TAX, TAX LAWS

AND TAX
ADMINISTRATION
October 15, 2022
TAX

enforced proportional contribution levied by

the law making body of the State to raise
revenue for public purpose
Elements of a valid tax
• Tax must be levied by the taxing power
having jurisdiction over the object of
taxation.
• Tax must not violate constitutional and
inherent limitations.
• Tax must be uniform and equitable.
• Tax must be for public purpose.
• Tax must be proportional in character.
• Tax is generally payable in money.
Taxation Law

Any law that arises from the exercise of the

taxation power of the State.
Types of Taxation Law

a. Tax Laws
--National Internal Revenue Code(NIRC)
--The Tariff and Customs Code
--The Local Tax Code (LGU)
--The Real Property Tax Code
b. Tax Exemption Laws
--The Minimum Wage Law
--BMBE Law
--Cooperative Development Act
GAAP versus Tax Laws
Classification of Taxes

A. As to purpose
a.1 Fiscal or revenue
a.2 Regulatory
a.3 Sumptuary
B. As to subject matter
b.1 Personal, poll or capitation
b.2 Property tax
b.3 Excise or privilege tax
Classification of Taxes

C. As to incidence
c.1 Direct tax
c.2 Indirect tax

D. As to amount
d.1 Specific tax
d.2 Ad valorem
Classification of Taxes
E. As to rate
e.1 Proportional tax
e.2 Progressive or graduated tax
e.3 Regressive tax
e.4 Mixed tax
F. As to imposing authority
f.1 National tax
f.2 Local tax
Distinction of Tax with Similar Items
• Tax vs. Revenue
• Tax vs. License fee
• Tax vs. Toll
• Tax vs. Debt
• Tax vs. Special Assessment
• Tax vs. Tariff
• Tax vs. Penalty
Tax System
method or schemes of imposing, assessing
and collecting taxes.
Tax Systems According to Imposition

1.Progressive- employed in the taxation of

income of individuals, and transfers of
properties by individuals.
2.Proportional- employed in the taxation of
corporate income and business.
3.Regressive- not employed in the
Philippines.
Tax Systems According to Impact

1.Progressive System- impacts more upon the

rich
2.Regressive System- emphasizes indirect
taxes, anti poor
Tax Collection System

1. Withholding System- the payor of the income

withholds or deducts the tax on the income before
releasing the same to the payee and remits the
same to the government.

Taxes collected under this system

• Withholding tax on compensation
• Expanded withholding tax
• Final withholding tax
• Withholding tax on government payments
Tax Collection System

2. Voluntary Compliance System- the taxpayer

himself determines his income, reports the same
through income tax returns and pays the tax to the
government.

3. Assessment or Enforcement System-

government identifies non-compliant taxpayers,
assesses their tax dues and penalties, and enforces
collections by coercive means.
Principles of a Sound Tax System
1. Fiscal Adequacy- requires that the
sources of government funds must be
sufficient to cover government costs.
Government must not incur a deficit.

2. Theoretical Justice or Equity- taxation

should consider the taxpayer’s ability to
pay. Exercise of taxation should not be
oppressive, unjust or confiscatory.
Principles of a Sound Tax System

3. Administrative Feasibility- tax laws should be

capable of efficient and effective administration
to encourage compliance.
Principles of a Sound Tax System

Applications of the Principle of Administrative

Feasibility
3.a E-filing and e-payment of taxes
3.b Substituted filing system for employees
3.c Final withholding tax on non-resident aliens
or corporations
3.d Accreditation of authorized agent banks in
the filing and payment of taxes
Tax Administration
Management of the tax system. This is
entrusted to the Bureau of Internal Revenue
which is under the supervision and
administration of the Department of Finance.
Chief Officials of BIR

a. 1 Commissioner
b. 4 Deputy Commissioners, each to be
designated to the ff:
Operations group
Legal Enforcement group
Information Systems group
Resource Management group
Powers of BIR
• Assessment and collection of taxes
• Enforcement of all forfeitures, penalties and
fines
• Giving effect to, and administering the
supervisory and police power conferred to it
by the NIRC
• Assignment of internal revenue officers and
other employees to other duties
Powers of BIR
• Provision and distribution of forms, receipts,
certificates, stamps, etc to proper officials
• Issuance of receipts and clearances
• Submission of annual report, pertinent
information to Congress and reports to the
Congressional Oversight Committee in
matters of taxation
Powers of CIR

1. To interpret the provisions of the NIRC,

subject to review by the Secretary of Finance
2. To decide tax cases, subject to the exclusive
appellate jurisdiction of the Court of Tax
Appeals
3. To obtain information and to summon,
examine, and take testimony of persons to
effect tax collection
Powers of CIR
4. To make assessment and prescribe additional
requirement for tax administration and
enforcement
5. To examine tax returns and determine tax
due thereon
6. To conduct inventory taking or surveillance
7. To prescribe presumptive gross sales and
receipts for a taxpayer
Powers of CIR

8. To terminate tax period

9. To prescribe real property values
10. To compromise tax liabilities of taxpayers
11. To inquire into bank deposits
12. To accredit and register tax agents
Powers of CIR
13. To refund or credit internal revenue taxes
14. To abate or cancel tax liabilities in certain
cases
15. To prescribe additional procedures or
documentary requirements
16. To delegate his powers to any subordinate
officer with rank equivalent to a division chief of
an office
Rules in Assignment of Revenue
Officers to Other Duties
1. Revenue Officer(RO) assigned to an
establishment where excisable articles are kept
shall in no case stay there for more than 2 years.
2. RO assigned to perform assessment and
collection function shall not remain in the same
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.
Other Agencies Tasked with Tax
Collection
1. Bureau of Customs
2. Board of Investment
3. Philippine Economic Zone Authority
4. Local Government Tax Collecting Unit
TAXPAYER CLASSIFICATION FOR
PURPOSES OF TAX ADMINISTRATION

A. Large Taxpayer (LTS)

- under the supervision of the BIR
B. Non large taxpayer
- under the supervision of their respective
Revenue District Offices(RDO)
Criteria for Determining Large
Taxpayers
A. As to payment
1. Value Added Tax- at least P200,000 per
quarter for the preceding year
2. Excise Tax- at least P1,000,000 tax paid for
the preceding year
3. Income Tax- at least P1,000,000 annual
income tax payment for the preceding year
Criteria for Determining Large
Taxpayers
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
Criteria for Determining Large
Taxpayers
B. As to Financial Conditions and Operations
1. Gross receipts or sales- P1,000,000,000 total
annual gross sales or receipts
2. Net worth- P300,000,000 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
SEC
End of Chapter 2