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TAX Notes - Rex B. > Taxes, Laws and Administration > Flashcards

Taxes, Laws and Administration Flashcards

1
Q

An enforced proportionate contribution imposed upon persons, properties, businesses, 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.

A

Tax

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2
Q

Elements of a Valid Tax

A
  1. must not violate the constitutional, inherent and or contractual limitation of the power of taxation.
  2. must be uniform and equitable, not unjust, excessive, oppressive, confiscatory or discriminatory
  3. must be for a public purpose.
  4. must be levied by the taxing power (legislature) having jurisdiction over the object of taxation.
  5. must be proportionate in character.
  6. generally payable in money, at regular interval (not regular in payment).
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3
Q

Tax imposed for the general purpose of the government or to raise revenue for government needs

A

Fiscal / General / Revenue Purpose

Ex: Income Tax

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4
Q

Tax imposed for a special purpose or to achieve some social or economic ends

A

Regulatory / Special / Sumptuary

Ex: Tariff or Custom duties

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5
Q

Tax of a fixed amount imposed on individuals residing within a specified territory without regard to their property or the occupation in which they will be engaged in.

A

Personal, poll or capitation

Ex: Community Tax Certificate

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6
Q

Tax imposed on property, whether real or personal, in proportion, either to its value or in accordance with some other reasonable method of apportionment

A

Property Tax

Ex: Real Estate Tax

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7
Q

Tax imposed upon the performance of an act, the enjoyment of a privilege or the engaging in an occupation.

A

Excise / Privilege Tax

Ex: income tax value-added tax, privilege tax on business or occupation

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8
Q

This tax is demanded from one person who is intended to pay it.

A

Direct Tax

Ex: Income tax & Poll tax

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9
Q

This 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

A

Indirect Tax

Ex: Value-Added Tax, Customs duties and some percentage taxes

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10
Q

Tax of a fixed amount imposed by the head or number

A

Specific Tax

Ex: Tax on distilled spirits, cigars and wines (Per piece)

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11
Q

Tax is imposed for a fixed proportion of the amount or value of the property to which the tax is assessed

A

Ad valorem Tax

Ex: Excise taxes cigarettes and gasoline, real property taxes & Certain customs duties (X% of selling price)

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12
Q

The tax is based on a fixed percentage of the amount of the property, income or other basis to be taxed.

A

Proportional / Flat rate

Ex: Real Estate Tax, VAT & Percentage Tax

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13
Q

The tax rate increases as the tax base increases. It is preferred in achieving vertical equity

A

Progressive / Graduated Tax

Ex: Income tax, Estate tax & Donor’s tax

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14
Q

The tax rate decreases as the tax base increases and The Philippines **do not have this kind of tax*, but some indirect taxes manifest a regressive effect.

A

Regressive Tax

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15
Q

Tax imposed by the National Government

A

National Tax

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16
Q

National Taxes

(Hint: PDIVES)

A
  • Percentage taxes
  • Donor’s and Estate tax
  • Income tax
  • Value-added tax
  • Excise tax
  • Documentary Stamp tax
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17
Q

Tax imposed by municipal or local governments

A

Local Tax

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18
Q

Local Taxes

(Hint: FB-PCR)

A
  • Tax on banks and other Financial institutions
  • Business taxes, fees and charges
  • Professional tax
  • Community tax
  • Real Property tax
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19
Q

Tax vs. Revenue

A

REVENUE

  • Refers to the amount collected.
  • The product of taxation.
  • refers to all the funds derived by the government whether from tax or from other sources

TAX

  • Refers to the amount imposed
  • Only one of the sources of Government revenues
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20
Q

Tax vs. License

A

LICENSE

  • For regulation
  • Limited
  • Required for the commencement of a business profession
  • Makes the business illegal
  • Always revocable
  • Power to license does not include the power to tax
  • Pre-activity
  • Imposed based on preceding year
  • Source: Police power

TAX

  • For revenue
  • No limit
  • Imposed on persons, properties, business rights, interests, privilege, acts and transactions
  • Does not make the act illegal
  • Has a nature of permanence
  • The power to tax includes power to license.
  • Post-activity
  • Imposed based on current data
  • Source: Taxing Power
21
Q

Tax vs. Toll

A

TOLL

  • Demand of ownership
  • Compensation for the use of somebody else’s property
  • May be imposed by the government or by private individuals
  • Determined by the cost of the property or improvements thereon

TAX

  • Demand of sovereignty
  • One’s support for the government
  • Imposed only by the government
  • Based on government needs
22
Q

Tax vs. Debt

A

DEBT

  • Based on contract
  • Non-compliance: No imprisonment
  • Assignable
  • Cash or In kind
  • Subject to set-off
  • Draws interest when stipulated or when in default

TAX

  • Based on Law
  • Non-compliance: May involve imprisonment, except for poll tax
  • Not assignable
  • Generally in money
  • Not subject to set-off
  • Does not earn interest, except when delinquent
23
Q

Tax vs. Special Assessment

A

SPECIAL ASSESSMENT

  • Imposed on Land
  • Cannot be made the liability of the person assessed, because it is the land that answers for the liability
  • Based on entirely benefits received
  • Coverage: Exceptional in application

TAX

  • Imposed on business, interests, transactions, rights, persons, properties or privileges
  • May be made a personal liability of the person assessed
  • Based on necessity with no hope of direct or immediate benefit to the taxpayer
  • Coverage: General application
24
Q

Tax vs. Tariff

A

Tariff

  • refers to a book of rates containing names of merchandises with corresponding duties to be paid for the same
  • 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
25
Q

Tax vs. Penalty

A

PENALTY

  • To regulate conduct through punishment and suppression of an injurious act
  • Exercised by Government or Private individuals
  • Source: Law or contract
  • In money or In kind

TAX

  • To raise revenue
  • Exercised by the Government
  • Source: Law
  • In money
26
Q

Other Notes:

A
  • Payment of tax is compulsory to those who are covered by imposition
  • Taxes are 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 of taxation includes the power to destroy, it is not absolute. It is subject to limitation or restrictions.
27
Q

Any law that provides for the assessment and collection of taxes for the support of the government and other public purposes

A

Tax Law

28
Q

Sources of Tax Laws

(Hint: J-CEO-STAR)

A
  • Judicial Decisions
  • Constitution
  • Executive Orders
  • Batas Pambansa Local Ordinances
  • Statutes and Presidential Decrees
  • Tax Treaties and conventions with foreign countries
  • Administrative Issuances or BIR Rulings
  • Revenue Regulation by the DoF
29
Q

Formal pronouncement intended to clarify or explain the tax law and carry into effect its general provisions by providing details of administration and procedure.

They have the force and effect of law.

A

Revenue Regulation

30
Q

These are the less general interpretations of the tax laws at the administrative levels, being issued from time 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 anytime.

A

Administrative Issuances or BIR Rulings

31
Q

Nature of Philippine Tax Laws

A

Philippine Tax Laws are:

  • Civil in nature and character.
  • They remain effective even in times of war.
  • They are not penal in nature although penalties are provided for their violation because they do not define crimes and provide for their punishment.
32
Q

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

A

Bureau of Internal Revenue

33
Q

BIR Composition

A

Officials of the Bureau

  1. Chief officer: The Commissioner of Internal Revenue (CIR) only
  2. 4 assistant chief: Deputy Commissioners
34
Q

Powers of the BIR

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 effects to and administering the supervisory and police powers conferred to it by 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
35
Q

Powers of the CIR

A
  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 in behalf of a taxpayer; or to disregard one filed by the taxpayer
  6. To change tax period
  7. To compromise the tax liabilities of taxpayers
  8. To conduct inventory surveillance
  9. To prescribe presumptive gross sales or receipts
  10. To prescribe 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 zoner
  1. To accredit tax agents
  • Individuals or general professional partnerships 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 the prescribed period shall be deemed approval of the application for accreditation.
  1. To inquire into bank deposits under certain cases
  2. To prescribe additional procedures or documentary requirements
  3. To delegate his powers to any subordinate officer with rank equivalent to a division chief of an office
  4. To refund or credit internal revenue taxes
  5. To abate or cancel tax liabilities in certain cases
  6. To examine tax returns and determine tax due thereon;
  7. To cause revenue officers and employees to make a canvass from time to time of any revenue district or region concerning taxpayers.
36
Q

Powers of CIR cannot be delegated

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
    (Note: to be discussed in tax remedies)

Exception: Compromise by Regional Evaluation Boards under the following requisites:

a. assessments are issued by the regional offices involving basic deficiency tax of P500,000.00, and

b. involves minor criminal violations as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upos recommendation of the CIR, discovered by regional and district officials

  1. The power to assign and reassign internal revenue officers to establishment 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.

37
Q

Rules in assignments to other duties of Revenue Officers

A
  • Revenue officers assigned to perform assessment and collection function shall not remain in the same assignment for more than 3 years
  • Assignment of internal revenue officers and employees of the Bureau to special duties shall not exceed 1 year.
38
Q

Agents and Deputies for Collection of National Internal Revenue Taxes

A
  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 receipts of payments of internal revenue taxes authorized to the made thru banks.
39
Q

Principle of Sound Tax System

(Hint: FAT-N)

A
  1. Fiscal Adequacy- sources of revenue should be sufficient to meet the demand for public expenditure
  2. Administrative Feasibility- tax laws must be capable of convenient, just and effective administration
  3. Theoretical Justice- tax must be imposed with equity and certainty and must consider the taxpayer’s ability to pay and benefits received
  4. Non-observance of the principles does not necessarily render a tax levy unconstitutional.
40
Q

Taxation and Economic Efficiency

A
  1. Income Effect- makes people economically efficient (ex: transformation)
  2. Substitution Effect- makes people economically inefficient (ex: indirect taxes)
41
Q

Marshall Dictum - “The power to tax includes the power to destroy”

A
  • Constitutional- if taxation power is used validly as an implementation 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
42
Q

Holmes Doctrine- “Taxation power is the power to build”

A

The power to tax should not be the power to destroy. The power to destroy is merely a consequence of taxation.

43
Q

Doctrine of Judicial Non-interference

A
  • The courts cannot inquire into the wisdom of a taxing act or the advisability or expediency of at ax.
  • The impracticability and absurd consequences of a tax law should be addressed to the legislature and administrative authorities and not the courts
44
Q

Imprescriptibility in Taxation

A

Taxes are imprescriptible unless the law itself provides for such prescription

45
Q

Prospectivity of Tax Laws

A

Tax laws are prospective in character and application

Exceptions:

  1. the retroactive application is necessarily implied from the provisions of the law
  2. it involves income tax
  3. the retroactive application is clearly the intent of the Congress
46
Q

Principle of Strictissimi Juris- “Taxation is the rule and exemption is the exception”

A

Tax exemption must be strictly construed against the taxpayer and liberally in favor of the government

47
Q

Doctrine of Equitable Recoupment

A
  • Where the refund of taxes are barred by prescription which can 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 prescription laws.

48
Q

Non-compensation or Set-off Rule

A
  • The government and the taxpayer are not creditor and debtor to each other.
  • Taxes are not in the nature of contracts between the parties but grew out-of duty arising from law; hence, they cannot be set-off.
49
Q

Doctrine of Estoppel

A
  • The State cannot be estopped by the neglect, errors, or mistakes of its agents or officers.
  • Thus, the erroneous application and enforcement of law by public officials do not block the subsequent correct application of the statutes.
  • The doctrine of estoppel operates only against the taxpayer

TAX Notes - Rex B. (21 decks)

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