TAXES, LAWS AND ADMINISTRATION Flashcards by Tina A

This is an enforced contribution imposed upon, persons, properties, business, rights, interests, privileges, transactions and acts within the territorial jurisdiction of the taxing authority exercise by the legislature for a public purpose and generally payable in money.

Tax

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What are the Elements f a Valid Tax?

Must not violate the constitutional, inherent, and or contractual limitation of the power of taxation
Must be uniform and equitable, not unjust, excessive, oppressive, confiscatory or discriminatory
Must be for a public purpose
Must be levied by the taxing power (legislature) having jurisdiction over the object of taxation
Must be proportionate in character
Generally payable in money, at regular interval (not regular in payment)

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What are the classifications of taxes

As to purpose
As to subject matter
As to incidence
As to amount
As to rate
As to imposing authority

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Classification of Taxes

What is under “As to purpose”

Fiscal - general, fiscal or revenue
Regulatory - special or sumptuary

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Classification of Taxes

This is tax imposed for the general purpose if the government or to raise revenue for government needs. Examples is income tax

Fiscal

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Classification of Taxes

This is tax imposed for a special purpose or to achieve some social or economic ends. Example is tariff or customs duties

Regulatory

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Classification of Taxes

What is under “As to subject matter”

Personal, poll or capitation
Property tax
Exercise tax or privilege tax

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Classification of Taxes

This is tax of a fixed amount imposed on individuals residing within a specified territory without regard to their property or the occupation in which they be engaged. Example is Community tax certificate

Personal, poll or capitation

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Classification of Taxes

This is tax imposed on property, whether real or personal, in proportion, either to its value or in accordance with some other reasonable method of apportionment. Example is Real estate tax

Property Tax

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Classification of Taxes

This is a tax imposed upon the performance of an act, the enjoyment of a privilege or the engaging in an occupation. Example is income tax, value-added tax, privilege tax on business or occupation

Excise tax or privilege tax

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Classification of Taxes

What is under “As to incidence”

Direct
Indirect

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Classification of Taxes

This is a tax where tax is demanded from one person who is intended to pay it. Example is Income tax and personal tax

Direct

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Classification of Taxes

This is a tax where the tax is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another by shifting the tax to another taxpayer. Example is Value-added tax, customs duties, and some percentage taxes

Indirect

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Classification of Taxes

What is under “As to amount:

Specific tax
Ad valorem

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Classification of Taxes

This is a tax of a fixed amount imposed by the head or number. Example is tax on distilled spirits, cigars and wines (PX/piece)

Specific tax

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Classification of Taxes

This is tax imposed for a fixed proportion of the amount or value of the property to which the tax is assessed. Example is excise taxes on cigarettes and gasoline, real property taxes and certain customs duties (X% of selling prices)

Ad valorem

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Classification of Taxes

What is under “As to rate”

Proportional or flat rate
Progressive or graduated tax
Regressive tax
Mixed tax

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Classification of Taxes

This tax is based on a fixed percentage of the amount of the property, income or other basis to be taxed. Examples are real estate tax, VAT and percentage taxes

Proportional or flat rate

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Classification of Taxes

This is when the tax rate increases as the tax base increase. This rate is preferred in achieving vertical equity. Example is income tax, estate tax and donor’s tax

Progressive or graduated tax

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Classification of Taxes

This is when the tax rate of which decreases as the tax base increases. The Philippines do not implement this.

Regressive tax

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Classification of Taxes

What is under “As to imposing authority”

National tax
Local tax

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Classification of Taxes

This tax is imposed by the National Government. Examples are:
a. Income taxes
b. Estate and donors
c. Value added tax
d. Excise tax
e. Other percentage taxes
f. Documentary stamp tax

National tax

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Classification of Taxes

This tax is imposed by municipal or local governments. Examples are:
a. Real property tax
b. Community tax; and
c. Professional tax
d. Tax on banks and other financial institutions
e. Business taxes, fees and charges

Local tax

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Distinction of Tax with Similar Items

Tax vs. Revenue

-This refers to the amount imposed
-Only one of the sources of government revenues

Tax

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Distinction of Tax with Similar Items Tax vs. Revenue -This refers to the amount collected -The product of taxation. It refers to tall the funds derived by the government whether from tax or from other sources

Revenue

Distinction of Tax with Similar Items Tax vs. License Purpose: For revenue Amount: No limit Subject of Imposition: Person, properties, business rights, interests, privilege, acts and transactions Effect of non-compliance: Does not necessarily make the act, business or profession illegal Revocability: Has a nature of permanence Scope: The power includes the power to license When imposed: Post-activity Basis of imposition: Current data Source of Power: Taxing power of the government

Tax

Distinction of Tax with Similar Items Tax vs. License Purpose: For regulation Amount: Limited Subject of Imposition: REquired for the commencement of a business profession Effect of non-compliance: Makes the business illegal Revocability: Always revocable Scope: Power to license does not include the power to tax When imposed: Pre-activity Basis of imposition: Preceedingyear of quarter date. If new business, based on capitalization Sources of Power: Polic power of the government

License

Distinction of Tax with Similar Items Tax vs. Debt Basis: Law Effect of non-compliance: May involve imprisonment, except for poll tax Assignable?: No Mode of settlement: Generally money Set-off: Generally not subject to set-off Interest: Does not earn interest except when delinquent

Tax

Distinction of Tax with Similar Items Tax vs.Debt Basis: Contract Effect of non-compliance: No imprisonment Assignable?: Yes Mode of settlement: Cash or In kind Set-off?: Subject to set-off Interest: Draws interest when stipulated or when in default

Debt

Distinction of Tax with Similar Items Tax vs. Toll -Demand of sovereignty -One's support for the government -Imposed only by the government -Based on government needs

Tax

Distinction of Tax with Similar Items Tax vs. Toll -Demand of ownership -Compensation for the use of somebody else's property -May be imposed by the government or by private individuals -Determine by the cost of the property or improvements thereon

Toll

Distinction of Tax with Similar Items Tax vs. Special Assessment Subject of the imposition: Business, interests, transactions, rights, persons, properties or privileges Effect on the person owning the subject: May be made a personal liability of the person assessed Basis of Imposition: Necessity with no hope of direct or immediate benefit to the taxpayer Coverage of application: General application

Tax

Distinction of Tax with Similar Items Tax vs. Special Assessment Subject of the imposition: Land Effect on the person owning the subject: Cannot be made the personal liability of the person assessed, because it is the land that answers for the liability Basis of Imposition: Entirely on benefits received Coverage of application: Exceptional in application

Special Assessment

This refers to a book of rates containing names of merchandise with corresponding duties to be paid for the same. This also refers to the duties payable on goods imported or exported. It is a system or principle of imposing duties on the importation or exportation of goods. ***Customs duties and tariffs are used interchangeably.

Tariff

Distinction of Tax with Similar Items Tax vs. Penalty Purpose: To raise revenue Exercising authority: The government Source: Law Mode of settlement: In money

Tax

Distinction of Tax with Similar Items Tax vs. Penalty Purpose: To regulate conduct through punishment and suppression of injurious act Excercising authority: The government or by private individuals Source: Law or contract Mode of settlement: In money or In kind

Penalty

NOTE:

-Payment of tax is compulsory to those who are covered by imposition. -Taxes re important because they are the lifeblood of the government -Taxes are personal. The burden of taxation cannot be transferred from one person to the other by private agreement as this is determined by law -While the power includes the power to destroy, it is not absolute. Is is subject ti limitation or restrictions.

This is any law that provides for the assessment and collection of taxes for the support of the government and other public purposes

Tax Law

What are the Sources of Tax Laws? (CASJEOTR)

1. Constitution 2. Administrative Issuance or BIR Rulings 3. Statutes and Presidential Decrees 4. Judicial Decisions 5. Executive Orders and Batas Pambansa Local 6. Ordinances 7. Tax Treaties and conventions with foreign countries 8. Revenue Regulation of the DoF.

This is a formal pronouncement intended to clarify or explain the tax law and carry into effect its general provisions by providing details of administration and protection. They have the force and effect of law

Revenue Regulation

These are the less general interpretations of the tax laws at the administrative levels, being issued fromtime to time by the CIR, to clarify certain provisions of the tax law. They are merely advisory or sort of an information service to the taxpayer such that, none of them are binding except to the addressee and may be reversed by the BIR at any time.

Administrative issuances or BIR Rulings

This means that tax laws are civil in nature and character. They remain effective in times of war. They are not penal in nature although penalties are provided for the violation because they do not define crimes and provide for the punishment

Nature of Philippines Tax Laws

This government body is tasked with tax administration function of the government. Together with the Bureau of Customs, they are under the supervision and control of the Department of Finance

The Bureau of Internal Revenue

What are the Chief Officials of the Bureau?

1. 1 Chief Officer: The commissioner of Internal Revenue 2. 4 Assistant Chief: Deputy Commissioners

What are the Powers of the Bureau?

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 effects to and administering the supervisory and police powers conferred to it bu the NIRC and or other laws 4. Assignment of internal revenue officers and other employees to other duties 5. Provisions and distribution to proper officials of forms, receipts, certificates, stamps; etc. 6. Issuances of receipts and clearances 7. Submit annual report, pertinent information to Congress and reports to the Congressional Oversight Committee in matters of taxation

What are the Powers of the Commissioner of Internal Revenue?

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 4. To make assessment and prescribe additional requirement for tax administration and enforcement 5. To make or amend a return for and and in behalf of a taxpayer; or to disregard one filed by the taxpayer 6. To change tax period 7. To compromise a tax liabilities of taxpayers 8. To conduct inventory surveillance 9. To prescribe presumptive gross sales or receipts 10. To prescribe the real estate values *The CIR is authorized to divide the Philippines into zones or areas and determine the fair market value of the real properties located in each zones or area. 11. To accredit tax agents *Individuals or general professional partnership who have been denied their accreditation may appeal to the Secretary of Finance who shall act on the appeal within 60 days from the receipt of such appeal. Failure by him to rule on the appeal within prescribed period shall be deemed approval of the application for the accreditation. 12. To inquire into bank deposits under certain cases 13. To prescribe additional procedures or documentary requirements 14. To delegate his powers to ay subordinate officer with rank equivalent to a division of an office 15. To refund or credit internal revenue taxes 16. To abate or cancer tax liabilities in certain cases 17. To examine tax returns and determine tax due thereon 18. To cause revenue officers and employees to make canvas from time to time of any revenue district or region concerning taxpayers.

What are the Powers of the CIR that cannot be delegated?

1. The power to recommend the promulgation or 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. Exception: Compromise by Regional Evaluation Boards under the following requisites: a. Assessment are issued by the regional offices involving basic deficiency tax of P500,000 and b. Involves minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the CIR, discovered by regional and district officials. 4. The power to assign and reassign internal officers to establishments where articles subject to excise tax are produced or kept. Revenue officers assigned to any such establishments shall in no case stay in his assignment for more than 2 years.

This is when revenue officers assigned to perform assessment and collection function shall not remain in the same assignment for more than 3 years. Assignment of interval revenue officers and employees of the Bureau to special duties shall not exceed 1 year.

Rules in assignments to other duties

Who are the Agents and Deputies of National Internal Revenue Taxes?

1. The Commissioner 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 the receipt of payments of internal revenue taxes authorized to the made thru banks.

What are the Principles of a Sound Tax System?

1. Fiscal Adequacy 2. Administrative Feasibility 3. Theoretical Justice 4. Non-observance of the principles does not necessarily render a tax levy unconstitutional

Principles of a Sound Tax System This means sources of revenue should be sufficient to meet the demand for public expenditure

Fiscal Adequacy

Principles of a Sound Tax System This means tax laws must be capable of convenient, just and effective administration

Administrative Feasibility

Principles of a Sound Tax System This means tax must be imposed with equity and certainty and must consider the taxpayer's ability to pay and the benefits received.

Theoretical Justice

What are Taxation and Economic Efficiency?

1. Income Effect 2. Substitution Effect

Taxation and Economic Efficiency This makes people economically efficient. Example is transformation

Income Effect

Taxation and Economic Efficiency This make people economically inefficient. Example is indirect taxes

Substitution Effect

What are the Fundamental Doctrines in Taxation?

A. Marshall Dictum - "The power to tax includes the power to destroy" B. Holmes Doctrine - "Taxation is the power to build" C. Doctrine of Judicial Non-interference D. Imprescriptibility in Taxation E. Prospectivity of Tax Laws F. Principle of "Strictissimi Juris" G. Doctrine of Equitable Recoupmnet H. Non-compensation or Set-off Rule I. Doctrine of Estoppel

Fundamental Doctrines in Taxation This is: -Constitutional if taxation power is used validly as an implement of police power in discouraging certain acts and enterprises inimical to public welfare. -Unconstitutional if in raising revenue, taxation is allowed to confiscate or destroy properties

Marshall Dictum - "The power to tax includes the power to destroy"

Fundamental Doctrines in Taxation This is where the power to tax should not be the power to destroy. The power to destroy is merely a consequence of taxation.

Holmes Doctrine "Taxation is the power to build"

Fundamental Doctrines in Taxation This means that the court cannot inquire into the wisdom of taxing act or the advisability or expediency of the tax. The impracticability and absurd consequences of a tax law should be addressed to the legislature and administrative authorities and not the courts.

Doctrine of Judicial Non-interference

Fundamental Doctrines in Taxation This means that taxes are imprescriptible unless the law itself provides for such prescription

Imprescriptibility in Taxation

Fundamental Doctrines in Taxation This means that tax laws are prospective in character and application Exceptions: 1. The retroactive application is necessarily implied from the provision of the law 2. It involves income tax 3. The retroactive application id clearly the intent of the Congress

Prospectivity of Tax Laws

Fundamental Doctrines in Taxation This means that taxation is the rule and exemption is the exception

Principle of Strictissimi Juris

Fundamental Doctrines in Taxation This is: -Where the refund of taxes are barred by prescription which no longer be claimed by a taxpayer but there is a present tax being assessed against the said taxpayer, such present tax may be recouped or set off against the tax, the refund of which has been barred -Basis: The government cannot enrich itself at the expense of the taxpayer **This doctrine is not applicable in the Philippines as it conflicts with prescribing laws

Doctrine of Equitable Recoupment

Fundamental Doctrines in Taxation This means that the government and the taxpayer are not creditors and debtors to each other. Taxes are not in the nature of contracts between the parties but grew out of duty arising from the law; hence they cannot be set off.

Non-compensation or Set-off Rule

Fundamental Doctrines in Taxation This means that the State cannot be estopped by the neglect, errors, or mistakes of its agents or officers. Thus, the erroneous application and enforcement of the law by public officials do not block the subsequent correct application of the statutes. ***This operates only against the taxpayer

Doctrine of Estoppel