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Income Tax (RECITATION FORMAT) > Ch.2 Taxes, Tax Laws and Tax Administration > Flashcards

Ch.2 Taxes, Tax Laws and Tax Administration Flashcards

1
Q

Explain to me what is taxation law

A

refers to any law that arises from the exercise of the taxation power of the State

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2
Q

Enumerate the types of taxation laws

A
  1. Tax Laws
  2. Tax Exemption Laws
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3
Q

What are the sources of taxation laws

A
  1. Constitution
  2. Statutes and Presidential Decrees
  3. Juridical Decisions or case laws
  4. Executive Orders and Batas Pambansa
  5. Administrative Issuances
  6. Local Ordinances
  7. Tax Treaties and Conventions with foreign countries
  8. Revenue Regulations
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4
Q

What are the types of Administrative Issuances

A
  1. Revenue Regulations
  2. Revenue memorandum orders
  3. Revenue memorandum rulings
  4. Revenue memorandum circulars
  5. Revenue bulletins
  6. BIR Rulings
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5
Q

What are rulings?

A

are merely advisory or a sort of information service to the taxpayer such that none of them is binding except to the addressee and may be reversed by the BIR at anytime

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6
Q

Explain the difference between GAAP and Tax Laws

A

GAAP are not laws, but are mere conventions of financial reporting. Taxpayers normally follow GAAP in recording transactions in their books. However, in the preparation and filing of tax returns, taxpayers are mandated to follow the tax law cases of conflict with GAAP

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7
Q

What is the nature of Philippine tax laws?

A

Philippine tax laws are civil and not political in nature. They are effective even during periods of enemy occupation. Our internal revenue laws are not penal in nature because they do not define crime. Their penalty provisions are merely intended to secure taxpayers’ compliance

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8
Q

Enumerate the types of rulings

A
  1. Value Added Tax (VAT) Rulings
  2. International Tax Affairs Division (ITAD) Rulings
  3. BIR Rulings
  4. Delegated Authority (DA) Rulings
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9
Q

What is tax?

A

is an enforced proportional contribution levied by the lawmaking body of the state to raise revenue for public purpose

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10
Q

What are the elements of a valid tax

A
  1. Tax must be levied by the taxing power having jurisdiction over the object of taxation
  2. Tax must not violate Constitutional and inherent limitations
  3. Tax must be uniform and equitable
  4. Tax must be for public purpose
  5. Tax must be proportional in character
  6. Tax is generally payable in money
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11
Q

Enumerate the classification of taxes

A
  1. As to purpose
  2. As to subject matter
  3. As to incidence
  4. As to amount
  5. As to Rate
  6. As to imposing authority
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12
Q

Give examples of taxes as to purpose

A
  1. Fiscal or revenue tax
  2. Regulatory tax
  3. Sumptuary
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13
Q

Give examples of taxes as to subject matter

A
  1. Personal, poll or capitation
  2. Property Tax
  3. Excise Tax or Privilege Tax
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14
Q

Give examples of taxes as to incidence

A
  1. Direct Tax
  2. Indirect Tax
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15
Q

Give Examples of taxes as to amount

A
  1. Specific Tax
  2. Ad Valorem
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16
Q

Give examples of tax as to rate

A
  1. Proportional Tax
  2. Progressive or Graduated Tax
  3. Regressive Tax
  4. Mixed Tax
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17
Q

Give Examples of tax as to imposing authority

A
  1. National Tax
  2. Local Tax
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18
Q

Differentiate Tax and Revenue

A

Tax refers to the amount imposed by the government for public purpose. Revenue refers to all income collections of the government which includes taxes, tariffs, licenses, toll, penalties, and others. The amount imposed is tax but the amount collected is revenue

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19
Q

Differentiate Tax and License Fee

A

Tax emanates from taxation power, License Fee emanates from police power. Tax are imposed after the commencement of a business or profession where license fee is imposed before engagement in those activities. In other words, tax is a post-activity imposition whereas license is a pre-activity imposition

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20
Q

Differentiate Tax and Toll

A

Tax is a levy of government; hence, it is a demand of sovereignty. Toll is a charge for the use of other’s property; hence, it is a demand ownership. The amount of tax depends on the needs of the government, toll is dependent upon the value of the property leased. Both private entities and the government impose toll but private entities cannot impose taxes

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21
Q

Differentiate Tax vs Debt

A

Tax arises from law; Debt arises from private contracts. Non-payment of tax leads to imprisonment; 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 but tax is generally payable in money. Tax only draws interest when taxpayer is delinquent, while Debt draws interest when it is so stipulated by the contracting parties or when debtor incurs a legal delay.

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22
Q

Differentiate Tax vs Special Assessment

A

Tax is imposed upon persons, properties, or privileges. Special assessment is levied by the government on LANDS adjacent to a public improvements. It is imposed on LAND ONLY and is intended to compensate the government for a part of the cost of the improvement. Unlike taxes, special assessment attaches to the land. It will not become a personal obligation of the land owner. Therefore, the non-payment of special assessment will not result to imprisonment of the owner

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23
Q

Differentiate Tax and Tariff

A

Tax is an amount imposed upon persons, privilege, transactions, or properties. Tariff is the amount imposed on imported or exported commodities

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24
Q

Differentiate Tax and Penalty

A

Tax is an amount imposed for the support of the government. Penalty is an amount imposed to discourage an act. Penalty may be imposed by the government and private individuals. It may both arise from law or contracts whereas tax arises from law

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25
Q

Explain to me what a tax system is

A

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 part of the machineries of the government in tax collection. The Philippine tax system is divided into two: The national tax system and the local tax system

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26
Q

Enumerate the types of tax systems according to imposition

A
  1. Progressive
  2. Proportional
  3. Regressive
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27
Q

Enumerate the types of tax system according to impact

A
  1. Progressive System
  2. Regressive System
28
Q

Explain to me a Progressive Tax System

A

A progressive tax system is one that emphasizes direct taxes. A direct tax cannot be shifted. Hence, it encourages economic efficiency as it leaves no other resort to taxpayers than to be efficient. This type of tax system impacts more upon the rich

29
Q

Explain to me what a regressive tax system is

A

A regressive tax system is one that emphasizes indirect taxes. Indirect taxes are shifted by business to consumers; hence, the impact of taxation rests upon the bottom end of the society. In effect, a regressive tax system is anti-poor

30
Q

Do the Philippines have a progressive or a regressive tax system?

A

It is widely believed that despite the Constitutional guarantee of a progressive taxation, the Philippines has a dominantly regressive tax system due to the prevalence of business taxes

31
Q

Enumerate the types of Tax Collection Systems

A
  1. Withholding system on income tax
  2. Withholding system on business tax
  3. Voluntary compliance method
  4. Assessment or enforcement method
32
Q

Explain to me what is Withholding system on income tax

A

Under this collection 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.

33
Q

What are the following withholding taxes collected under the withholding system on income tax

A
  1. Creditable Withholding Tax
  2. Final Withholding Tax
34
Q

What is a Creditable Withholding Tax

A

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-compliant taxpayers

35
Q

What is withholding tax on compensation

A

an estimated tax required by the government to be withheld by employers against the compensation income to their employees

36
Q

What is expanded withholding taxes

A

an estimated tax required by the government to be deducted on certain income payments made by taxpayers engaged in business

37
Q

What is a final withholding tax

A

a system of tax collection wherein payors are required to deduct the full tax on certain income payments. The final withholding tax is intended for the collection of taxes from income with high risk of non-compliance

38
Q

Explain to me what is a withholding system on business tax

A

when the national government agencies and instrumentalities including government-owned and controlled corporations (GOCCs) purchase goods or services from private suppliers, the law requires withholding of the relevant business tax (i.e. VAT or percentage tax).

39
Q

What is a voluntary compliance system

A

Under this collection system, the taxpayer himself determines his 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

40
Q

Tax due under voluntary compliance system will be reduced by

A
  1. Withholding tax on compensation by employers
  2. 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 credit for excessive tax withheld

41
Q

What is an assessment or enforcement system

A

Under this collection system, the government identifies non-compliant taxpayers, assesses their tax dues including penalties, demands for taxpayer’s voluntary compliance or enforces collections by coercive means such as a summary proceeding or juridical proceedings when necessary

42
Q

What are the principles of a sound tax system according to Adam Smith

A
  1. Fiscal adequacy
  2. Theoretical Justice
  3. Administrative feasibility
43
Q

Explain what is the Fiscal Adequacy principle

A

requires that the sources of government funds must be sufficient to cover government costs. The government must not incur a deficit, since it paralyzes the government ability to deliver the essential public service to the people. Hence, taxes should increase in response to increase in government spending

44
Q

Explain the theoretical justice or equity principle

A

suggests that taxation should consider the taxpayer’s ability to pay. It also suggests that the exercise of taxation should not be oppressive, unjust, or confiscatory

45
Q

Explain the administrative feasibility principle

A

suggests that tax law should be capable of efficient and effective administration to encourage compliance. Government should make it easy for the taxpayer to comply by avoiding administrative bottlenecks and reducing compliance costs

46
Q

What is a tax administration

A

refers to the management of the tax system. Tax 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

47
Q

Who composes the Chief Officials of the Bureau of Internal Revenue

A
  1. 1 Commissioner
  2. 4 Deputy Commissioners, each designated to the following
    a. Operations Group
    b. Legal Enforcement Group
    c. Information Systems Group
    d. Resource Management Group
48
Q

What are the powers of the Bureau of Internal Revenue

A
  1. Assessment and collection of taxes
  2. Enforcement of all forfeitures, penalties and fines, and judgments in all cases decided in its favor by the courts
  3. Giving effect to, and administering the supervisory and police powers conferred to it by the NIRC and other laws
  4. Assignment of internal revenue officers and other employees to other duties
  5. Provision and distribution of forms, receipts, certificates, stamps, etc. to proper officials
  6. Issuance of receipts and clearances
  7. Submission of annual report, pertinent information to Congress and reports to the Congressional Oversight Committee in matters of taxation
49
Q

What are the powers of the commissioner of internal revenue

A
  1. To interpret provisions of the NIRC, subject to review by the Secretary of the 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
  4. To make an 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 when: the taxpayer failed to issue receipts; or The CIR believes that the books or other records of the taxpayer is wrong
  8. To terminate tax period when the taxpayer is: Retiring from business; Intending to leave the Philippines; Intending to remove, hide, or conceal his property; Intending to perform any act tending to obstruct the proceedings for the collection of the tax or render the same ineffective
  9. To prescribe real property values
  10. To compromise tax liabilities of taxpayers
  11. To inquire into bank deposits, only under the following instances: 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
  12. To accredit and register tax agents
  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 procedures
  16. To delegate his powers to any subordinate officer with a rank equivalent to a division chief of an office
50
Q

What are the non-delegated power of the CIR

A
  1. The power to recommend the promulgation of rules and regulations to the Secretary of Finance
  2. The power to issue rulings of first impression or to reverse, revoke, or modify any existing rulings of the Bureau
  3. The power to compromise or abate any tax liability
  4. The power to assign and reassign internal revenue officers to establishment where articles subject to excise tax are produced or kept
51
Q

The Regional Evaluation Boards may compromise tax liabilities under the following:

A

a. Assessments are issued by the regional offices involving basic deficiency tax of P500,000 or less and
b. Minor criminal violations discovered by regional and district officials

52
Q

Composition of Regional Evaluation Board

A

a. Regional Director as Chairman
b. Assistant Regional Director
c. Heads of the Legal, Assessment and Collection Division
D. Revenue District Officer having jurisdiction over the taxpayer

53
Q

Other agencies tasked with tax collections or tax incentives related functions

A
  1. Bureau of Customs
  2. Board of Investments
  3. Philippine Economic Zone Authority
  4. Local Government Tax Collecting Unit
  5. Fiscal Incentives Review Board
54
Q

What does BOC do?

A

Bureau of Customs is tasked to administer collection of tariffs on imported articles and collection of VAT on importation. Together with BIR, they are under the supervision of Department of Finance

55
Q

What does BOI do?

A

The Board of Investments is tasked to lead the promotion of investments in the Philippines by assisting Filipinos and foreign investors to venture and prosper in desirable areas of economic activities. It supervises the grant of tax incentives under the Omnibus Incentives Code. The BOU is an attached agency of DTI

56
Q

What does PEZA do?

A

The Philippine Economic Zone Authority is created to promote investments in export-oriented manufacturing industries in the Philippines and, among other myriads 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 is also an attached agency of the DTI

57
Q

Local Government Tax Collecting Units

A

Provinces, municipalities, cities and barangays also imposed and collect various local taxes, fees and charges to rationalize their fiscal autonomy

58
Q

What does the FIRB do?

A

The Fiscal Incentive Review Board has oversight function on the administration and grant of tax incentives by the Investment Promotion Agencies and other government agencies administering tax incentives. It approves or disapproves grant of tax incentives to private entities and tax subsidies to government-owned and controlled corporation government instrumentalities, government commissaries, state universities and colleges

59
Q

Taxpayer Classification for Purposes of Tax Classification

A
  1. Large Taxpayer
  2. Non-Large Taxpayer
60
Q

Large taxpayers are under the supervision of?

A

the Large Taxpayer Service (LTS) of the BIR National Office

61
Q

Non-Large taxpayers are under the supervision of?

A

under the supervision of the respective Revenue District Offices (RDOs) where the business, trade or profession of the taxpayer is situated

62
Q

Criteria for Large Taxpayers

A
  1. As to Payment
  2. As to financial conditions and results of operations
63
Q

Criteria for Large Taxpayers as to payment examples

A
  1. VAT - at least 200,000 per quarter for the preceding year
  2. Excise Tax - at least 1,000,000 tax paid for the preceding year
  3. Income Tax - at least 1,000,000 annual income tax paid for the preceding year
  4. Withholding Tax - At least 1,000,000 annual withholding tax payments or remittances from all types of withholding taxes
  5. Percentage Tax - at least 200,000 percentage tax paid or payable per quarter for the preceding year
  6. Documentary Stamp Tax - At least 1,000,000 aggregate amount per year
64
Q

Criteria for Large Taxpayers as to financial conditions and results of operations

A
  1. Gross receipts or sales - 1,000,000,000 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 - 800,000,000 total annual purchases for the preceding year
  4. Top corporate taxpayer listed and published by the Securities and Exchange Commssion
65
Q

The following taxpayers shall be automatically classified as large taxpayers upon notice in writing by the CIR

A
  1. All branches of taxpayers under the Large Taxpayer’s Service
  2. Subsidiaries, affiliates, and entities of conglomerates or group of companies of a large taxpayer
  3. Surviving company in case of merger or consolidation of a large taxpayer
  4. A corporation that absorbs the operation or business in case of spin-off of any large taxpayer
  5. Corporation with an authorized capitalization of at least 300,000,000 registered with the SEC
  6. Multinational enterprises with an authorized capitalization or assigned capital of at least 300,000,000
  7. Publicly listed corporations
  8. Universal, commercial and foreign banks (the regular business unit and foreign currency deposit unit shall be considered one taxpayer for purposes of classifying them as large taxpayer)
  9. Corporate taxpayers with 100,000,000 authorized capital in banking, insurance, telecommunication, utilities, petroleum, tobacco, and alcohol industries
  10. Corporate taxpayers engaged in the production of metallic minerals

Income Tax (RECITATION FORMAT) (14 decks)

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