Taxes, Laws and Administration Flashcards
(49 cards)
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
2
Q
Elements of a Valid Tax
A
- 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).
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
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
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
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
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
8
Q
This tax is demanded from one person who is intended to pay it.
A
Direct Tax
Ex: Income tax & Poll tax
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
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)
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)
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
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
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
15
Q
Tax imposed by the National Government
A
National Tax
16
Q
National Taxes
(Hint: PDIVES)
A
- Percentage taxes
- Donor’s and Estate tax
- Income tax
- Value-added tax
- Excise tax
- Documentary Stamp tax
17
Q
Tax imposed by municipal or local governments
A
Local Tax
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
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
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
Tax vs. Penalty
**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
Other Notes:
- 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
Any law that provides for the **assessment and collection of taxes** for the **support of the government** and other **public purposes**
Tax Law
28
Sources of Tax Laws
(Hint: J-CEO-STAR)
- **J**udicial Decisions
- **C**onstitution
- **E**xecutive Orders
- Batas Pambansa Local **O**rdinances
- **S**tatutes and Presidential Decrees
- **T**ax Treaties and conventions with foreign countries
- **A**dministrative Issuances or BIR Rulings
- **R**evenue Regulation by the DoF
29
**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.**
Revenue Regulation
30
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.
Administrative Issuances or BIR Rulings
31
Nature of Philippine Tax Laws
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
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**.
Bureau of Internal Revenue
33
BIR Composition
Officials of the Bureau
1. Chief officer: **The Commissioner of Internal Revenue** (CIR) only
2. **4 assistant chief**: Deputy Commissioners
34
Powers of the BIR
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
Powers of the 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
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
11. 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.
12. To **inquire into bank deposits** under **certain cases**
13. To **prescribe additional procedures or documentary requirements**
14. To **delegate his powers to any subordinate officer** with **rank equivalent to a division chief** of an office
15. To **refund or credit internal revenue taxes**
16. To **abate or cancel tax liabilities** in **certain cases**
17. To **examine tax returns** and **determine tax due** thereon;
18. To **cause revenue officers and employees to make a canvass from time to time** of any revenue district or region concerning taxpayers.
36
Powers of CIR **cannot be delegated**
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
4. 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
Rules in assignments to other duties of Revenue Officers
- 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
Agents and Deputies for Collection 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 **receipts of payments** of internal revenue taxes **authorized to the made thru banks.**
39
Principle of Sound Tax System
(Hint: FAT-N)
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
Taxation and Economic Efficiency
1. **Income Effect**- makes people **economically efficient** (ex: transformation)
2. **Substitution Effect**- makes people **economically inefficient** (ex: indirect taxes)
41
**Marshall Dictum** - "The power to tax includes the power to destroy"
- **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
**Holmes Doctrine**- "Taxation power is the power to build"
The power to tax should **not be the power to destroy**. The **power to destroy is merely a consequence** of taxation.
43
Doctrine of Judicial Non-interference
- 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
Imprescriptibility in Taxation
Taxes are **imprescriptible** *unless the law itself provides for such prescription*
45
Prospectivity of Tax Laws
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
Principle of **Strictissimi Juris**- "Taxation is the rule and exemption is the exception"
**Tax exemption** must be **strictly construed against the taxpayer** and **liberally in favor of the government**
47
Doctrine of **Equitable Recoupment**
- 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
Non-compensation or Set-off Rule
- 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
Doctrine of Estoppel
- 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**
