Professional Documents
Culture Documents
Chapter 5 - TAX
Chapter 5 - TAX
Aban
NOTES (PROF. CABANEIRO) A2011
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IN GENERAL
Agencies involved in tax administration
1. Bureau of Internal Revenue
2. Bureau of Customs
3. Provincial, city and municipal assessors and treasurers
Bureau of Internal Revenue
Headed
by
the
Commissioner
and
Commissioners
Assistant Commissioners and Division Chiefs
Regional Directors
Revenue District Officers
Revenue Enforcement Officers or Examiners
two
Deputy
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
NOTES (PROF. CABANEIRO) A2011
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
NOTES (PROF. CABANEIRO) A2011
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
NOTES (PROF. CABANEIRO) A2011
RULE
ON
ESTOPPEL
AND
SOME
COMPLIANCE
REQUIREMENTS
Rule on no estoppel against the government
It is settled rule of law that in the performance of its
governmental functions, the State cannot be estopped by
the neglect of its agents and officers. Nowhere is this more
true than in the field of taxation.
[Commissioner v.
Procter and Gamble Co., G.R. No. 66838, April 15, 1988]
Similarly, estoppel does not apply to deprive the
government of its right to raise defenses even if these
defenses are being raised for the first time on appeal.
[Commissioner v. Procter and Gamble Co., G.R. No.
66838, April 15, 1988] However, this was reversed in a
subsequent resolution issued by the Supreme Court in the
same case. [Commissioner v. Procter and Gamble Co.,
G.R. No. 66838, December 2, 1991, Resolution)]
Estoppel against the taxpayer
While the principle of estoppel may not be invoked against
the government, this is not necessarily true in the case of
the taxpayer.
Some compliance requirements
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
NOTES (PROF. CABANEIRO) A2011
Letter of authority
This is the authority issued by the Revenue Regional
Director and given to a revenue officer assigned to perform
assessment functions to examine taxpayers within the
jurisdiction of the district in order to collect the correct
amount of tax, or to recommend the assessment of any
deficiency tax due in the same manner that the said acts
could have been performed by the Revenue Regional
Director himself.
Kinds
1.
2.
3.
4.
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of assessment
Self assessment
Deficiency assessment
Illegal and void assessment
Erroneous assessment
Self assessment
One in which the tax is assessed by the taxpayer himself.
The amount of tax is reflected in the tax return that is filed
by him and the tax assessed is paid at the time he files the
return. This system of filing of return and payment of tax is
known as the pay-as-you-file system.
Tax so assessed is known as self assessed tax.
Deficiency assessment
This is an assessment made by the tax assessor himself
whereby the correct amount of the tax is determined after
an examination or investigation is conducted.
The liability is determined and is thereafter assessed for the
following reasons:
1. The amount ascertained exceeds that which is shown as
the tax by the taxpayer in his return;
2. No amount of tax is shown in the return; or
3. The taxpayer did not file any return at all.
Illegal and void assessment
This is an assessment wherein the tax assessor has no
power to act at all.
Erroneous assessment
This is an assessment wherein the assessor has the power
to assess but errs in the exercise of the power.
Principles governing tax assessments
1. Assessments are prima facie presumed correct and made in
good faith.
2. It is the taxpayer and not the BIR who has the duty of
proving otherwise.
3. Assessments shld not be based on presumptions but on
actual facts.
4. Assessment is discretionary on the Commissioner who
cannot therefore be compelled to assess a tax when he or
she believes that there is no basis for such assessment.
5. The authority vested in the Commissioner to assess taxes
may be delegated. However, it is settled that the power to
make final assessment cannot be delegated.
6. Assessments must be directed to the right party.
Investigative power of the Commissioner; factual basis of
assessments
Inasmuch as assessments are based on facts, the
Commissioner is given the power to obtain information
which serves as basis for said assessments, and is also
given the means to secure them. [See powers of the
Commissioner]
Means employed in the assessment of tax
1. Examination of returns and determination of the tax due
2. Assess the proper tax on the best evidence obtainable
3. Conduct inventory-taking, surveillance and to prescribe
presumptive gross sales and receipts
4. Issue jeopardy assessments and terminate the taxable
period
5. Prescribe real property values
6. Inquire into bank deposit accounts
7. Accredit and register tax agents
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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8. Prescribe
additional
procedural
or
documentary
requirements.
The Confidentiality Rule:
Although Sec. 71 of the 1997 Tax Code provides that tax
returns shall constitute public records, it is still confidential
in nature and may not be inquired into in unauthorized
cases. Those employees of the BIR found guilty are subject
to penalty or imprisonment.
Exceptions to the Confidentiality Rule:
1. When the inspection of the return is authorized upon the
written order of the President of the Philippines.
2. When the inspection is authorized under Finance Regulation
No. 33 of the Sec of Finance.
3. Whent the production of the tax return is MATERIAL
EVIDENCE in a criminal case.
4. When authorized by the taxpayer himself.
The net worth method
A very effective method of determining taxable income and
the deficiency income tax due thereon is the net worth
method or what is otherwise known as the inventory
method of income tax verification.
The method is an extension of the accounting principle:
Assets minus liabilities equals net worth. The taxpayers net
worth is determined both at the beginning and at the end of
the same taxable year. The increase or decrease in net
worth is adjusted by adding all non-deductible items and
subtracting therefrom non-taxable receipts.
The legal basis for the use of the net worth method is the
authority of the Commissioner to adopt an accounting
method that clearly reflects the income.
Conditions for the use of the net worth method
1. That the taxpayers books do not clearly reflect his income
or the taxpayer has no books, or if the has books, he refuses
to produce them.
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
NOTES (PROF. CABANEIRO) A2011
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Interest
This is an increment on any unpaid amount of tax assessed
at the rate of 20% per annum or such higher rate as may be
prescribed by the regulations from the date prescribed for
payment until the amount is fully paid.
Classes of interest
1. Deficiency interest
2. Delinquency interest
3. Interest on extended payment
Deficiency interest
Any deficiency in the tax due shall be subject to the interest
of 20% per annum which shall be assessed and collected
from the date prescribed for its payment until the full
payment thereof.
When delinquency interest imposed?
Delinquency interest is imposed in case of failure to pay:
1. The amount of the tax due on any return required to be
filed; or
2. The amount of tax due for which no return is required; or
3. A deficiency tax or any surcharge or interest thereon on
the issue date appearing in the notice and demand of
the Commissioner.
Rate is 20% per annum until the amount is fully paid which
interest shall form part of the tax.
Interest on extended payment
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general manager, branch manager, treasurer, officer-incharge, and employees responsible for the violation.
Give examples of crimes and offenses
1. Attempt to evade or defeat tax
Any person who willfully attempts in any manner to evade
or defeat any tax imposed under the NIRC or the payment
thereof.
2. Failure to file return, supply correct information, pay tax,
withhold and remit tax, and refund excess tax withheld on
compensation.
3. Unlawful pursuit of business.
4. Unlawful possession or removal of articles subject to excise
tax without payment of the tax.
5. Failure or refusal to issue receipts or sales or commercial
invoices, violations related to the printing of such receipts or
invoices and other violations.
Prescription for violations of any provision of the NIRC
All violations of any provision of the NIRC shall prescribe in 5
years.
Prescription shall begin to run from the day of the
commission of the violation of the law, and if the same be
not known at the same time, from the discovery thereof
and the institution of judicial proceedings for its
investigation and punishment.
The prescription shall be interrupted when proceedings are
instituted against the guilty persons and shall begin to run
again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is
absent from the Philippines.
When is informers reward given?
An informers reward is given to persons instrumental in the:
1. discovery of violations of the NIRC; and
2. discovery and seizure of smuggled goods.