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    2 Taxes Tax Laws and Tax Administration

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    Cherrie Arianne Fhaye Naraja

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    Chapier 2 - Taxes, Tax Laws and Tax Administraton ‘Sources of Taxation Laws 1. Constitution 2. Statutes and Presidential Decrees 3. Judicial Decisions or case laws 4. Executive Orders and Batas Pambansa 5S. Administrative issuances & Local Ordinances 7. Tax Treaties and conventions with foreign countries 8 Revenue Regulations ‘Types of Administrative Issuances Revenue regulatons 2. Revenue memorandum orders 3. Revenue memorandum rulings 4. Revenue memorandum orculars 5. Revenue bulletins 6 BIR rulings Revenue Regulations are issuances signed by the Secretary of Finance recommendation of the Commissioner of Internal Revenue (CIR) that prescribe, or define rues and regulations for the effecive enforcement ore Provisions of the National Internal Revenue Code (NIRC) and related statutes Revenue regulations are formal pronouncements intended to clarify or explain thet law and carry into effec ts general provisions by providing detalls of adrvnisratin and procedure. Revenue regulation has the force and ellect of a law, but intended to expand or lieu the application ofthe law otherwise tis vid Revenue Memorandum Orders (RMOs) are issuances. that provide directives instructions. prescribe guidelines, and outline processes, operanions, ace, workflows, methods, and procedures necessary in the implementation of stated policies, goals objectives, plans and programs of the Bureau in ll areas of operon except auditing [Revenue Memorandum Rulings (RRs) are rulings opinions and interpretatonsot CIR with respect (othe provisions ofthe Tax Cade ad other tax laws as applied Ws specific set of facts, with without established precedents, and which the CIRM) issue from time to time lor the purpose of prowling taxpayers guidance om thet consequences in specific situations. IK Rulings, therefore, cannot contravene {Seued RMR otherwise. the Rulings are sil and old ab initio. Revenue Memorandum Circulars (RMCs) ae sssuances that publish pertinent af plicable portions as well as amplifications oflaws, rules regulations, and pr Issued by the BIR and other agences/offices. 36 chapter 2 - Taxes, Tax Laws and Tax Administration notices, and official announcements lero perio iasances, en Aenea Blt) gral ever that eansodate the Bure of itera tripe cammisoner ereumnstravion in relation tothe ses postion on ce nce esata ofthe Ta Cae, forthe ga Tepobte fan Rutags ae official positions ofthe Bi et saerseelatve clacton 2 evi tothe taxpayer such that ngs ace merely advisory or sor of information sevice t sh Rags ae es ang exept Cote addresace and may be ceversed by the BIR at anytime, nn specific ssues of law relevant tax laws, and other issuan' Bureau to queries raised by taxpayers and id interpretation of tax laws. ‘Types of rulings 1, Value Added Tax (VAT) rulings 2. International Tax AMfairs Division (ITAD) rulings 3, BIR rulings 4. Delegated Authority (DA) rulings erally accepted accounting principles (GAAP) vs, Tax Laws SERETIN cepted acountng prineples oF GAAP are no laws, but are mere ceratons of rane reporting. They are benchmarks forthe fur and relevant ‘Siunlon and recognition of nceme,eopense,aeets, habits, and equ of @ ‘eporgeniy or general purpose nana reporting GAAP accounting reports Evntned to mee! te common needs of ast number of user in the general nue Tax laws including rules, regulations, and rulings prescribe the criteria for tax reporting, a special form of financial reporting, which 1s intended to meet specific needs oftax authorities ‘Taxpayers normally follow GAAP in recording transactions in their books. However, in the preparation and filing of tax retums, taxpayers are mandated to follow the tax law in cases of conflict with GAAP. NATURE OF PHILIPPINE TAX LAWS Phiyppme tas las are evil and not pobtical in nature. Th ical in nature. They are effective even arig need of enemy accion. Fey ae law af he Odupied tertory and not by the occupying enemy. Tax payments made during occupations of fe ‘enemies are valid. ne patons of forsiga Cur tnternal revenue laws are not penal in nature because they do not define énme. Their penalty provisions are merely int Sopa merely intended to secure taxpayers’ 37 eT Chapter 2 Taxes, Tax Lave and Tax Adminisbaton Tax ‘Taxis an enfored proportional contribution levied by the lawns Sutetoraicerevenceforpuicpurpase ne MAMAN By Elements ofa Valid Tax 1. Tax must be levied by the taxing power having jurisdiction ov ia y the taxing power having jurisdiction over the object of ‘Tax must not violate constitutional and inherent limitations. ‘Tax must be uniform and equitable ‘Tax must befor public purpose. ‘Tax must be proportional in character. ‘Taxis generally payable in money. Gassification of Taxes ‘A Asto purpose 1, Fiscal or revenue tax ~ 2 tax imposed for general purpose 2. Regulatory — a tax imposed to regulate business, conduct, acs or transactions 3. Sumpruary~ a tax levied to achieve some socal or economic objectives B. Asto 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 a, ‘enjoyment ofa privilege ar engagement in an occupation © Astoincidence 1. Direct cax ~ When both the impact and incidence of taxation rest upon the same taxpayer, the taxis said to be direct. The tax iscolected from the person who 1s intended to pay the same. The statutory taxpayer is the ‘economic taxpayer. 2. Indirect tox ~ When the taxis paid by any person other than the one who fs intended to pay the same, the taxis sad to be indirect This occurs is the case of business taxes where the statutory taxpayer is not the ‘economic taxpayer. ‘The statutory taxpayer isthe person named by law to pay the ax At economic taxpayer isthe one who actually pays the tax. D. Astoamount 1. Specific ax ~ a tax ofa fixed amount imposed on a per uni bass such a per kilo, ter or meter, te 8 ‘awe and Tax Administration onapter 2- Taxes, TOx Ls iets yon the value of 2. Ad valorem -atax of fied proportion imposed th object . ee -d rate tax. Th ool te = THs sa Ma or fed 9 1, Proporta ality av suet all txpayes ta eg othe ai) 1 ves great ox This 31 Fg epertse The ue of Bones UX 2 a ate because gets more tat those whom eal oman the gap between the rich and the POO. se aaa tan Ts tax mpoes decreasing tx ates 5 the ee base egresi TN coal reverse of progressive tas. Regressive (AX (8 aaa ec del wlates the Constatonal Ruarantee peogressive aration Mod tox Ts tox manifest tax rates which sco above types of tax. F. Astoimposing authority 1. Nationa tax tax imposed bythe national government 2 Income tx tax on annual income, gains or profits ‘b Bhate tar ~ tax on gratuitous transfer of properties by a decedent upon death Donor tax~ taxon grattous transfer of properties by a living donor 4. Value Added Tex ~ consumption tax collected by VAT business taxpayers © Ger percetage tar ~ consumption tax collected by non-VAT snes taxpayers Brest ~ ax on sin products and non-essential commodities such as alcohol, cigarettes’ and metallic minerals. ‘This should. be differentiated with the privilege tax which i also called excise tax Documentary stamp tax ~ a. tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale oF Xtansfer ofan obligation, right or property incident thereto he use of proportional th the same rate ich imposes increasing rates an rates results 1 more capable ination of any of the 2 Lasting yo 3 munca rl ovement Examples: we propery tae o pocee Sates ses and charges 39 (Chapter 2 - Taxes, Tax Laws and Tax Administration 4. Community tac © Tax on banks and other financial institutions DISTINCTION OF TAXES WITH SIMILAR ITEMS Taxvs Revenue Tax refers tothe amount mposed by the mount posed by the government for public purpose refer all income calections ofthe verment wth incude ta ee licenses. toll, penalties and o e amount collected eens and others, The amount imposed is tax but the angen, Tax vs License fee Tax has a broader subject than license. Tax emanates from taxa imposed upon ject such as persons, proy hive Imposed upon any objet sch operons, properties piles tee License fee emanates from police power and is imposed to regulate the exercise of privilege such as the commencement ofa business or a profession. Taxes are imposed after the commencement ofa business or profession where hhense fe s imposed before engagement in thse actives In other words ats a post-actviy imposition whereas icense ia preeciviy mpastion Taxvs. Toll “Tax isa levy of government hence, itis a demand of sovereignty. Tol is a cha for the use of other's property; hence, it is a demand of ownership, = The amount of tax depends upon the needs of the government, but the amount oh toll is dependent upon thevalue ofthe property leased. Both the government and private entities impose tall, but private entities cannot impose taxes. Tax vs. Debt “Tax arises from law while debt arses from private contracts. Non-payment of ax Jeads to imprisonment, bt non-payment of debt does not lead to imprisonment. Debt can be subject to set-off but tax is not. Debt can be paid in kind (dacion ot ‘pago) but tax is generally payable in money. ‘Tax draws interest only when the taxpayer is delinquent. Debt draws intrest when it is so stipulated by the contracting parties or when the debtor incurs legal delay ‘chapter 2- Taxes, Tax Laws and Tax Administrator peta Assesament «set Tavs Special Aseed upon persons, properties, or privileges, Special poke went is levied by the government on lands adjacent to a pt assessment poze on land only and 1s smtended to compensa rer vpecal sessment he bereft terns of the appreciation i an Te ee uic improvement On the other hand as vied without vat on of dre ronmate Dene attaches tothe an, will nt become a personal ox ent spc een pment of ates Unlike taxes, special assessment Dbligation ofthe land owner. Therefore, the n eet result to Imprisonment ofthe owner (ualike in non-payt Taxvs. Tacit ‘Tax i broader than tariff. Tax is an amount imposed upon persons, privilege, transactions, o properties. Tariffs the amount imposed on imported or exported commodities ‘Taxvs. Penalty Tar is an amount imposed for the support of the government. Penalty is an mount imposed to discourage an act. Penalty may be imposed by both the overnment and private individuals. It may arise both from law or contract ‘whereas tax arises from law. ‘TAX SYSTEM ‘The eax stem refers to the methods or schemes of imposing, assessing, and collecting taxes. It includes all the tax laws and regulations, the means of their enforcement, and the government offices. bureaus and withholding agents which are par of the machineries ofthe government in tax collection. The Philippine tax system is divided into two: the national tax system and the local tax system, ‘Types of Tax Systems According to Imposition 1 Progressive ~ employed in the taxation of income of individuals, and transfers cofproperties by individuals 2. Proportion - eraployed in taxation of corporate mcome and business 3. Regressive ~not employed inthe Philippines tec ener 7a other resort to taxpayers than to be efficient. This ewe, a at ‘chapter 2- TaHe8 axtaweand Tex Admenistaion a Regressive SIEM 5 one that emphasizes indirect taxes, indig Ages tn consume Hee the ae of tng Ermita seats an z rs ptt ogre a ‘TAX COLLECTION SYSTEMS |A. Withholding system on income tax ~ Under this cllection system, the Tene income withholds or deducts the tax on the income before releasing ty seme to the payee and remits the same to the government. The following we the withholding taxes collected under this system: 1. Creduable withholding tax ‘a. Withholding tax on compensation ~ an estimated tax required by ihe government to be withheld (ie. deducted) by employers against ke ‘compensation income to their employees b. Expanded withholding cox - an estimated tax required by te government to be deducted on certain income payments made by taxpayers engaged in business ‘The creditable withholding tax is intended to support the self-assessment method to lessen the burden of lump sum tax payment of taxpayer and also provides for a possible third-party check for the BIR of non-compliat taxpayers. 2. Final withholding tax - a system of tax collection wherein payors ax required to deduct the full ax on certain income payments The final withholding tax is intended for the collection of taxes fr income wath high risk of non-compliance. ‘Similarities of Onl tax and creditable withholding tax 4 In both cases, the income payor withholds a fraction ofthe income andrew ‘the same tothe government. 1k By collecting at the moment cash 1s available, both serve to minimize flow problems tothe taxpayer and ccllection problems to the government Chapter 2 - Taxes, Tax Laws and Tax Administration Differences between FWT and CWT ing Create witokdina Fo [con tt wine Taipan — overage of arin psi Tome | Catan passive and active | wihnetaing —__ | Z rae Who remit te actus” | —Tavome payor] Tacome payor forthe CWT and [eax - | "fre taspayer for he balance Necessity of Income ta | return for taxpayer holding system on business tax - when the national government agencies and instrumentalities including government-owned and controlled corporations (GOCCs) purchase goods oF services from private suppliers, the Jaw requires withholding of the relevant business tax (Le. VAT or percentage tax) Business taxation is discussed under Business and Transfer Toxation by ‘the same author. Voluntary compliance system - Under this collection system, the taxpayer himself determines bis income, reports the same through income tax returns ‘and pays the tax to the government. This system is also referred to as the *Self-assessment method.” ‘The tax due determined under this system will be reduced by: a, Withholding tax on compensation withheld by employers . Expanded withholding taxes withheld by suppliers of goods or services ‘The taxpayer shall pay to the government any tax balance after such credit or claim refund or tax eredit for excessive tax withheld. D. Assessment or enforcement system - Under this collection system, the government identifies non-comphant taxpayers, assesses their tax dues Including penalties, demands for taxpayer's voluntary compliance or enforces collections by coercive means such as summary proceeding or judicial proceedings when necessary. PRINCIPLES OF A SOUND TAX SYSTEM According to Adam Smith, governments should adhere to the following principles fr canons to evolve a sound tax system: 1. Fiscal adequacy 2 ‘Theoretical justice 3 Administrative feasibility 2 Chapter 2 - Taxes, Tax Laws and Tax Administration Chapter 2 - Taxes, Tax Laws and Tax Administration Fiscal adequacy Fiscal adequacy requces thatthe sources of government funds MUSE be sufiggy 3. Fico adequty reas ge The govermneM MSL NO INEUF det A te 2 cove eyees the government abity to dele the essential public serge ee ee epic we res geet spending, ‘ : ‘ Theoretical aioe ‘ Theoret ty sggts that tration soul consider he tp Particles ee ae cae of fasten shear ae Be senor conlseory Administrative feasibility ‘Aaminstrocve feasibility suggests that tax laws should be capable of efficient ang 2 fective administration to encourage compliance. Government should make y tasy for the taxpayer to comply by avoiding administrative bottlenecks ang reducing compliance costs ‘The following are applications of the principle of administrative feasibility 1, Efiling and e-payment of taxes a 2. Substituted filing system for employees 3. Final withholding tax on non-resident allens or corporations 4. Accreditation of authorized agent banks in the filing and payment of taxes TAX ADMINISTRATION Tox administration refers to the management of the tax system. Tar administration of the national tax system in the Philippines is entrusted to the Bureau of Internal Revenue which is under the supervision and administration of ‘the Department of Finance. Chief ofMcials of the Bureau of Internal Revenue 4. 1 Commissioner 2. 4 Deputy Commissioners, each to be designated to the following: a. Operations group b. Legal Enforcement group Information Systems Group 4. Resource Management Group ‘POWERS OF THE BUREAU OF INTERNAL REVENUE 1. Assessment and collection of taxes 2. Enforcement of al forfeitures, penalties and fines, and judgments in all cases decided in its favor by the courts “4 Giving effect to, and administering the supervisory and pohee powers conferred tot by the NIRC and other laws “Assignment of internal revenue officers and ot Provision and distribution of forms, receipt proper officals Issuance of receipts and clearances ‘Submission of annual report, pertinent information to Congress and reports tO the Congressional Oversight Committee in matters of taxation her employees to other duties ts, certificates, stamps, etc. (0 POWERS OF THE COMMISSIONER OF INTERNAL REVENUE ‘To interpret the provisions of the NIRC, subject to review by the Secretary of Finance ‘To decide tax cases, subject tothe exclusive appellate jurisdiction of the Court of Tax Appeals, such as: a. Disputed assessments »b, Refunds of internal revenue taxes, fees, or other charges Penalties imposed d. Other NIRC and special law matters administered by the BIR. To obtatn information and to summon, examine, and take testimony of persons to effect tax collection Purpose: For the CIR to ascertain: ‘a, The correctness of any tax return or in making a return when none has been made by the taxpayer bb. The tax liabilty of any person for any internal revenue tax or in correcting, any such liability Tax compliance of the taxpayer Authorized acts a, Toexamine any book, paper, record or other data relevant to such inquiry \b. To obtain on a regular basis any information from any person other than. the person whose anternal reverie tax liability 1s subject to audit ¢ To summon the person Siable for tax or required to file a return, his ‘employees, or any person having possession and custody of his books of accounts and accounting records to produce such books, papers, records fr other data and to give testimony 4d. To take testimony of che person concerned, under oath, as may be relevant or material to the snquiry fe. To cause revenue officers and employees to make canvass of any revenue distret To make assessment and prescribe additional requirement for tax administration and enforcement 4s ‘Chapter 2 - Taxes, Tax Laws and Tax Administration §. Toexamine tax returns and determine tax due thereon, ‘The CIR or his duly authorized representatives may authorize the examina of any taxpayer andthe assessment ofthe correct amount of tax. Failie tat ‘a return shall not prevent the CIR from authorizing the examination, ‘Tac or deficiency assessments are due upon notice and demand by the cg his representatives. * furs suteens of dearatons shalt whan bat I i ee aN Ree en eer caine nenigios a a ae plow aroha When a return shall not be forthcoming within the prescribed deadline or when there is a reason to believe that the return is false, incomplete or ‘erroneous, the CIR shall assess the proper tax om the basis of best evidence available. In case a person fails to file a required retum or other documents atthe tine prescribed by law or willfully files a false or fraudulent return or other documents, the CIR shall make or amend the return from his own knowledge and from such information obtained from testimony. The return shall be ‘presumed prima facie correct and sufficient for all legal purposes, 6. To conduct inventory taking or surveillance 7. To prescribe presumptive gross sales and receipts for a taxpayer when: The taxpayer failed to issue receipts; or b. The CIR believes that the books or other records of the taxpayer do not correctly reflect the declaration in the return The presumptive gross sales or receipt shail be derived from the performance of similar business under simlar circumstances adjusted for other relevant 8 Toterminste tat period when the txpyeris: 2. Retinng om basness 3. endingt leave te Piippines Intending remove hide, 9 concal is property 4. Intending to perform any act tending to obstruct the proceedings for the caletion ofthe ako render the same iefecve The termination ofthe taxable period sal be communicated through a ne8et ‘to the taxpayer together with a request for immediate sat. Taxes shall be due and payable immediately ne 45 9. To prescribe real property values ‘Chapter 2 - Taxes, Tax Laws and Tax Administration ‘ones and prescribe real 1 authorized to divide the Philippines into ‘The CIR is authorized to divide the Philipps prreciers property values after consultation with competent appraisers prescribed are referred to as zonal value. For purposes of internal revenue taxes, fair value of real property sh: whichever is higher of 4. Zonal value prescribed by the Commissioner . Faic-macket value 2 shown in the schedule of market values of the Provincial and City Assessor’ Office “The NIRC previously used the assessed value which is merely a fraction of the fair market value, Assessed value is the basis of the real property tax mn local taxation, The value to use now is the full fair value of the property. all mean, 10. To compromise tax abilities of taxpayers 11, To inquire into bank deposits, only under the following instances: a Determination of the gross estate of a decedent . To substantiate the taxpayer's claim of financial incapacity to pay tax in an application for tax compromise In cases of finanaial incapacity, inquiry can proceed only if the taxpayer ‘waives his privilege under the Bank Deposit Secrecy Act 12, To accredit and register tax agents ‘The denial by the CIR of application for accreditation is appealable to the Department of Finance. The lailure of the Secretary of Finance to act on the appeal within 60 days is deemed an approval 13, To refund or credit internal revenue taxes 14, To abate or cancel tax labilties in certain cases 15. To prescribe additional procedures or documentary requirements 16, To delegate his powers to any subordinate officer with a rank equivalent to a division chief of an ofice Non-delegated power ofthe CIR ‘The fllowing powers ofthe Coromissioner shal nat be delegated: 1. The power to recommend the promtigaton of roles and regulations to the Secretary of inane 2. The power to istue rulings of first mpression orto reverse, revoke or madly any existing clings ofthe Bureau. a Chapter 2 - Taxes, Tax Laws and Tax Administration 3. The power to compromise or abate any tax tabihty Exceptionally, the Regional Evaluation Boards may compromise tax. under the following: ‘abit: ‘a assessments are issued by the regional offices involving basic defici {ax of 500,000 oF less, and b. minor criminal violations discovered by regional and district officials iency Composition of che Regional Evaluation Board a. Regional Director as chairman b. Assistant Regional Director Heads ofthe Legal, Assessment and Collection Division dd. Revenue District Officer having jurisdiction over the taxpayer 4. The power to assign and reassign internal revenue officers to establishments where articles subject co excise tax are produced or kept. Rules in assignments of revenue officers to other duties 1. Revenue officers assigned to an establishment where excisable articles are kept shall m no case stay there for more than 2 years. 2. Revenue officers assigned to perform assessment and collection function shall not remain ia the seme assignment for more than 3 years. 3. Assignment of internal revenue officers and employees of the Bureau to special duties shall not exceed 1 year. ‘Agents and Deputies for Collection of National Internal Revenue Taxes ‘The following are constituted agents for the collection of internal revenue taxes: 1. The Commisstoner of Customs and his subordinates with respect to collection ‘of national internal revenue taxes on imported goods. 2. ‘The head of appropriate government offices and his subordinates with respect to the collection of energy tax. 3, Banks duly accredited by the Commissioner with respect to receipts of payments of internal revenue taxes authorized to be made thru banks, These are referred to as authorized government depositary banks (AGDB). OTHER AGENCIES TASKED WITH TAX COLLECTIONS OR TAX INCENTIVES RELATED FUNCTIONS 1. Bureau of Customs 2. Board of investments 3. Philippine Econonuc Zone Authonty 4. Local Government Tax Collecting Unit 48 (Chapter 2 - Taxes, Tax Laws and Tax Administraton Bureau of Customs (BOC) [Aside from ils regulatory functions, the bureau of Customs is tasked to administer ‘collection of tanifls on imported articles and collection of the Value Added Tax on importation. Together with the BIR, the BOC is under the supervision of the Department of Finance. ‘The Bureau of Customs is headed by the Customs Commissioner and is assisted by five Deputy Commissioners and 34 District Collectors. rd of Investments (BO!) ‘The BOI 1s tasked to Jead the promotion of investments in the Philippines by assisting Filipinos and foreign investors to venture and prosper in desirable areas fof economic activities. It supervises the grant of tax ancentives under the Omnibus Investment Code. The BOI is an attached agency of the Department of Trade and Industry (DTH) ‘The BOI 1s composed of five ful-ume governors, exctuding the DTI secretary as its chairman. The President of the Philippines shall appoint a vice chatrman of the ‘board who shall act as the BOI's managing head. Philippine Economte Zone Authority (PEZA) ‘The PLZA vs created to promote investments in exportoniented manufacturing industries inthe Philippines and, among other mynads of functions, supervise the grant of both fiscal and non-fiscal incentives. PEZA registered enterprises enjoy tax holidays for certain years, exemption from Import and export taxes including local taxes. The PEZA ts also an attached agency of the DTI. The PEZA is headed by a director general and is assisted by three deputy directors. Local Government Tax Collecting Units Provinces, municipalities, cities and barangeys also imposed and collect various taxes to rationalize thetr fiscal autonomy. ‘The special tax treatments of BOl-registered or PEZA-registered enterprises including the local taxes imposed by local governments will be discussed under Local & Preferential Taxation by the same author. CChepter 2 - Taxes, Tax Laws and Tax Administration ‘TAXPAYER CLASSIFICATION FOR PURPOSES OF TAX ADMINISTRATION For purposes of effective and efficent tax administration, taxpayers are classgeg into: 1 Large taxpayers - under the supervision of the Large Taxpayer Service (ins of the BIR National Office. 2. Non-lerge taxpayers ~ under the supervision of the respective Revenue District Offices (RDOs) where the business, trade or profession of the taxpayer is situated Criteria for Large Taxpayers: A. Asto payment 1. Value Added Tax - Atleast P200,000 per quarter for the preceding year 2. Excise Tax - At Yeast 1,000,000 tax paid for the preceding year 3. Income Tax - At least P1.000,000 annwal income tax paid for the preceding year 4. Withholding Tax - At least P1,000,000 annual withholding tax payments or remittances from all types of withholding taxes 5, Percentage tax - At least P200,000 percentage tax paid or payable per quarter for the preceding year 6. Documentary stamp tax At least P1,000,000 aggregate amount per year B. Asto financial conditions and results af aperations 1. Gross receipts or sales -P1,000,000,000 total annual gross sales or receipts 2. Net worth - 300,000,000 total net worth at the close of each calendar or fiscal year 3. Gross purchases - P800,000,000 total annual purchases for the preceding year 4. Top corporate taxpayer listed and published by the Securities and Exchange Commission ‘Automatic classification of taxpayers as large taxpayers. ‘The foliowing taxpayers shall be automatically classified as large taxpayers upon notice in writing by the CIR: 1, All branches of taxpayers under the Large Taxpayer's Service 2. Subsidiaries, affiliates, and entities of conglomerates or group of companies of & large taxpayer 3. Surviving company in case of merger or “onsolidation of a large taxpayer 4. A corporation that absorbs the operation or business in case of spin-off of 20y large taxpayer Corporation with an authorized capitalization of atleast P300,000,000 registered swath the SEC Chapter 2- Taxes, Tax Laws and Tax Admnistration 6. Multinational enterprises with an authorized capstaization or assigned capital of atleast P300,000,000 7. Publicly isted corporations. 9, Universal, commercial, and foreign banks (Whe regular business unit and foreign ‘currency deposit unit shall be considered one taxpayer for purposes of classifyir them as large taxpayer) 9. Corporate taxpayers with at Yeast 100,000,000 authonzed capital in banking, insurance. celecommunieaton, lites, petroleum. tobacco, and alcohol industries 10, Corporate taxpayers engaged inthe production of metalic minerals st (Chapter 2 - Taxes, Tax Laws and Tax Administration (CHAPTER 2: SELF-TEST EXERCISES Discussion Questions 1, Distinguish tax law from tax exemption law. 2. Enumerate the sources of tax laws. 3. Discuss the nature of Philippine tax law. 4. Distinguish tax laws, revenue regulations, and rulings, 5. Define tax and identify ts elements 6. What are the classifications of taxes? Enumerate and provide examples dassifiation. ‘ree 7. Compare tax with revenue, license, toll, debt, special assessment, tar, wy penalty 8. Whatis a tax system? What are its types? ‘9. Enumerate the principles of a sound tax system. Explain each, 10. Enumerate the powers ofthe BIR. 111, Enumerate the non-delegated powers ofthe CIR. Exercise Drill No. 1 Identify the type of tax that is described by the following: [_terefers w all nceme collection B ‘Chapter 2- Taxes, Tax Laws and Tax Administraton Exercise Drill No.2 Identify whic item ws described by the following: fof the government 2." ris an ingiasston lor the support of the government [3 tis imposed upun land adjacent to public improvements posed untymporte! and exported commmiodi [eis a charge imposed prior tothe commencement of business 2 exercise of a profession. [a itis. pos-activty rather tana pre Jats subjeet tu compensation or setath. [itis a charge fr the use of others’ property 9._Itisan imposition tended to dicurage an ack 16 IRarises from contracts rather than from law. imposition, Exercise Dri No.3 ria forthe selection of large taxpayer for each ofthe following: LL, Tax that remains at flat rate regardless ofthe value ofthe tax object Te teehidnatieel cape sar aol oa 115. Tax upun performance af an act or enroyment ofa 52 2 " 3 Income ta A eeamptn ak ale by hon VAT barnes Sanat _——— 2.Taxon grants ante af ager by ing daar $name t 3. Tat that decresses in rates athe mount or value of he $eemmay SanpTa — tax object increases _ [Ast Tax collected upon perons who are note ahtony upyers i = 'S._Tax that is imposed based on the value of the tax object "3. Gruss purchases” i i ] Tax or general purpose iss thee thea pany Se earoiay Tr When taxis collected pon someone who is effectively reimbursed by another, the 9. Impoued onthe gatos tantra property upon deal tsi oes Tol taxon eidenigof scot, bine oes 2, Allare a valorem taxes, except one. Select the exception. 4 Polltax «Real property tax Estate tax ‘Capital gains tax on real property capital asset 3, Taxation power can be used to destroy a asarevenue measure. cas animplement of police power. 1b. evenifthe taxisinvald, d.when the State is tn dire need of funds. 4. Which isnot a characteristic of tax? 4. Itisan enforced contribution, b._ Its generally payable in money. 53 chapter 2 - Taxes, Tax Laws and Tax Administration e Itis subject to assignment. &._Itislevied by the law-malang body of the State having jurisdiction, 5. Which of the following isa local tax? a. Value added tax ‘¢ Documentary stamp tax b. Real propertytax Other percentage taxes 6. Which is nota source of tax law? a CHEDregulations —¢-Judicial decisions ‘BIR Rulings @. Constitution 2, Taxas to purpose is classified as a Fiscalor regulatory National or Tocal tax b. Director indirecttax Specific or ad valorem tax 8, Taxas to incidence is classified as Fiscal or regulatory c. National or local tax Director indirect tax 4 Specificar ad valorem tax: 9, Taxasto source is classified as 2 Fiscal or regulatory c-National or local tax b. Director indirect tax Specific or ad valorem tax 10, Which is not anature oftax? ‘a. Enforced proportional contribution 'b._Enforced withia the territorial jurisdiction ofthe taxing authority & _Levied by the lawmaking body 4. Generally payablein kind 11, Taxes that cannot be shifted by the statutory taxpayer are referred to as a direct taxes. business taxes. 1B ndirect taxes. personal taxes. 12, Which is alocal tax? a Donor's tax Professional tax Documentary stamp tax Excise tax 13, Asto subject matter, taxes do not include a. Property tax Poll tax Regulatory tax . Excise tax 14, A tax that is imposed upon the performance of an act, the enjoyment of ‘orthe engagement ina profession s known as 2. incometax, excise tax b. Ucense, transfer tax, ‘Chapter 2 - Taxes, Tax Laws and Tax Administration 415. Which is a national tax? ‘a. Real property tax Community tax Income tax 4. Professional tax 16. Which ofthe following distinguishes license from fax? 3. Unlimited in imposition Does not renders business illegal B. Imposed for revenue d. Pre-actwity n applicanon 17, Which is correct? ‘a. Taxes may be subject to compensation Toll being a demand of ownership, ss exercised only by private entities. ‘c._ Dacion en pago and cession in payment are applicable to taxation, 4. Spectal assessment applies only when public improvernent is made. 18. Taxas to determination of amount is clasified as a Fiscal or regulatory ¢.National or local tax 1B. Director indirect tax d. Specific or ad valorem tax 19, Tax classifications as to abject do not include Poll tax Regulatory tax Property tax Bxcse tax ‘Tax must not violate constitutional and inherent limuation. Tax must be uniform and equitable. Tax must be for public purpose. ‘Tax must be levied by the lawmaking body. ‘Tax must be proportionate in character. ‘Tax is generally payable in money. Which ofthe above is/are not aa essential characterstic of a valid tax? a. Allofthe above None, except F b Allexcept F d.None of the above 21, To limit the production of an environmentally harmful commodity, Congress passed a law subjecting the sales of an environmentally unfriendly commodity 10 '2P10/kilo tax but a 59% taxi imposed on sales exceeding P100,000, Which is incorrect? a. Thetaxisa combination of an ad valorem tax and specific tax. , Thisisan example of aregulatory tax. & Thisisa national tax. 4. Thisis local tax 22, Which is not am excise tax? a. Incometax Community tax 20. mmenep oe ¢ Estate tax 4. Occupation tax 35 Chapter 2 - Taxes, Tax Laws and Tax Administration 23, Which isan indirect tax? a. Value added tax. 'b. Donor's tax «Income tax 4. Real property tax 24, Which isnot an ad valorem tax? a Realpropertytax Income tax b. Excisetaxoncigar —_-d. Donor’s tax 25, Atax that is imposed based on per unit or per head basis is known as ‘2 Proportional tax ¢ Ad valorem tax BL Specific tax 4. Progressive tax 26, Taxasto rates excludes a Specific tax Mixed tax b. Progressive tax 4. Proportional tax 27, Mr. A has a tax obligation to the government amounting to PBO,000, Since he Jeaving the country, he entered into a contract with Mr. B wherein Mr. R shal ‘the PBO,000 tax n his behalf. On duo date, Mr.B failed to pay the tax The BIR sen. a letter of demand to Mr. A which he refused to pay. Which of the following statements is correct? 1a. The government cannot enforce collection charges against Mr. A since he has validly transferred his obligations to B under the contract. ‘The government can no longer run after Mr. A because he is already outside the Philippine territory. . Thegovernment should wait until Mr. B becomes solvent again, 4. The government should force Mr. A to pay because taxes are non-assignable, 28. Philippine tax laws are, by nature, apolitical political and civil b cwil 4. penal and civil. 29. Motor vehicles tax isan example of a. Propercy tax © Income tax b. Privilege tax Indirect tax 30. Which of te following statements is correct? a. The Marshall Doctrine is not used in practice since itis unconstitutional. . Anex post facto tax law violates the constitution, A tax bill personally drafted by the president shall become a law ater approval by congress, 4. Wis in the public interest that errors of public officials should bind the government to limit government abuse. ‘Chapter 2 - Taxes, Tax Laws and Tax Admnistration 431. Tax rulings are issued by the a Secretary of Finance 1b, Supreme Court Court of Tax Appeals <4. Commissioner of Internal Revenue 32. Which ofthe following is limited in application? a Taxlaws Tax treaties . Revenue Regulations 4. BIR Ruling 33. Which is not asource oftax law? a. Judicial decisions €-Opinions of tax experts b. Revenue regulations —d. Tax treaties and ordinances 34, Which issues revenue regulations? a. Department of Finance. Commissioner of internal Revenue b. Congress

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