewer.pdf

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TAX ATIONSan Beda College of LAW ALABANG

GENERAL PRINCIPLES

I. Concepts, Nat!e and C"a!acte!#st#cs ofTa$at#on and Ta$es.

Ta$at#on %ef#ned&

As a p!ocess, it is a means by which thesovereign, through its law-making body, raisesrevenue to defray the necessary expenses of thegovernment. It is merely a way of apportioningthe costs of government among those who insome measures are privileged to enjoy itsbenefits and must bear its burdens.

As a po'e!, taxation refers to the inherentpower of the state to demand enforcedcontributions for public purpose or purposes.

Rat#onale of Ta$at#on ( The Supreme ourtheld!

"It is said that taxes are what we pay forcivili#ed society. $ithout taxes, the governmentwould be paraly#ed for lack of the motive powerto activate and operate it. %ence, despite thenatural reluctance to surrender part of one&shard-earned income to the taxing authorities,every person who is able must contribute hisshare in the running of the government. Thegovernment for its part is expected to respond inthe form of tangible and intangible benefitsintended to improve the lives of the people andenhance their moral and material values. Thes)*+#ot#c !elat#ons"#p #s t"e !at#onale ofta$at#onand should dispel the erroneous notionthat it is an arbitrary method of exaction by thosein the seat of power.

Taxation is a symbiotic relationship,whereby in exchange for the protection that theciti#ens get from the government, taxes arepaid.' (ommissioner of Internal )evenue vs*llegre, Inc.,et al., +-/, 0eb. 12, 13

P!poses and O+ect#-es of Ta$at#on

1.Re-ene to provide funds or property withwhich the State promotes the general welfare andprotection of its citi#ens.

2.Non(Re-ene45)657

a.P!o*ot#on of Gene!al Welfa!e Taxationmay be used as an implement of police power inorder to promote the general welfare of thepeople. 4see +ut# vs *raneta ( 5hil 183 and9sme:a vs 9rbos (;.). 1,1>37

b.Reglat#on *s in the case of taxes levied onexcises and privileges like those imposed intobacco or alcoholic products or amusemenplaces like night clubs, cabarets, cockpits, etc.

In the case of Caltex Phils. Inc. vs COA

(;.).


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Tax is a pecuniary burden @ an exaction tobe discharged alone in the form of money whichmust be in legal tender, unless Aualified by law,such as )* >B8 which allows backpay certificatesas payment of taxes.

4.It is p!opo!t#onatein character - It is ordinarilybased on the taxpayers ability to pay.

5.It is levied on pe!sons o! p!ope!t) ( * taxmay also be imposed on acts, transactions, rightsor privileges.

6.It is levied for p+l#c p!pose o! p!poses (Taxation involves, and a tax constitutes, a burdento provide income for public purposes.

7.It is levied by the Statewhich has jurisdictionover the persons or property. - The persons,

property or service to be taxed must be subjectto the jurisdiction of the taxing state.

T"eo!) and Bas#s of Ta$at#on

0.Necess#t) T"eo!)Taxes proceed upon the theory that the

existence of the government is a necessityC thatit cannot continue without the means to pay itsexpensesC and that for those means, it has theright to compel all citi#ens and properties withinits limits to contribute.

In a case, the Supreme ourt held that!Taxation is a power emanating from

necessity. It is a necessary burden to preserve theState&s sovereignty and a means to give theciti#enry an army to resist aggression, a navy todefend its shores from invasion, a corps of civilservants to serve, public improvements designedfor the enjoyment of the citi#enry and thosewhich come with the State&s territory andfacilities, and protection which a government issupposed to provide. (Phil. Guaranty Co., Inc. vsCommissioner of Internal evenue, !" #CA$$%&.

1.T"e Benef#ts(P!otect#on T"eo!)The basis of taxation is the reciprocal duty

of protection between the state and itsinhabitants. In return for the contributions, thetaxpayer receives the general advantages andprotection which the government affords thetaxpayer and his property.

2al#f#cat#ons of t"e Benef#t(P!otect#onT"eo!)&

a.It does not mean that only those who are ableto pay and do pay taxes can enjoy the privilegesand protection given to a citi#en by thegovernment.

b.0rom the contributions received, thegovernment renders no special or commensuratebenefit to any particular property or person.

c.The only benefit to which the taxpayer isentitled is that derived from his enjoyment of theprivileges of living in an organi#ed societyestablished and safeguarded by the devotion otaxes to public purposes. (Gome' vs Palomar, %#CA )*&

d.* taxpayer cannot object to or resist thepayment of taxes solely because no personabenefit to him can be pointed out as arising fromthe tax.(+oren'o vs Posaas, - Phil "%"&

3.L#fe+lood T"eo!)

Taxes are the lifeblood of the governmentbeing such, their prompt and certain availabilityis an imperious need. (Collector of Internaevenue vs. Goorich International ubber Co.#ept. -, !*-%& $ithout taxes, the governmenwould be paraly#ed for lack of motive power toactivate and operate it.

Nat!e of Ta$#ng Po'e!

1.In"e!ent #n so-e!e#gnt) @ The power otaxation is inherent in sovereignty as an inciden

or attribute thereof, being essential to theexistence of every government. It can beexercised by the government even if theonstitution is entirely silent on the subject.

a.onstitutional provisions relating to the poweof taxation do not operate as grants of the poweto the government. They merely constitutelimitations upon a power which would otherwisebe practically without limit.

b.$hile the power to tax is not expresslyprovided for in our constitutions, its existence isrecogni#ed by the provisions relating to taxation.

In the case of /actan Cebu Internationa

Airport Authority vs /arcos, #ept. !!, !**-,as anincident of sovereignty, the power to tax habeen described as "unlimited in its rangeacknowledging in its very nature no limits, so thasecurity against its abuse is to be found only inthe responsibility of the legislative which imposesthe tax on the constituency who are to pay it.'

2.Leg#slat#-e #n c"a!acte!@ The power to tax isexclusively legislative and cannot be exercised bythe executive or judicial branch of thegovernment.


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3.S+ect to const#tt#onal and #n"e!entl#*#tat#ons@ *lthough in one decided case theSupreme ourt called it an awesome power, thepower of taxation is subject to certain limitations.=ost of these limitations are specifically providedin the onstitution or implied therefrom while the

rest are inherent and they are those which springfrom the nature of the taxing power itselfalthough, they may or may not be provided in theonstitution.

Scope of Leg#slat#-e Ta$#ng Po'e! 4S * 5 D *=7

1.s+ects of Ta$at#on(the persons, property oroccupation etc. to be taxed31.a*ont o! !ate of t"e ta$3.p!poses fo! '"#c" ta$es s"all +e le-#ed

p!o-#ded t"e) a!e p+l#c p!poses4.appo!t#on*ent of t"e ta$5.s#ts of ta$at#on6.*et"od of collect#on

Is t"e Po'e! to Ta$ t"e Po'e! to %est!o)7

In the case of Churchill, et al. vsConcepcion (" Phil *-*&it has been ruled that!

The power to impose taxes is one sounlimited in force and so searching in extent sothat the courts scarcely venture to declare that itis subject to any restriction whatever, except

such as rest in the discretion of the authoritywhich exercise it.


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Aspects of Ta$at#on

1.Le-) @ determination of the persons, propertyor excises to be taxed, the sum or sums to beraised, the due date thereof and the time andmanner of levying and collecting taxes (strictly

speaking, such refers to taxation3

2.Collect#on @ consists of the manner ofenforcement of the obligation on the part of thosewho are taxed. (this includes payment by thetaxpayer and is referred to as tax administration3

The two processes together constitute the"ta$at#on s)ste*'.

Bas#c P!#nc#ples of a Sond Ta$ S)ste* 40*T7

1.9#scal Adeac) the sources of tax revenueshould coincide with, and approximate the needsof government expenditure.


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C.As to P!pose

1.Gene!al:9#scal:Re-ene @ tax imposed for thegeneral purposes of the government, i.e., to raiserevenues for governmental needs.

6xamples! income taxes, H*T, and almost

all taxes

2.Spec#al:Reglato!)@ tax imposed for specialpurposes, i.e., to achieve some social oreconomic needs.

6xamples! educational fund tax under )eal5roperty Taxation

D.As to ;eas!e of Appl#cat#on

1.Spec#f#c Ta$ @ tax imposed per head, unit ornumber, or by some standard of weight ormeasurement and which reAuires no assessment

beyond a listing and classification of the subjectsto be taxed.

6xamples! taxes on distilled spirits, wines,and fermented liAuors

2.Ad


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Ta$ -s Spec#alAssess*ent1.imposed on persons,property and excise

1.levied only on land

.personal liability of

the person assessed

.not a personal liability

of the person assessed,i.e. his liability is limitedonly to the landinvolved

>.based on necessity aswell as on benefitsreceived

>.based wholly onbenefits

8.general application(see *postolic 5refectvs Treas. 9f Jaguio, 215hil ?823

8.exceptional both astime and place

I*po!tant Po#nts to Cons#de!

Rega!d#ng Spec#al Assess*ents&1.Since special assessments are not taxes withinthe constitutional or statutory provisions on taxexemptions, it follows that the exemption underSec. (>3, *rt. HI of the onstitution does notapply to special assessments.

2.%owever, in view of the exempting proviso in#ec. " of the +ocal Government Coe,

properties which are actually, irectly anexclusively use for reli3ious, charitable aneucational purposes are not exactly exemptfrom real property taxes but are exempt from theimposition of special assessments as well.( see

Aban&> .The general rule is that an exemption fromtaxation does not include exemption from specialassessment.

d.L#cense o! Pe!*#t 9ee -s Ta$L#cense o! Pe!*#t fee @ is a charge

imposed under the police power for the purposesof regulation.

Ta$ -sL#cense:Pe!*#t 9ee1.enforced contribution

assessed by sovereignauthority to defraypublic expenses

1.legal compensation or

reward of an officer forspecific purposes

.for revenue purposes .for regulationpurposes

>.an exercise of thetaxing power

>.an exercise of thepolice power

8.generally no limit inthe amount of tax to bepaid

8.amount is limited tothe necessary expensesof inspection andregulation

?.imposed also on ?.imposed on the right

persons and property to exercise privilege/.non-payment doesnot necessarily makethe act or businessillegal

/.non-payment makethe act or businesillegal

T"!ee /#nds of l#censes a!e!ecogn#>ed #n t"e la'&1.+icenses for the regulation of usefuoccupations..+icenses for the regulation or restriction of nonuseful occupations or enterprises>.+icenses for revenue only

I*po!tance of t"e d#st#nct#ons+et'een ta$ and l#cense fee&1.Some limitations apply only to one and not tothe other, and that exemption from taxes may

not include exemption from license fees.2.The power to regulate as an exercise of policepower does not include the power to impose feesfor revenue purposes. (see American /ail +ine vsCity of 8utuan, +4!-$, /ay "!, !*-$ anrelate cases&>.*n extraction, however, maybe considered botha tax and a license fee.8.Jut a tax may have only a regulatory purpose.

5.The general rule is that the imposition is a tax iits primary purpose is to generate revenue andregulation is merely incidentalC but if regulation isthe primary purpose, the fact that incidentally

revenue is also obtained does not make theimposition of a tax. (see Pro3ressive9evelopment Corp. vs :ue'on City, !$ #CA-*&

e.%e+t -s Ta$ebt is based upon juridical tie, created by

law, contracts, delicts or Auasi-delicts betweenparties for their private interest or resulting fromtheir own acts or omissions.

Ta$ -s %e+t1.based on law 1.based on contracts

express or implied.generally, cannot beassigned

.assignable

>.generally payable inmoney

>.may be paid in kind

8.generally not subjectto set-off orcompensation

8.may be subject toset-off or compensation

?.imprisonment is asanction for non-payment of tax exceptpoll tax

?.no imprisonment fonon-payment of debt


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/.governed by specialprescriptive periodsprovided for in the Taxode

/.governed by theordinary periods ofprescriptions

2.does not drawinterest except only

when delinAuent

2.draws interest whenso stipulated, or in case

of default

Gene!al Rle&Taxes are not subject to set-off orlegal compensation. The government and thetaxpayer are not creditors and debtors or eachother. 9bligations in the nature of debts are dueto the government in its corporate capacity, whiletaxes are due to the government in its sovereigncapacity (Philex /inin3 Corp. vs CI, * #CA-)$; epublic vs /ambulao +umber Co., - #CA-&

E$cept#on& $here both the claims of the

government and the taxpayer against each otherhave already become due and demandable aswell as fully liAuated. (see 9omin3o vs Garlitos, +4!)*5, 6une *, !*-"&

Pe!t#nent Case&

P"#le$ ;#n#ng Co!p. -s Co**#ss#one! ofInte!nal Re-ene;.).


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of theprivilegesof living inanorgani#edsociety

0amnumabsueinBuria1 isattained

>O>4I/PAI/=>2 O7 CO>2AC2#- theimpairmentrule subsist

- contractmay beimpaired

- contracts maybe impaired

2A>#7= O7 POP=2 IGD2#- taxes paidbecomepart ofpublicfunds

- no transferbut onlyrestraint onthe exerciseof propertyright exists

- property istaken by thegov&t uponpayment of justcompensation

#COP=- affects all

persons,propertyand excise

- affects all

persons,property,privileges,and evenrights

- affects only

the particularpropertycomprehended

8A#I#- publicnecessity

- publicnecessityand theright of thestate andthe public toself-

protectionand self-preservation

-publicnecessity,private propertyis taken forpublic use

A


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b.The term 0public purpose1 is synonymouswith 03overnmental purpose1; a purposeaffecting the inhabitants of the state ortaxing district as a community and notmerely as individuals.

c. * tax levied for a private purposeconstitutes a taking of property without dueprocess of law.

d. The purposes to be accomplished bytaxation need not be exclusively public. *lthoughprivate individuals are directly benefited, the taxwould still be valid provided such benefit is onlyincidental.

e. The test is not as to who receives themoney, but the character of the purpose forwhich it is expendedC not the immediate result ofthe expenditure but rather the ultimate.

g. In the imposition of taxes, public purposeis presumed.

2.Test #n dete!*#n#ng P+l#c P!poses #nta$

a. %t) Test @ whether the thing to bethreatened by the appropriation of public revenueis something which is the duty of the State, as agovernment.

b. P!o*ot#on of Gene!al Welfa!e Test @whether the law providing the tax directlypromotes the welfare of the community in eAualmeasure.

Bas#c P!#nc#ples of a Sond Ta$ S)ste*@9AT

a. 9#scal Adeac) the sources of tax revenueshould coincide with, and approximate the needsof government expenditure.


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4.Ta$ Leg#slat#on -#s(=(-#s Ta$Ad*#n#st!at#on ( 6very system of taxationconsists of two parts!

a. the elements that enter into theimposition of the tax 4S * 5 D * =7, or taxregulationC and

b. the steps taken for its assessment andcollection or tax administrationIf what is delegated is tax legislation, the

delegation is invalidC but if what is involved isonly tax administration, the non-delegability ruleis not violated.

. Te!!#to!#al#t) o! S#ts of Ta$at#on

0.I*po!tant Po#nts to Cons#de!&

a.Territoriality or Situs of Taxation means0place of taxation1depending on the nature

of taxes being imposed.b.It is an inherent mandate that taxationshall only be exercised on persons,properties, and excise within the territory ofthe taxing power because!

b.13 Tax laws do not operate beyond acountry&s territorial limit.b.3 5roperty which is wholly andexclusively within the jurisdiction ofanother state receives none of theprotection for which a tax is supposed tobe compensation.

c.%owever, the fundamental basis of theright to tax is the capacity of the governmentto provide benefits and protection to theobject of the tax. * person may be taxed,even if he is outside the taxing state, wherethere is between him and the taxing state, aprivity of relationship justifying the levy.

1.9acto!s to Cons#de! #n dete!*#n#ngS#ts of Ta$at#on

a.kind and lassification of the Taxb.location of the subject matter of the taxc.domicile or residence of the persond.citi#enship of the persone.source of incomef.place where the privilege, business oroccupation is being exercised

.E$e*pt#on of t"e Go-e!n*ent f!o* Ta$es

0.I*po!tant Po#nts to Cons#de!&Reasons fo! E$e*pt#ons&a.13 To levy tax upon public propertywould render necessary new taxes onother public property for the payment of

the tax so laid and thus, the governmenwould be taxing itself to raise money topay over to itselfCa.3 In order that the functions of thegovernment shall not be unduly impedeanda.>3 To reduce the amount of money thahas to be handed by the government inthe course of its operations.

2.Mnless otherwise provided by law, theexemption applies only to government entitiesthrough which the government immediately anddirectly exercises its sovereign powers (InfantryPost =xchan3e vs Posaas, % Phil )--&>.3 foreign government may not be suedwithout its consent so that it is useless to assessthe tax since it cannot be collected

b.83 reciprocity among states

Const#tt#onal L#*#tat#ons

1.%e P!ocess of La'

a.Bas#s& #ec. ! Art. " 0>o person shall beeprive of life, liberty or property withouue process of law x x x.'

Re#s#tes &1. The interest of the public generally

as distinguished from those of aparticular class reAuire theintervention of the stateC

. The means employed must bereasonably necessary to theaccomplishment for the purposeand not unduly oppressiveC


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>. The deprivation was done underthe authority of a valid law or ofthe constitutionC and

8. The deprivation was done aftercompliance with fair andreasonable method of procedureprescribed by law.

In a string of cases, the Supreme ourtheld that in order that due process of law mustnot be done in an arbitrary, despotic, capricious,or whimsical manner.

.Eal P!otect#on of t"e La'

a.Bas#s& #ec.! Art. " 0 xxx >or shall anyperson be enie the eual protection of thelaws.I*po!tantPo#nts to Cons#de!!

1. 6Aual protection of the laws

signifies that all persons subject to legislationshall be treated under circumstances andconditions both in the privileges conferred andliabilities imposed

. This doctrine prohibits classlegislation which discriminates against some andfavors others.

b.)eAuisites for a Halid lassification1. =ust not be arbitrary . =ust not be based upon substantial

distinctions>. =ust be germane to the purpose of law.8. =ust not be limited to exiting conditions

onlyC and ?. =ust play eAually to all members of a

class.

>.?n#fo!*#t), E#ta+#l#t) andP!og!ess#-#t) of Ta$at#on

a.Bas#s& Sec. (13 *rt. HI. The rule oftaxation shall be uniform and eAuitable. Theongress shall evolve a progressive systemof taxation.b. I*po!tant Po#nts to Cons#de!&1. ?n#fo!*#t) (eAuality or eAual

protection of the laws3 means all taxable articlesor kinds or property of the same class shall betaxed at the same rate. * tax is uniform when thesame force and effect in every place where thesubject of it is found.

. E#ta+lemeans fair, just, reasonableand proportionate to one&s ability to pay.

>. P!og!ess#-e s)ste* of Ta$at#onplaces stress on direct rather than indirect taxes,or on the taxpayers& ability to pay

8. IneAuality which results in singling outone particular class for taxation or exemption

infringes no constitutional limitation. (seeCommissioner vs. +in3ayen Gulf =lectric, !-#CA $&

?. The rule of uniformity does not call foperfect uniformity or perfect eAuality, becausethis is hardly attainable.

8.9!eedo* of Speec" and of t"e P!ess

a.Bas#s& Sec. 8 *rt. III.


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. The non-impairment rule, however,does not apply to public utility franchise since afranchise is subject to amendment, alteration orrepeal by the ongress when the public interestso reAuires.

2.Non(#*p!#son*ent fo! non(pa)*ent ofpoll ta$

a.Bas#s&Sec. B *rt. III. ". The word "exclusively' means"primarily&.

8. The exemption is not limited toproperty actually indispensable but extends to

facilities which are incidental to and reasonablynecessary for the accomplishment of saidpurposes.

?. The constitutional exemptionapplies only to property tax.

/. %owever, it would seem that undeexisting law, gifts made in favor or religiouscharitable and educational organi#ations wouldnevertheless Aualify for donor&s gift taxexemption. (Sec. 1B1(3(>3,


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assessment, or toll or any penalty imposed inrelation thereto.'

1>. Ta$ E$e*pt#ons of Re-enes andAssets, #ncld#ng g!ants, endo'*ents,donat#ons o! cont!#+t#ons to Edcat#onalInst#tt#ons

a.Bas#s& Sec. 8(83 *rt. OIH. "Subject to theconditions prescribed by law, all grants,endowments, donations or contributions usedactually, directly and exclusively foreducational purposes shall be exempt fromtax.'b.I*po!tant Po#nts to Cons#de!&

1. The exemption granted to non-stock, non-profit educational institution covers income,property, and donor&s taxes, and custom duties.. To be exempt from tax or duty, the revenue,

assets, property or donation must be usedactually, directly and exclusively for educationalpurpose.>. In the case or religious and charitableentities and non-profit cemeteries, the exemptionis limited to property tax.8. The said constitutional provision grantingtax exemption to non-stock, non-profiteducational institution is self-executing.?. Tax exemptions, however, of proprietary (forprofit3 educational institutions reAuire priorlegislative implementation. Their tax exemption isnot self-executing./. +ands, Juildings, and improvementsactually, directly, and exclusively used foreducational purposed are exempt from propertytax, whether the educational institution isproprietary or non-profit.

c.%epa!t*ent of 9#nance O!de! No. 03(F, dated %ec. 06, 0F

The following are some of the highlights of the90 order governing the tax exemption of non-stock, non-profit educational institutions!

1. The tax exemption is not only limited torevenues and assets derived from strictly schooloperations like income from tuition and othermiscellaneous feed such as matriculation, library,)9T, etc. fees, but it also extends to incidentalincome derived from canteen, bookstore anddormitory facilities.

. In the case, however, of incidental income,the facilities mentioned must not only be ownedand operated by the school itself but suchfacilities must be located inside the schoolcampus. anteens operated by mereconcessionaires are taxable.

>. Income which is unrelated to schoooperations like income from bank deposits, trustfund and similar arrangements, royaltiesdividends and rental income are taxable.

8. The use of the school&s income or assetsmust be in consonance with the purposes fowhich the school is createdC in short, use must beschool-related, like the grant of scholarshipsfaculty development, and establishment oprofessional chairs, school building expansionlibrary and school facilities.

Ot"e! Const#tt#onal P!o-#s#ons !elated toTa$at#on

1.S+ect and T#tle of B#lls @Sec. 16@00F Const#tt#on

"6very Jill passed by ongress shalembrace only one subject which shall beexpressed in the title thereof.'

in the Tolentino 6-H*T case, supra, the 6-vator the 6xpanded Halue *dded Tax +aw ()*221/3 was also Auestioned on the ground thathe constitutional reAuirement on the title of abill was not followed.

.Po'e! of t"e P!es#dent to


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minister, or other religious teacher or dignitary assuch except when such priest, preacher, ministeror dignitary is assigned to the armed forces or toany penal institution, or government orphanageor leprosarium.'

?.Ta$es le-#ed fo! Spec#al P!pose @Sec.1@3, A!t. o.**))-, /ar. "!, !**"&

/.Allot*ent to Local Go-e!n*ents

Bas#s& Sec. 6, A!t. X of t"e 0FConst#tt#on

"+ocal ;overnment units shall have ajust share, as determined by law, in thenational taxes which shall be automaticallyreleased to them.'

I


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c.Tang#+le Pe!sonal p!ope!t)@ taxable inthe state where it has actual situs @ where itis physically located. *lthough the ownerresides in another jurisdiction.

Rle of Le$ Re# S#tae

d.Intang#+le Pe!sonal P!ope!t) @ situs orpersonal property is the domicile of theowner, in accordance with the principle;OBILIA SE2??NT?R PERSONA;, saidprinciple, however, is not controlling when itis inconsistent with express provisions ofstatute or when justice demands that itshould be, as where the property has in facta situs elsewhere. (see Eells 7ar3o 8anH v.Collector $5 PDI+ "%; Collector v. 7isher +4!!-, 6anuary, !*-!&

e.Inco*e @ properly exacted from personswho are residents or citi#ens in the taxing

jurisdiction and even those who are neitherresidents nor citi#ens provided the income isderived from sources within the taxing state.

f.Bs#ness, Occpat#on, and T!ansact#on@ power to levy an excise tax depends uponthe place where the business is done, of theoccupation is engaged in of the transactionnot place.

g.G!at#tos T!ansfe! of P!ope!t) @transmission of property from donor todonee, or from a decedent to his heirs maybe subject to taxation in the state where thetransferor was a citi#en or resident, or wherethe property is located.


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>.E$e*pt#ons

4.T!eat#eswith other States?.P!#nc#ple of Rec#p!oc#t)

Const#tt#onal#t)

ouble Taxation in its stricter sense isundoubtedly unconstitutional but that in thebroaersense is not necessarily so.Gene!al Rle& 9ur onstitution does notprohibit double taxationC hence, it may not beinvoked as a defense against the validity of taxlaws.

a.$here a tax is imposed by the at#on, defined @ the reduction inthe price of the taxed object eAual to thecapitali#ed value of future taxes which thepurchaser expects to be called upon to pay

3.T!ansfo!*at#on@ The method whereby themanufacturer or producer upon whom the tax hasbeen imposed, fearing the loss of his market if heshould add the tax to the price, pays the tax andendeavors to recoup himself by improving hiprocess of production thereby turning out hi

units of products at a lower cost.

4.Ta$ E-as#on@ is the use of the taxpayer ofillegal or fraudulent means to defeat or lessen thepayment of a tax.

Ind#c#a of 9!ad #n Ta$at#ona.0ailure to declare for taxation purposes true

and actual income derived from business for twoconsecutive years, and

b.Substantial underdeclaration of income taxreturns of the taxpayer for four consecutive years

couple with overstatement of euction.

6vasion of the tax takes place only whenthere are no proceeds. 6vasion of Taxation istantamount, fiscally speaking, to the absenceof taxation.

5.Ta$ A-o#dance@ is the use by the taxpayeof legally permissible alternative tax rates omethod of assessing taxable property or incomein order to avoid or reduce tax liability.


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Tax *voidance is not punishable by law, ataxpayer has the legal right to decrease theamount of what otherwise would be his taxesor altogether avoid by means which the lawpermits.

%#st#nct#on +et'een Ta$ E-as#on andA-o#dance

Ta$ E-as#on -s Ta$A-o#danceaccomplished bybreaking the letterof the law

accomplished bylegal procedures ormeans which maybecontrary to the intentof the sponsors of thetax law butnevertheless do notviolate the letter of

the law

.It implies a waiver on the part of thegovernment of its right to collect what otherwisewould be due to it, and in this sense is prejudicialthereto.

8.It is not necessarily discriminatory so long asthe exemption has a reasonable foundation orrational basis.

.Rat#onale of ta$ E$e*pt#on5ublic interest would be subserved by theexemption allowed which the law-making bodyconsiders sufficient to offset monetary lossentailed in the grant of the exemption. (CI vs8othelo #hippin3 Corp., +4!-"", 6une *,!*-$; CI vs PA+, +45*-5, Oct. "!, !*-)&

.G!onds fo! Ta$ E$e*pt#ons1.=ay be based on a contract in which case,

the public represented by the ;overnment issupposed to receive a full eAuivalent therefore

.=ay be based on some ground of publicpolicy, such as, for example, to encourage newand necessary industries.

>.=ay be created in a treaty on grounds oreciprocity or to lessen the rigors of internationadouble or multiple taxation which occur wherethere are many taxing jurisdictions, as in thetaxation of income and intangible personaproperty

6.E#t), not a g!ond fo! Ta$ E$e*pt#onThere is no tax exemption solely on the

ground of eAuity, but eAuity can be used as abasis for statutory exemption. *t times the lawauthori#es condonation of taxes on eAuitableconsiderations. (Sec 2/, 22, +ocal ;overnmenode3

0.#nds of Ta$ E$e*pt#ons

1.*s to+as#s

a.Const#tt#onal E$e*pt#ons Immunitiesfrom taxation which originate from theonstitution

b.Statto!) E$e*pt#ons Those whichemanate from +egislation

2.*s to fo!*a.E$p!ess E$e*pt#on $henever expressly

granted by organic or statute of lawb.I*pl#ed E$e*pt#on 6xist wheneve

particular persons, properties or excises aredeemed exempt as they fall outside the scope o

the taxing provision itself

3.*s to e$tenta.Total E$e*pt#on onnotes absolute

immunityb.Pa!t#al E$e*pt#on 9ne where collection

of a part of the tax is dispensed with

;.P!#nc#ples Go-e!n#ng t"e Ta$ E$e*pt#on

1.6xemptions from taxation are highlydisfavored by law, and he who claims anexemption must be able to justify by the clearesgrant of organic or statute of law. (Asiatic

Petroleum vs +lanes, * PDI+ --; Collector oInternal evenue vs. /anila 6ocHey Club, *) PDI+-$5&

2.%e who claims an exemption must justifythat the legislative intended to exempt him bywords too plain to be mistaken. (@isayan Cebu2erminal vs CI, +4!*%"5, 7eb. $, !*-%&

>.%e who claims exemptions shouldconvincingly proved that he is exempt

4.Tax exemptions must be strictly construed(Phil. Acetylene vs CI, +4!*$5$, Au3. !$, !*-$&


18/67


5.Tax 6xemptions are not presumed. (+eala=lectric Co. vs CI, +4!-), Apr. "5, !*-"&

6.onstitutional grants of tax exemptions areself-executing (Opinion >o. !"5, !*)$, #ec. Of

6ustice&2.Tax exemption are personal.

.eductions for income tax purposes partakeof the nature of tax exemptions, hence, they arestrictly construed against the tax payer

9.* tax amnesty, much like a tax exemption isnever favored or presumed by law (CI vs CA,G.. >o. !5)%$-, 6an. 5, !***&

1B.The rule of strict construction of taxexemption should not be applied to organi#ationsperforming strictly religious, charitable, andeducational functions


19/67


c.6xemptions in favor of the ;overnment, itspolitical subdivisionsC

d.6xemptions to traditional exemptees, suchas, those in favor of charitable institutions.

/.The tax laws are presumed valid.

2.The power to tax is presumed to exist.

TAX A%;INISTRATION AN% EN9ORCE;ENT

Agenc#es In-ol-ed #n Ta$ Ad*#n#st!at#on

1. Jureau of Internal )evenue and theJureau of ustoms for internal revenueand customs law enforcement. It isnoteworthy to note that the JI) islargely decentrali#ed in that a great

extent of tax enforcement duties aredelegated to the )egional irectorsand )evenue istrict 9fficers.

. 5rovincial, ity and =unicipalassessors and treasures for local andreal property taxes.

Agents and %ept#es fo! Collect#on ofNat#onal Inte!nal Re-ene Ta$es

Mnder Sec. 1 of the 12 o. --)"), !% April !*)).&

E$cept#ons&

The ourt ruled in Commissioner oInternal evenue vs. C.A., et. al. G.. >o. !!$*),- 7eb !**$ thatlike other principles of law, thenon-application of estoppel to the governmenadmits of ex'eptions in the interest of


20/67


(usti'e and fair play) as where in(usti'e willresult to the taxpayer*

Estoppel Aga#nst t"e Ta$pa)e!

$hile the principle of estoppel may not beinvoked against the government, this is notnecessarily true in case of the taxpayer. In CI vs.#uyac, !5 Phil )!*, the taxpayer made severalreAuests for the reinvestigation of its taxliabilities such that the government, acceding tothe taxpayers reAuest, postponed the collectionof its liability. The taxpayer cannot later on bepermitted to raise the defense of prescriptioninasmuch as his previous reAuests forreinvestigation have the effect of placing him inestoppel.

Nature and +inds of ssessments

n assessment is the offi'ial a'tion ofan administrative offi'er determinin! theamount of tax due from a taxpayer) or itmay be the noti'e to the effe't that theamount therein stated is due from thetaxpayer that the payment of the tax ordefi'ien'y stated therein* (8isaya +an2ransportation Co. vs CI, !5% Phil !"")&

Class#f#cat#ons&

a. Self(assess*ent( Tax is assessed bythe taxpayer himself. The amount isreflected in the tax return that is filedby him and the tax is paid at the timehe files his return. (#ec. %- JAK L!K,!**$ >IC&

b. %ef#c#enc) Assess*ent- This is anassessment made by the tax assessorwhereby the correct amount of the taxis determined after an examination orinvestigation is conducted. The liabilityis determined and isC therefore,

assessed for the following reasons!1. The amount ascertainedexceeds that which is shown astax by the taxpayer in hisreturnC

. IC&

c. Illegal and o!5$)!, !5 6uly !**)&

. *ssessments should not be based onpresumptions no matter how logical thepresumption might be. In order to stand thetest of judicial scrutiny it must be based ona'tual fa'ts.

>. *ssessment is discretionary on the parof the ommissioner. Mandamus will not lieto 'ompel him to assess a tax afterinvesti!ation if he finds no !round toassess* Mandamus to 'ompel theCommissioner to assess will result in theen'roa'hment on exe'utive fun'tions,/eralco #ecuirities Corp. vs. #avellano, +4"-!)! an +4"-$), " Oct !**&.


21/67


=xceptF

$he -IR Commissioner may be'ompelled to assess by mandamus if inthe exer'ise of his dis'retion there iseviden'e of arbitrariness and !raveabuse of dis'retion as to !o beyond

statutory authority ,/acea vs. /acarai3,G.. >o. ))*, ) 6une !**".*

8. The authority vested in the ommissionerto assess taxes may be delegated. nassessment si!ned by an employee forand in behalf of the Commissioner ofInternal Revenue is valid* /owever) it issettled that the power to ma%e finalassessments 'annot be dele!ated* $he

person to whom a duty is dele!ated'annot lawfully dele!ate that duty to

another* ,City +umber vs. 9omin3o, +4!)-!!,"5 6an !*-&.

?. *ssessments must be directed to the rightparty. /en'e) if for example) the taxpayerbein! assessed is an estate of ade'edent) the administrator should bethe party to whom the assessmentshould be sent,epublic vs. ela ama, +4!!5), * >ov. !*--&) and not the heirs ofthe de'edent

;eans E*plo)ed #n t"e Assess*ent of Ta$es

A. E$a*#nat#on of Ret!ns& ConfidentialityRule

The Tax ode reAuires that after the returnis filed, the ommissioner or his duly authori#edrepresentative shall examine the same andassess the correct amount of tax. The tax or thedeficiency of the tax so assessed shall be paidupon notice and demand from the ommissioneror from his duly authori#ed representative. *ny

return, statement or declaration filed in any officeauthori#ed to receive the same shall not bewithdrawn. %owever, within three (>3 days fromthe date of such filing, the same may bemodified, changed or amended, provided that nonotice for audit or investigation of such return,statement or declaration has in the meantimebeen actually served upon the taxpayer. (#ec-JAK, !**$ >IC&

*lthough Sec. 21 of the 12 IC&

-est Eviden'e 0btainable refers to anydata, record, papers, documents, or any evidencegathered by internal revenue officers fromgovernment offices or agencies, corporationsemployers, clients or patients, tenants, lesseesvendees and from all other sources, with whomthe taxpayer had previous transactions or from


22/67


whom he received any income, after ascertainingthat a report reAuired by law as basis for theassessment of any internal revenue tax has notbeen filed or when there is reason to believe thatany such report is false, incomplete or erroneous.

* case in point on the use of the bestevidence obtainable is #y Po vs C2A.In that case,there was a demand made by the ommissioneron the Silver up $ine ompany owned bypetitioner&s deceased husband 5o Jien Seng. Thedemand was for the taxpayer to submit to the JI)for examination the factory&s books of accountsand records, so JI) investigators raided thefactory and sei#ed different brands of alcoholicbeverages.

The investigators, on the basis of thewines sei#ed and the sworn statements of thefactory&s employees on the Auantity of rawmaterials consumed in the manufacture of liAuor,assessed the corresponding deficiency incomeand specific taxes. The Supreme ourt, onappeal, upheld the legality of the assessment.

C* Inventory1$a%in!) Surveillan'e andPresumptive "ross Sales and Re'eipts

The ommissioner is authori#ed at any timeduring the taxable year to order the

inventory-taking of goods of any taxpayer asa basis for assessment.

If there is reason to believe that a personis not declaring his correct income, sales orreceipts for internal revenue tax purposes, hisbusiness operation may be placed underobservation or surveillance. The finding made inthe surveillance may be used as a basis forassessing the taxes for the other months orAuarters of the same or different taxable years.(#ec. - JCK, !**$ >IC&

2* $ermination of $axable Period

The ommissioner shall declare the tax periodof a taxpayer terminated at any time when itshall come to his knowledge!

a. That the taxpayer is retiring frombusiness subject to taxC

b. That he intends to leave the5hilippines or remove his propertytherefromC

c. That the taxpayer hides or conceals hipropertyC or

d. That he performs any act tending toobstruct the proceedings for thecollection of the tax for the past ocurrent Auarter or year or to render thesame totally or partly ineffectiveunless such proceedings are begunimmediately.

The written decision to terminate the taxperiod shall be accompanied with a reAuest fothe immediate payment of the tax for the periodso declared terminated and the tax for thepreceding year or Auarter, or such portion thereoas may be unpaid. Said taxes shall be due andpayable immediately and shall be subject to althe penalties prescribed unless paid within thetime fixed in the demand made by theommissioner (#ec. - JK, !**$ >IC3

E. 9#$#ng of Real P!ope!t) IC&.

9. In#!) #nto Ban/ %epos#ts

6xamination of bank deposits enables theommissioner to assess the correct tax liabilitiesof taxpayers. %owever, bank deposits areconfidential under ).*. 18B?.


23/67


writin3 his privilege under ).*. 18B?, or underother general or special laws, and such waivershall constitute the authority of the ommissionerto inAuire into bank deposits of the taxpayer(#ec. -J7K, !**$ >IC&.

Net Wo!t" ;et"od #n In-est#gat#on

The basis of using the ,12


24/67


@c T"at t"e!e #s a f#$ed sta!t#ng po#nto! open#ng net 'o!t", #.e., a date+eg#nn#ng '#t" a ta$a+le )ea! o!p!#o! to #t, at '"#c" t#*e t"eta$pa)e!Ds f#nanc#al cond#t#on can

+e aff#!*at#-el) esta+l#s"ed '#t"so*e def#n#teness.

This is an essentialcondition, considered to be thecornerstone of a net worth case. Ifthe starting point or opening networth is proven to be wrong, thewhole superstructure usually fails.

The courts have uniformly stressedthat the validity of the result of anyinvestigation under this methodwill depend entirely upon a correctopening net worth.

@d T"at t"e c#!c*stances a!e sc"t"at t"e *et"od does not !eflectt"e ta$pa)e!Ds #nco*e '#t"!easona+le acc!ac) and ce!ta#nt)and p!ope! and st add#t#ons ofpe!sonal e$penses and ot"e! non(dedct#+le e$pend#t!es 'e!e*ade and co!!ect, fa#! ande#ta+le c!ed#t adst*ents 'e!eg#-en +) 'a) of el#*#nat#ng non(ta$a+le #te*s. ,Properad(ustments to 'onform to thein'ome tax laws.

5roper adjustments for non-deductible items must be made. Thefollowing non-deductibles, as the casemay be, must be added to theincrease or decrease in the net worth!

1. personal, living or family

expensesC. premiums paid on any life

insurance policyC>. losses from sales or exchanges

of property between membersof the familyC

8. income taxes paidC?. estate, inheritance and gift

taxesC/. other non-deductible taxesC2. election expenses and other

expenses against public policyC

. non-deductible contributionsC. gifts to othersC1B. net capital loss, and the like

9n the other hand, non-taxableitems should be deducted therefrom

These items are necessaryadjustments to avoid the inclusion owhat otherwise are non-taxablereceipts. They are!

1. inheritance, gifts and beAuestsreceivedC

. non-taxable capital gainsC>. compensation for injuries o

sicknessC8. proceeds of life insurance

policiesC

?. sweepstakes winningsC/. interest on governmen

securities and the like

Increase in net worth are notaxable if they are shown not to be theresult of unreported income but to bethe result of the correction of errors inthe taxpayer&s entries in the booksrelating to indebtedness to certaincreditors, erroneously listed althoughalready paid. (7ernane' DermanosInc. vs. CI, +4!%%!, "5 #ept. !*-*&

Enfo!ce*ent of 9o!fe#t!es and Penalt#es

Statto!) Offenses and Penalt#es

0. Add#t#ons to t"e Ta$

*dditions to the tax are incrementsto the basic tax incident due to thetaxpayer&s non-compliance with certainlegal reAuirements, like the taxpayer&srefusal or failure to pay taxes andKor otheviolations of taxing provisions.

*dditions to the tax consist of the!

(13 civil penalty, otherwise knownas surchar3e,which may either be ?N o


25/67


?B N of the tax depending upon thenature of the violationC

(3 interest either for a deficiencytax or delinAuency as to paymentC

(>3 other civil penalties oradministrative fines such as for failure tofile certain information returns andviolations committed by withholdingagents. (#ecs. $ to %, !**$ >IC&

Gene!al Cons#de!at#ons on t"eAdd#t#on to ta$

a. *dditions to the tax or deficiencytax apply to all taxes, fees, and charges

imposed in the Tax ode.

b. The amount so added to the taxshall be collected at the same time, inthe same manner, and as part of the tax.

c. If the withholding agent is thegovernment or any of its agencies,political subdivisions or instrumentalities,or a government owned or controlledcorporation, the employee thereof

responsible for the withholding andremittance of the tax shall be personallyliable for the additions to the taxprescribed (#ec. $JbK, !**$ >IC& suchas the ?N surcharge and the BNinterest per annum on the delinAuency(#ecs. ) an * JCK, !**$ >IC&

S!c"a!ge

The payment of the surcharge is

manatory and the ommissioner ofInternal )evenue is not vested with anyauthority to waive or dispense with thecollection thereof. In one case, theSupreme ourt held that the fact that onaccount of riots directed against thehinese on certain dates, they wereprevented from paying their internalrevenue taxes on time, does not authori#ethe ommissioner to extend the timeprescribed for the payment of taxes or toaccept them without the additional

penalty (+im Co Chui vs. Posaas, $ Phi-5&

The ommissioner is not vestedwith any authority to waive or dispense

with the collection therof.(CI vs. CA,

supra&. The penalty and interest are nopenal but compensatory for theconcomitant use of the funds by thetaxpayer beyond the date when he isupposed to have paid them to the;overnment.(Philippine efinin3 Companyvs. C.A., G.. >o. !!))$*, ) /ay !**-&.

*n extension of time to pay taxesgranted by the ommissioner does noexcuse payment of the surcharge (CI vsCu


26/67


no surcharge will be added to theamount of tax due on the return. Insuch case, in order to avoid theimposition of the surcharge, thetaxpayer must make a statementshowing all the facts alleged asreasonable causes for failure to file thereturn on time in the form of anaffidavit, which should be attached tothe return.

Inte!est

This is an increment on any unpaidamount of tax, assessed at the rate oftwenty percent (BN3 per annum, or suchhigher rate as may be prescribed y rulesand regulations, from the date prescribed

for payment until the amount is fully paid.(#ec. * JAK, !**$ >IC&

Interest is classified into!

0. %ef#c#enc) #nte!est*ny deficiency in the tax due, as the

term is defined in this code, shall besubject to the interest of BN per annum,or such higher rate as may be prescribedby rules and regulations, which shall beassessed and collected from the dateprescribed for its payment until the fullpayment thereof (#ec. * J8K, !**$>IC&

1. %el#nenc) #nte!estThis kind of interest is imposed in case

of failure to pay!

(13 The amount of the tax due onany return reAuired to be filed,or

(3 The amount of the tax due forwhich no return is reAuired, or

(>3 * deficiency tax, or anysurcharge or interest thereonon the due date appearing inthe notice and demand of theommissioner.

3. Inte!est on E$tended Pa)*ent

Imposed when a person reAuired to paythe tax is Aualified and elects to pay the tax oninstallment under the provisions of the ode, but

fails to pay the tax or any installment thereof, oany part of such amount or installment on orbefore the date prescribed for its payment, owhere the ommissioner has authori#ed anextension of time within which to pay a tax or adeficiency tax or any part thereof. (#ec. *JK!**$ >IC&

Ad*#n#st!at#-e Offenses

1. 0ailure to 0ile ertain Information)eturns

. 0ailure of a $ithholding *gent toollect and )emit Taxes

>. 0ailure of a $ithholding *gent to)efund 6xcess $ithholding Tax

So!ces of !e-enes&1.Income tax. 6state Tax and dono&r tax>. H*T8. 9ther percentage taxes?. 6xcise tax/. ocumentary stamp taxes2.9ther as imposed and provided by JI)

)6=6I6S 90 T%6 ;9H6)


27/67


a. *ctual @ There is taking of possessionof personal property out of thetaxpayer into that of the government.

In case of intangible property.Taxpayer is also diverted of the powerof control over the property

b. onstructive @ The owner is merelyprohibited from disposing of hispersonal property.

*ctual vs. onstructive istraint=ade on the propertyonly of a delinAuenttaxpayer.

=ay be made on theproperty of anytaxpayer whetherdelinAuent or not

There is actual taking orpossession of theproperty.

Taxpayer is merelyprohibited fromdisposing of hisproperty.

6ffected by having a listof the distraint propertyor by service or warrantof distraint orgarnishment.

6ffected by reAuiringthe taxpayer to sign areceipt of the propertyor by leaving a list ofsame

*n immediate step forcollection of taxeswhere amount due isdefinite.

Such immediate step isnot necessaryC tax duemay not be definite orit is being Auestioned.

)eAuisites!

1. Taxpayer is delinAuent in the payment oftax.

. SubseAuent demand for its payment.>. Taxpayer must fail to pay delinAuent tax at

time reAuired.8. 5eriod with in to assess or collect has not

yet prescribed. In case of constructive distraint,

reAuisite no. 1 is not essential (seeSec. B/ T3

$hen remedy not available!

$here amount involved does not exceed51BB (Sec. B? T3.

In keeping with the provision on theabatement of the collection of tax as the cost ofsame might even be more than 51BB.

5rocedure!

1. Service of warrant of distraint upontaxpayer or upon person in possession otaxpayer&s personal property.

. 5osting of notice is not less than twoplaces in the municipality or city andnotice to the taxpayer specifying time andplace of sale and the articles distrained.

>. Sale at public auction to highest bidder8. isposition of proceeds of the sale.

$ho may effect distraint *mountInvolved

1. commissioner or his dueauthori#ed representative

. )9

In excess o51,BBB,BBB.BB51,BBB,BBB.BBor less

%ow *ctual istraint 6ffected

1. In case of Tangible 5roperty!

a. opy of an account of the propertydistrained, signed by the officerleft either with the owner or personfrom whom property was taken, athe dwelling or place of businessand with someone of suitable ageand discretion

b. Statement of the sum demanded.c. Time and place of sale.

. In case of intangible property!

a. Stocks and other securitiesServing a copy of the

warrant upon taxpayer and uponpresident, manager, treasurer oother responsible officer of theissuing corporation, company oassociation.

b. ebts and credits1. +eaving a copy of the warran

with the person owing the debts

or having in his possession suchcredits or his agent.

. $arrant shall be sufficienauthority for such person to payI) his credits or debts.

c. Jank *ccounts @ garnishment1. Serve warrant upon taxpaye

and president, managertreasurer or responsible officeof the bank.


28/67


. Jank shall turn over to I) somuch of the bank accounts asmay be sufficient.

%ow constructive istraint 6ffected

1. )eAuire taxpayer or person in possessionto

a. Sign a receipt covering propertydistrained

b. 9bligate him to preserve the sameproperties.

c. 5rohibit him from disposing theproperty from disposing theproperty in any manner, with outthe authority of the I).

. $here Taxpayer or person in possessionrefuses to sign!

a. 9fficer shall prepare list of theproperty distrained.

b. In the presence of two witnesses ofsufficient age and discretion, leavea copy in the premises whereproperty is located.

;rounds of onstructive istraint

1. Taxpayer is retiring from any businesssubject to tax.

. Taxpayer is intending to leave the5hilippinesC or

>. To remove his property there from.

8. Taxpayer hides or conceals his property.?. Taxpayer acts tending to obstruct

collection proceedings.

. $hen the amount of the bid for theproperty under distraint is not eAual to theamount of the tax or is very much lessthan the actual market value of articles,the I) or his deputy may purchase thedistrained property on behalf of thenational government.

+evy of )eal 5roperty

+evy @ *ct of sei#ure of real property in order toenforce the payment of taxes. Theproperty may be sold at public sale, i

after sei#ureC the taxes are not voluntarilypaid. The reAuisites are the same as that o

distraint.

5rocedure!

1. International )evenue officer shall preparea duly authenticated certificate showing

a. . Service of written notice to!a. The taxpayer, andb. ) where property is located.

8. *dvertisement of the time and place osale.

?. Sale at public auction to highest bidder./. isposition of proceeds of sale.

The excess shall be turned over toowner.

)edemption of property sold or forfeited

a. 5erson entitled! Taxpayer or anyone fohim

b. Time to redeem! one year from date osale or forfeiture- Jegins from registration of the deed o

sale or declaration of forfeiture.- annot be extended by the courts.

c. 5ossession pending redemption @ ownenot deprived of possession

d. 5rice! *mount of taxes, penalties andinterest thereon from date of delinAuencyto the date of sale together with intereson said purchase price at 1?N per annumfrom date of purchase to date oredemption.

istraint and +evy compared

1. Joth are summary remedies for collectionof taxes.

. Joth cannot be availed of where amouninvolved is not more than 51BB.


29/67


>. istraint @ personal property+evy @ real property

8. istraint @ forfeiture by government, notprovided+evy @ forfeiture by governmentauthori#ed where there is no bidder or thehighest bid is not sufficient to pay thetaxes, penalties and costs.

?. istraint @ Taxpayer no given the right ofredemption+evy @ Taxpayer can redeem propertieslevied upon and soldKforfeited to thegovernment.

. 0ailure to file notice of such lien in the

office of register of eeds, purchases orjudgment creditor.

8. estruction of the property subject to thelien.

In case and8, the taxpayer is still liable.

6nforcement of Tax +ien vs. istraint* tax lien is distinguished from disttraint in

that, in distraint the property sei#ed must be thaof the taxpayer, although it need not be theproperty in respect to the tax is assessed. Taxlien is directed to the property subject to the taxregardless of its owner.

. There must be acceptance of the offer in

settlement of the original claim.

$hen taxes may be compromised!

1. * reasonable doubt as to the validity if theclaim against the taxpayer existsC

. The financial position of the taxpayedemonstrates a clear inability to pay theassessed tax.

>. riminal violations, except!a. Those already filed in courtb. Those involving fraud.

+imitations!

1. =inimum compromise rate!a. 1BN of the basic tax assessed @ in

case of financial incapacity.b. 8BN of basic tax assessed @ othe

cases.. Subject to approval of 6valuation Joard

a. $hen basic tax involved exceeds51,BBB,BBB.BB or

b. $here settlement offered is lessthan the prescribed minimumrates.


30/67


elegation of 5ower to ompromise

;)! The power to compromise or abate shall notbe delegated by the commissioner.6! The )egional 6valuation Joard maycompromise the assessment issued by theregional offices involving basic taxes of 5 ?BB D orless.

)emedy in case of failure to comply!The I) may either!

1. enforce the compromise, or. )egard it as rescinded and insists upon

the original demand.

ompromise 5enalty1. It is a certain amount of money which the

taxpayer pays to compromise a taxviolation.

. It is pain in lieu of a criminal prosecution.>. Since it is voluntary in character, the same

may be collected only if the taxpayer iswilling to pay them.

6nforcement of forfeiture

0orfeiture! Implies a divestiture of property without compensation, in conseAuence of a default oroffense.

Includes the idea of not only losing butalso having the property transferred to anotherwith out the consent of the owner and wrongdoer.

1. 6ffect! Transfer the title to the specificthing from the owner to the government.

. $hen available!a. . %ow enforced!a. In case of personal property @ by

sei#ure and sale or destruction ofthe specific forfeited property.

b. In case of real property @ by ajudgment of condemnation andsale in a legal action or proceeding,civil or criminal, as the case mayreAuire.

8. $hen forfeited property to be destroyedor sold!

a. To be destroyed @ by order of theI) when the sale for consumptionor use of the following would be

injurious to the public health oprejudicial to the enforcement othe law! (at least B days aftesei#ure3

1. distilled spirits. liAuors>. cigars8. cigarettes, and othe

manufactured products otobacco

?. playing cards/. *ll apparatus used in o

about the illicit productionof such articles.

b. To be sold or destroyed @ dependsupon the discretion of I)

1. *ll other articles subject toexercise tax, (wineautomobile, mineraproducts, manufactured oilsmiscellaneous productsnon-essential items apetroleum productsmanufactured or removed inviolation of the Tax ode.

. ies for printing or makingI) stamps, labels and tagsin imitation of or purport tobe lawful stamps, labels otags.

?. $here to be sole!a. 5ublic sale! provided, there is

notice of not less than B days.

b. 5rivate sale! provided, it is withthe approval of the Secretary o0inance.

/. )ight of )edemption!a. 5ersonal entitled @ taxpayer o

anyone for himb. Time to redeem @ with in one (1

year from forfeiturec. *mount to be paid @ full amount o

the taxes and penalties, pluinterest and cost of the sale

d. To whom paid @ ommissioner othe )evenue ollection 9fficer

e. 6ffect of failure to redeem @forfeiture shall become absolute.

2.


31/67


1. )eAuiring filing of bonds @ in thefollowing instances!

a. 6state and donor&s taxb. 6xcise taxesc. 6xporter&s bondd. =anufacturer&s and

importer&s bond. )eAuiring proof of filing income tax

returnsJefore a license to engage

in trade, business or occupation orto practice a profession can beissued.

>. ;iving reward to informers @ SumeAuivalent to 1BN of revenues,surcharges or fees recoveredandKor fine or penalty imposed andcollected or 51, BBB,BBB.BB percase, whichever is lower.

8. Imposition of surcharge andinterest.

?. =aking arrest, search and sei#ure+imited to violations of any

penal law or regulationadministered by the JI),committed with in the view of theInternal )evenue 9fficer or 66.

/. eportation in case of aliens @ onthe following grounds

a. Dnowingly and fraudulentlyevades payment of I) taxes.

b. $illfully refuses to pay suchtax and its accessory

penalties, after decision onhis tax liability shall havebecome final and executory.

2. Inspection of booksJooks of accounts and other

accounting records of taxpayermust be preserved, generallywithin three years after date thetax return was due or was filedwhichever is later.

. Mse of . InAuiring into bank deposit

accounts of

a. * deceased person todetermine gross estate

b. *ny taxpayer who filedapplication for compromiseby reasons of financiaincapacity his tax liability.

18. )egistration of Taxpayers.

Eudicial )emedies

ivil and riminal *ctions!1. Jrought in the name of the

;overnment of the 5hilippines.. onducted by +egal 9fficer of JI)>. =ust be with the approval of the

I), in case of action, for recoveryof taxes, or enforcement of a finepenalty or forfeiture.

*. ivil *ction*ctions instituted by the

government to collect internal revenuetaxes in regular courts ()T or =Tsdepending on the amount involved3

$hen assessment made hasbecome final and executory for failure otaxpayer to!

a. ispute same by filing protest withI)

b. *ppeal adverse decision of I) toT*

J. riminal *ction* direct mode of collection o

taxes, the judgment of which shall noonly impose the penalty but also ordepayment of taxes.

*n assessment of a tax deficiencyis not necessary to a criminal prosecutionfor tax evasion, provided there is a primafacie showing of willful attempt to evade.

6ffect of *cAuittal on Tax +iability!

oes not exonerate taxpayer his civliability to pay the tax due. Thus, thegovernment may still collect the tax in the same

action.)eason! Tax is an obligation, does not arise froma criminal act.

6ffect of Satisfaction of Tax +iability on rimina+iability

$ill not operate to extinguish taxpayer&scriminal liability since the duty to pay the tax isimposed by statute, independent of any attempon past of taxpayers to evade payment.


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This is true in case the criminal action isbased on the act to taxpayer of filing a false andfraudulent tax return and failure to pay the tax.

3 years afterthe last day prescribed by law for thefiling of the return or from the day thereturn was filed, in case it is filedbeyond the period prescribed thereof.(Section B> of the Tax ode3

B, 123

*n affidavit executed by a revenue officeindicating the tax liabilities of a taxpayerand attached to a criminal complaint fortax evasion, cannot be deemed anassessment. ( I) vs. 5ascoi )ealty orp.

Eune , 13 * transcript sheets are not returns,

because they do not contain information

necessary and reAuired to permit thecomputation and assessment of taxe(Sinforo *lca vs. ommissioner, ec. 1/83

J.3 6xceptions! (Sec. ic3

1. $here no return was filed - within ten (1Byears after the date of discovery of theomission.

. $here a return was filed but the same wasfalse or fraudulent @ within ten (1B3 yearsfrom the discovery of falsity or fraud.

, 1283

c. * fraud assessment which hasbecome final and executory, thefact of fraud shall be judiciallytaken cogni#ance of in the civil ocriminal action for the collectionthereof. (Sec. paragraph (a33

0raud may be established by the following! (Jadges of 0raud3

a. Intentional and substantiaunderstatement of tax liability othe taxpayer.

b. Intentional and substantiaoverstatement of deductions oexemption

c. )ecurrence of the foregoingcircumstances.

InstancesKircumstances negating fraud!a. $hen the ommissioner fails

impute fraud in the assessmennoticeKdemand for payment.


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b. $hen the ommissioner failed toallege in his answer to thetaxpayer&s petition for review whenthe case is appealed to the T*.

c. $hen the ommissioner raised theAuestion of fraud only for the firsttime in his memorandum whichwas filed the T* after he hadrested his case.

d. $here the JI) itself appeared, "notsure' as to the real amount of thetaxpayer&s net income.

e. * mere understatement of incomedoes not prove fraud, unless thereis a sufficient evidence shavingfraudulent intent.

>. $here the commissioner and thetaxpayer, before the expiration of thethree (>3 year period of limitation haveagree in writing to the extension of saidperiod.

-yearlimitation signed by the taxpayer.

. *ssessment of unpaid taxes, where thebases of which is not reAuired by law to bereported in a return such as excise taxes.

(armen vs. *yala Securities orp., years after the return was due owas filed, whichever is later.

J. 6xceptions!1. $here a fraudulentKfalse return

with intent to evade taxes was fileda proceeding in court for thecollection of the tax may be filedwithout assessment, at anytimewithin ten years after the discoveryof the falsity or fraud.

years3 would apply ()ep. vs. )et., =arch>1, 1/3

. $hen the taxpayer omits to file areturn @ a court proceeding for thecollection of such tax may be filedwithout assessment, at anytimewithin 1B years after the discoveryof the omission.

>. $aiver of statute of limitations @any internal revenue tax, which hasbeen assessed within the periodagreed upon, may be collected bedistinct or levy of by a proceedingin court within the period agreedupon in writing before theexpiration of ?-year period.


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a. *greement to extend period ofvs. b. *greement

renouncing5rescription. It must be made before the

period of prescription6xpiration of the period agreed upon to

an agreement waiving the defenseofbe valid.

5rescription is till binding to the

Taxpayer although made beyondsuch

prescriptive period.

8. $here the government makesanother assessment on the basis ofreinvestigation reAuested by thetaxpayer @ the prescriptive periodfor collection should be countedfrom the last assessment. ()ep. vs.+ope#, =arch >B, 1/>3

?. $here the assessment is revisedbecause of an amended return @the period for collection is countedfrom the last revised assessment.

/. $here a tax obligation is securedby a surety bond @ the governmentmay proceed thru a court action to

forfeit a bond and enforce suchcontractual obligation within aperiod of ten years.

2. $here the action is brought toenforce a compromise entered intobetween the commission and thetaxpayer @ the prescriptive periodis ten years.

. $hen tax is deemed collected forpurposes of the prescriptive period.

1. ollection by summary remedies @ It iseffected by summary methods whenthe government avail of distraint andlevy procedure.

. ollection by judicial action @ Thecollection begins by filing thecomplaint with the proper court. ()T3

>. $here assessment of thecommissioner is protected Q appealedto the T* @ the collection begin whenthe government file its answer totaxpayer&s petition for review.

III. )ules of 5rescription In riminal ases

*. )ule! *ll violations of any provision of thetax code shall prescribe after five (?years.


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a proceeding in court and for/B days thereafterCe.g.

0iling a petition for review inthe T* from the decision ofthe ommissioner. The

commissioner is preventedfrom filing an ordinaryaction to collect the tax.

$hen T* suspends thecollection of tax liability ofthe taxpayer pursuant toSection 11 of )* 11? uponproof that its collection may

jeopardi#es the governmentand Kor the taxpayer.

b. $hen the taxpayer reAuestsfor reinvestigation which is

granted by commissioner.

. In criminal cases for violation of taxcode @ the period shall not run when

the offender is absent from the5hilippines.


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b. *ction to contest forfeiture ofchattelC and

c. *ction for amages

(3 riminal *ction

a. 0iling of complaint againsterring Jureau of Internal)evenue officials andemployees.

A%;INISTRATIo. !4**ate #ept. -, !***&.

%#spted Assess*ent

Taxpayer or his duly authori#ed representativemay administratively protest against a 0ormal


37/67


+etter of emand and *ssessment notice withinthirty (>B3 days from date of receipt thereof.

If the protest is denied in whole or part, or isnot acted upon within one hundred eighty (1B3

days from submission of documents, the taxpayeradversely affected by the decision or inactionmay appeal to the T* within >B days fromreceipt of the said decision, or from lapse of theone hundred (1B3-day period! otherwise, thedecision shall become final and executory

#everal issues in the assessment notice buttaxpayer only isputesMprotests valiity of someof the issues

Taxpayer reAuired to pay the deficiencytax or taxes attributable to the undisputed

issues. ollection letter to be issued calling for

the payment of deficiency tax, includingapplicable surcharge andKor interest.


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(a3 6rroneously or illegally assessed orcollected internal revenue taxes

Taxpayer pays under the mistake offact, as for instance in a case where he is not

aware of the existing exemption in his favor atthe time payments were made

* tax is illegally collected ifpayments are made under duress.

(b3 5enalties imposed without authority

(c3 *ny sum alleged to have beenexcessive or in any manner wrongfully collected

The value of internal revenue stampswhen they are returned in good condition by thepurchaser may also be redeemed.

>ecessity of Proof for efun Claims

)efund claim partakes of the nature of anexemption which cannot be allowed unlessgranted in the most explicit andcategorical language. (CI vs. 6ohnson an#ons

0ailure to discharge burden of giving proofis fatal to claim

It must be shown that payment was anindependent single act of voluntarypayment of a tax believed to be due,collectible and accepted by thegovernment, and which therefore, becomepart of the state moneys subject toexpenditure and perhaps already spent orappropriated (CI vs. +i ao, +4!!)$%, 9ec.), !*-"&.

#tatutory euirements for efun Claims

a. W!#tten cla#* fo! !efnd o! ta$ c!ed#tf#led +) t"e ta$pa)e! '#t" t"e Co**#ss#one!

This reAuirement is *andato!). )easons& (a3 to afford the commissioner

an opportunity to correct the action ofsubordinate officer and (b3 to notify thegovernment that the taxes sought to berefunded are under

Auestion and that, therefore, such noticeshould then be borne in mind inestimating the revenue available forexpenditure (8ermeBo vs. CI )$ Phil *-&.

6xcept! Tax credit or tax refund where onthe face of the return upon which payment

is made, such payment appears clearly tohave been erroneous. (#ec. *, !**$>IC&.

+. Catego!#cal de*and fo! !e#*+!se*ent

c. Cla#* fo! !efnd o! ta$ c!ed#t *st +ef#led o! t"e s#t p!oceed#ng t"e!eof *st +eco**enced #n co!t '#t"#n t'o @1 )ea!sf!o* date of pa)*ent of ta$ o! penalt)!ega!dless of an) spe!-en#ng e-ent.(#ec.5 (c& * !**$ >IC&

)eAuirement a condition precedent andnon-compliance therewith bars recovery(Phil. Acetylene Co. Inc, vs. Commissioner,C2A Case >o. !"!, >ov. $, !*-&.

)efers not only to the "administrative'claim that the taxpayer should file within years from date of payments with the JI)but also the judicial claim or the action forefund the taxpayer should commencewith the T* (see Gibbs vs.. Collector oInternal evenue, !5$ Phil "&.

Taxpayer may file an action for refund inthe T* even before the ommissionedecides his pending claim in the JI)(Commissioner of Internal evenue vsPalanca 6r., +4!---, Oct. *, !*--&.

Suspension of the -yaer prescriptive

period may be had when!(13 there is a pending litigationbetween the two parties (governmentand taxpayer3 as to the proper tax tobe paid and of the properinterpretation of the taxpayer&s chartein relation to the disputed taxC and

(3 the commissioner in that litigatedcase agreed to abide by the decision othe Supreme ourt as to the collectionof taxes relative thereto (Panay=lectric Co., Inc. vs. Collector ofInternal evenue !5" Phil. )!*&

TAX RE9?N% TAX CRE%IT

There is actually areimbursement ofthe tax

The governmentissues a tax creditmemo covering theamount determinedto be reimbursablewhich can be appliedafter properverification, againstany sum that may bedue and collectibleform the taxpayer


39/67


6ven if the -year period has lapsed thesame is not jurisdictional and may besuspended for reasons of eAuity and otherspecial circumstances. (CI vs. Phil.

American +ife Ins. Co., G.. >o. !5%5),/ay *, !**%&.

-year prescriptive period for filing of taxrefund or credit claim computed from dateof payment of tax of penalty except in thefollowing!

orporations

-year prescriptive period for overpaidAuarterly income tax is counted not fromthe date the corporation files its Auarterlyincome tax return, but from the date thefinal adjusted return is filed after thetaxable year (Commissioner of Internalevenue vs. 2/? #ales, Inc., G.. >o.)"$"-, 6an. !%, !**&.

Taxes payable in installment

-year period is counted form thepayment of the last installment (CI vsPalanca, 6r., supra&

$ithholding Taxes

5rescriptive period counted not fromthe date the tax is withheld and remittedto the JI), but from the end of the taxableyear (Gibbs vs. Commissioner of Internalevenue, supra&

H*T )egistered 5erson whose sales are #ero-ratedor effectively #ero-rated

-year period computed from the endof the taxable Auarter when the salestransactions were made (#ec. !! (A&!**$ >IC&.

Interest on 2ax efun

The ;overnment cannot be reAuired topay interest on taxes refunded to the taxpayerunless!

0. T"e Co**#ss#one! acted '#t"patent a!+#t!a!#ness

*rbitrariness presupposes inexcusable orobstinate disregard of legal provisions (CI vs.

@ictorias /illin3 Corp., Inc. +4!*-5$, >ov. *,!*--&.

1. In case of Inco*e Ta$ '#t""eld ont"e 'ages of e*plo)ees.

*ny excess of the taxes withheld over the

tax due from the taxpayer shall be returned orcredited within > months from the fifteenth (1?th3day of *pril. )efund or credit after such time earninterest at the rate of /Nper annum, startingafter the lapse of the >-month period to the datethe reund or credit is made ( #ec $* (c& (& !**$>IC&

APPEAL to t"e CTA

*dverse decision or ruling rendered by theommissioner of Internal )evenue indisputed assessment or claim for taxrefund or credit, taxpayer may appeal thesame within thirty (>B3 days after receipt(Sec. 11, ).*. Bdays from notice. %ence, it could nobecome final and executory. ()epublic vse la )ama, 1 S)* /13

=otion for reconsideration suspends therunning of the >B @day period of perfectingan appeal. =ust advance new grounds nopreviously alleged to toll the reglementaryperiodC otherwise, it would be merely proforma. ()oman atholic *rchbishop vsoll., +-1//>, Ean. >1, 1/3.

)eAuirements for *ppeal in isputed*ssessment

a. Tax assessed has not been paidCb. Taxpayer has filed with theommissioner of Internal )evenue apetition for the reconsideration ocancellation of the assessmentC

c. 0inal decision or ruling has beenrendered on such petitionC

d. Suit or proceeding in the T* is madewithin >B days from receipt of thedecision

6ffect of 0ailure to *ppeal *ssessment


40/67


a. Taxpayer barred, in an action forcollection of the tax by thegovernment, from using defense ofexcessive or illegal assessment.

b. *ssessment is considered correct.

)eAuirements for *ppeal in )efund and Taxredit

a. Tax has been paidCb. Taxpayer has filed with the I) a

written claim for refund or tax creditwithin years from payment of the taxor penaltyC and

c. Suit or proceeding is instituted in theT* also within the same prescriptiveperiod of two years from the date ofpayment regardless of anysupervening cause. (see Secs. B8, 12 1, 12


41/67


1B3$ithout the authority of law, demandingor accepting money or other things ofvalue fore the compromise or settlementof any charge or complaint for anyviolation of the Tax ode. (see. Sec. /,12


42/67


d. articles lost or destroyed

e. dead or injured animalsC and

f. for manifest classical errorsC (seesection 12B1-12B, T3

. Eudicial relief

In drawback cases where the goodsare re-exported

a. 5rotest

see the earlier discussions on"ustoms 5rotest ases'

b. In sei#ure cases

see earlier discussion on thesubject

c. Settlement of case by the paymentof fine or redemption of forfeitedproperty

see earlier discussions on thesubject


43/67


Re#s#tes&

?. Taxpayer is delinAuent in the payment oftax.

/. SubseAuent demand for its payment.

2. Taxpayer must fail to pay delinAuent tax attime reAuired.

. 5eriod with in to assess or collect has notyet prescribed. In case of constructivedistraint, reAuisite no. 1 is not essential(see Sec. B/ T3

W"en !e*ed) not a-a#la+le&

$here amount involved does not exceed51BB (Sec. B? T3. In keeping with the provisionon the abatement of the collection of tax as thecost of same might even be more than 51BB.

P!oced!e&

?. Service of warrant of distraint upontaxpayer or upon person in possession oftaxpayer&s personal property.

/. 5osting of notice is not less than twoplaces in the municipality or city andnotice to the taxpayer specifying time and

place of sale and the articles distrained.

2. Sale at public auction to highest bidder

. isposition of proceeds of the sale.

$ho may effect distraint*mountInvolved

>. commissioner or his dueauthori#ed representative

8. )9

In excess of51,BBB,BBB.BB

51,BBB,BBB.BBor less

Jo' Actal %#st!a#nt Effected

>. In case of Tangible 5roperty!

a. opy of an account of the propertydistrained, signed by the officer,left either with the owner or person

from whom property was taken, athe dwelling or place of businessand with someone of suitable ageand discretion

b. Statement of the sum demanded.

c. Time and place of sale.

8. In case of intangible property!

a. Stocks and other securities

Serving a copy of the warrant upontaxpayer and upon presidentmanager, treasurer or otheresponsible officer of the issuingcorporation, company oassociation.

b. ebts and credits

>. +eaving a copy of the warranwith the person owing the debtsor having in his possession suchcredits or his agent.

8. $arrant shall be sufficienauthority for such person to payI) his credits or debts.

c. Jank *ccounts @ garnishment

>. Serve warrant upon taxpayeand president, managertreasurer or responsible officeof the bank.

8. Jank shall turn over to I) somuch of the bank accounts asmay be sufficient.

Jo' const!ct#-e %#st!a#nt Effected

>. )eAuire taxpayer or person in possessionto

a. Sign a receipt covering propertydistrained

b. 9bligate him to preserve the sameproperties.

c. 5rohibit him from disposing theproperty from disposing the property inany manner, with out the authority othe I).


44/67


8. $here Taxpayer or person in possessionrefuses to sign!

a. 9fficer shall prepare list of theproperty distrained.

b. In the presence of two witnesses ofsufficient age and discretion, leave acopy in the premises where property islocated.

G!onds of Const!ct#-e %#st!a#nt

/. Taxpayer is retiring from any businesssubject to tax.

2. Taxpayer is intending to leave the5hilippinesC or

. To remove his property there from.

. Taxpayer hides or conceals his property.

1B. Taxpayer acts tending to obstructcollection proceedings.


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/. Joth are summary remedies for collectionof taxes.

2. Joth cannot be availed of where amountinvolved is not more than 51BB.

. istraint @ personal property

+evy @ real property

. istraint @ forfeiture by government, notprovided

+evy @ forfeiture by governmentauthori#ed where there is no bidder or thehighest bid is not sufficient to pay thetaxes, penalties and costs.

1B. istraint @ Taxpayer no given the right ofredemption

+evy @ Taxpayer can redeem propertieslevied upon and soldKforfeited to thegovernment.


46/67


/. There must be acceptance of the offer insettlement of the original claim.

W"en ta$es *a) +e co*p!o*#sed&

8. * reasonable doubt as to the validity if theclaim against the taxpayer existsC

?. The financial position of the taxpayerdemonstrates a clear inability to pay theassessed tax.

/. riminal violations, except!

a. Those already filed in court

b. Those involving fraud.

L#*#tat#ons&

>. =inimum compromise rate!

a. 1BN of the basic tax assessed @ incase of financial incapacity.

b. 8BN of basic tax assessed @ othercases.

8. Subject to approval of 6valuation Joard

c. $hen basic tax involved exceeds

51,BBB,BBB.BB or

d. $here settlement offered is lessthan the prescribed minimumrates.

%elegat#on of Po'e! to Co*p!o*#se

General ule! The power to compromiseor abate shall not be delegated by thecommissioner.

=xception! The )egional 6valuation Joard

may compromise the assessment issued by theregional offices involving basic taxes of 5 ?BB D orless.

Re*ed) #n case of fa#l!e to co*pl)&

The I) may either!

>. enforce the compromise, or

8. )egard it as rescinded and insists uponthe original demand.

Co*p!o*#se Penalt)

8. It is a certain amount of money which thetaxpayer pays to compromise a taxviolation.

?. It is pain in lieu of a criminal prosecution.

/. Since it is voluntary in character, the samemay be collected only if the taxpayer iswilling to pay them.

Enfo!ce*ent of fo!fe#t!e

0orfeitureUimplies a divestiture oproperty with out compensation, in conseAuenceof a default or offense. It includes the idea of noonly losing but also having the propertytransferred to another with out the consent of theowner and wrongdoer.

. 6ffect! Transfer the title to the specificthing from the owner to the government.

. $hen available!a.


47/67


the law! (at least B days aftersei#ure3

1. distilled spirits

. liAuors

>. cigars

8. cigarettes, and othermanufactured products oftobacco

?. playing cards

/. *ll apparatus used in or aboutthe illicit production of sucharticles.

d. To be sold or destroyed @ dependsupon the discretion of I)

>. *ll other articles subject toexercise tax, (wine, automobile,mineral products, manufacturedoils, miscellaneous products,non-essential items a petroleumproducts3 manufactured orremoved in violation of the Taxode.

8. ies for printing or making I)stamps, labels and tags, in

imitation of or purport to belawful stamps, labels or tags.

1. $here to be sold!

c. 5ublic sale! provided, there isnotice of not less than B days.

d. 5rivate sale! provided, it is withthe approval of the Secretary of0inance.

1>. )ight of )edemption!

f. 5ersonal entitled @ taxpayer oranyone for him

g. Time to redeem @ with in one (13year from forfeiture

h. *mount to be paid @ full amount ofthe taxes and penalties, plusinterest and cost of the sale

i. To whom paid @ ommissioner othe )evenue ollection 9fficer

j. 6ffect of failure to redeem @forfeiture shall become absolute.


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Jooks of accounts and other accountingrecords of taxpayer must be preserved,generally within three years after date thetax return was due or was filed whicheveris later.

11. Mse of . Inventory @ Taking of stock-in-trade andmaking surveillance.

18.5rescribing presumptive gross sales orreceipt!

c. 5erson failed to issue receipts andinvoices

d. )eason to believe that records do notcorrectly reflect declaration in return.

1?. 5rescribing real property values

1/. InAuiring into bank deposit accounts of

c. * deceased person to determine grossestate

d. *ny taxpayer who filed application forcompromise by reasons of financialincapacity his tax liability.

12. )egistration of Taxpayers.

8d#c#al Re*ed#es

Civil an Criminal ActionsF

1. Jrought in the name of the ;overnment ofthe 5hilippines.

. onducted by +egal 9fficer of JI)

>. =ust be with the approval of the I), incase of action, for recovery of taxes, orenforcement of a fine, penalty orforfeiture.

C. C#-#l Act#on

*ctions instituted by the government tocollect internal revenue taxes in regular

courts ()T or =Ts, depending on theamount involved3

$hen assessment made has become finaand executory for failure or taxpayer to!

c. ispute same by filing protest with I)

d. *ppeal adverse decision of I) to T*

%. C!#*#nal Act#on

* direct mode of collection of taxes, thejudgment of which shall not only imposethe penalty but also order payment otaxes.

*n assessment of a tax deficiency is notnecessary to a criminal prose

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